Indian companies Act 1956. It is an artificial person created by law, formed for the purpose of business, registered under law having an independent legal.

It is an artificial person created by law, formed for the purpose of business, registered under law having an independent legal entity, a distinctive name, common seal and perpetual succession

TYPES OF COMPANIES On the basis of incorporation:-

1. Chartered Companies: The royal prerogative has power to create a corporation by the grant of a charter to persons assenting to be incorporated. E.g. Bank of England, East India Company

2. Statutory Companies: These are companies created by a special act of the Legislature

E.g. Reserve Bank of India, State Bank of India, Life Insurance Corporation

3. Registered Companies: These are companies which are formed and registered under the companies Act, 1956.

On the basis of liability1) Companies limited by shares

2) Companies limited by guarantee3) Unlimited Companies

On the basis of Number of members.

1) Private Limited Company

2) Public Limited Company

• Document that governs the relationship between the company and the outside world

• required to incorporate a company in the United Kingdom, Ireland and India

Contents of MemorandumName clause• Governed by “ Emblems and Names Act 1950”• Seal to be present on all business letters,

notices etc

Registered Office ClauseAscertains domicile and nationality of a company

Objects Clause Explains the utilization of shareholders funds Enables the person dealing with the company

to ascertain its powers

Liability ClauseIt states the liability of the members of the company is limited

Capital Clause• It must state the authorized of nominal share

capital

Association or Subscription Clause

It specifies the willingness of the subscribers to associate and form a company

Alteration of the MemorandumChange of nameChange of registered officeChange of the Objects clause To carry on its business more economically To attain its main object by new or improved

means To enlarge or change the local area of its

operation

To restrict or to abandon any of the objects specified in the memorandum

To sell or dispose of the whole or any part of the undertaking of the company

To amalgamate with any other company or body of persons

Articles of AssociationMeaning and purpose:Articles of Association of a company and its bye laws

are regulations which govern the management of its internal affairs and the conduct of its business.

They define the duties, rights, powers and authority of the shareholders and the directors in their respective capacities and of the company is to be carried out.

They are framed with the object of carrying out the aims & objects as set out in the memorandum of association.

The articles of association of a company have a contractual force between the members inter se in relation to their rights as such members.

Articles cannot supersede the objects as setout in the memorandum of association.

The articles must be: (i) printed, (ii) divided into paragraphs, numbered consecutively,(iii) signed by subscribers to the memorandum in the presence of at least one witness who shall attest the signatures. Also, articles are to be stamped with requisite stamp and filed along with the memorandum.

Distinction between Memorandum of Association & Articles of Association

Memorandum of Association Articles of Association

1.It is the charter of the company indicating the nature of its capital.

It also defines the company’s relationship with outside world.

1.They are the regulations for the internal management of the

company & are subsidiary to the memorandum

2.It defines the scope of the activities of the company, or the

area beyond which the actions of the company cannot go.

2.They are the rules for carrying out the objects of the company as

set out in the memorandum

3.It, being the charter of the company, is the supreme document

3.They are subordinate to the memorandum. If there is a conflict between the articles & the memorandum, the latter prevails.

4.Every company must have its own memorandum

4.A company limited by shares need not have articles of its own. In such a case, Table A applies of sch I, sec 26.

5.Any act of the company which is ultra vires the memorandum is wholly void & cannot be ratified even by the whole body of shareholders

5.Any act of the company which is ultra vives the articles (but in intra vires the memorandum) can be confirmed by the shareholders

Contents of Articles1. The business of the company;2. The amount of capital issued and the classes

of shares into which the capital is divided, the increase and reduction of share capital;

3. The rights of each class of shareholders and the procedure for variation of their rights;

4. The execution or adoption of a preliminary agreement, if any;

5. The allotment of shares; calls and forfeiture of shares for non-payment of calls;

6. Transfer and transmission of shares;

7. Company’s lien on shares;8. Exercise of borrowing powers including

issue of debentures;9. General meetings, notices, quorum, proxy,

poll, voting, resolution, minutes;10. Number, appointment and powers of

directors;11. Dividends – interim and final – and

general reserves;12. Accounts and audit;13. Keeping of books – both statutory and

others.

Inspection and copies of the ArticlesA company shall, on being so required by a

member, send to him within seven days of the requirement, on payment of one rupee, a copy of the articles.

if a company makes default, the company and every officer of the company, who is in default, shall be punishable with fine up to Rs 50 (s.39).

Alteration of articles.Section 31 provides that subject to the

provisions of the Act and to the conditions contained in its memorandum, a company may, by special resolution alter or add to its articles must be filed with the Registrar within 30 days of the passing of the special resolution.

Limitation on power to alter Articles1. Must not exceed the powers given by the

memorandum or conflict with the other provisions of the memorandum.

2. Must not be inconsistent with any provision of the companies Act or any other statue.

3. Must not include anything which is illegal, or opposed to public policy or unlawful.

4. The alteration must be bona fide for the benefit of the company as a whole. The alteration will not be bad merely because it inflicts hardship on an individual shareholder.

Contd…

5. There cannot be alteration of the articles so as to compel the existing members to take or subscribe for more shares or in any way to contribute to the share capital, unless they given their consent in writing

6. The amended regulation in the Articles of Association cannot operate retrospectively, but only from the date of amendment.

DOCTRINE OF CONSTRUCTIVE NOTICEEvery outsider dealing with a company is

deemed to have notice of the contents of the Memorandum & the Articles of Association.

These documents, on registration with the Registrar, assume the character of public documents. This is known as constructive notice of Memorandum and Articles

DOCTRINE OF INDOOR MANAGEMENTThere is one limitation to the doctrine of constructive

notice of the Memorandum & the Articles of company. The outsiders dealing with the company are entitled to

assume that as far as the internal proceedings of the company are concerned, everything has been regularly done.

They are presumed to have read these documents & to see that the proposed dealing is not inconsistent therewith, but they are not bound to do more; they need not inquire into the regularity of the internal proceedings as required by the memorandum & the Articles.

They can presume that all in being done regularly. This limitation of the doctrine of constructive notice is known as the “doctrine of indoor management”.

INITIAL PUBLIC OFFER

ROAD MAP FOR PRESENTATION

INTRODUCTIONNEW ISSUE MARKET

FUNTIONS OF IPO MARKETROLE OF THE IPO MARKET

RECENT TRENDS IN THE CAPITAL MARKET

INDIAN FINANCIAL SYSTEM

1.FINANCIAL INTREMEDIARIES(UNIT TRUST OF INDIA,COMMERCIALBANKS,LIC’S,DEVELOPMENTBANKS)

2.FACILITATING ORGANISATIONS(NEW ISSUE MARKET, STOCK EXCHANGES)

Initial Public Offering (IPO) refers to the offering of stock in A

company to the public through a public market. NASDAQ is a

popular market for e-commerce related companies. The IPO

of a company serves as a significant liquidity opportunity for early

investors, including founders and the Venture Capital investors.

FIRSTLY, SECURITIES ISSUED IN THE NEW ISSUE MARKET ARE INVARIABLY LISTED ON RECGNISED STOCK EXCHANGES, THIS FACILITIES PROVIDED BY THE SECONDARY MARKET S THUS , WIDENS THE INITIAL MARKET

SECONDLY,THE STOCKEXCHANGES EXERCISE CONSIDERABLE CONTROL OVER THE ORGANISATION OF NEW ISSUES,INTERMS OF THE REGULATORY FRAME WORKRELATING TO DEALING OF SECURITIES,NEW ISSUES WHICH SEEK STOCKEXCHANGE QUOTATION HAVE TO COMPLY WITH STATUTUORY RULES AS WELL AS REGULATIONS FRAMED BY THE STOCK EXCHANGE

PRIVATE SUBSCRIPTIONRIGHTS ISSUEPUBLIC ISSUES

1.REAL ESTATE2.RETAIL SECTOR3.INFRASTRUCTURE4.FINANCIAL SERVICES….

DISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY

1. Minimum number of members.2. Maximum number of members.3. Minimum Paid up Capital.4. Restriction on name.5. Commencement of business.6. Invitation to public.7. Transferability of shares.8. Issue of share warrants.

DISTINCTION BETWEEN A PUBLIC COMPANY AND A PRIVATE COMPANY

9. Further issue of capital.10. Number of directors.11. Statutory meeting.12. Quorum.13. Restrictions on the appointment of

directors.14. Managerial remuneration.15. Financial assistance for the purchase of

shares.

“ an occasion when people come together

to discuss or decide something “

Meetings of share holders.Statutory meeting(Section 165) Statutory meeting is the first meeting of the

shareholders of a company. This meeting is held only once in the life time of the company.

Objectives: • To approve the preliminary contracts specified in the

prospectus of the company with modification if any.• To discuss the success of floating the project of the

company.

Provisions:1. Time: Every company , shall , within a period of not

less than ONE month and not more than SIX months from the date on which the company is entitled to commence the business, hold the Statutory meeting

Statutory meeting(Section 165) contd..

2. Notice: The company must give notice to its member at least 21 clear days before holding the statutory meeting stating time, date and place of meeting.

3. Statutory Report: The Directors of the co., are required to send a report called statutory report to every member of the company along with the notice of the meeting at least 21 days before the date of the meeting.

CONTENTS: Allotment of Shares: The total number of share allotted,

distinguishing fully paid or partly paid up and the extent to which they are so paid up, shares issued otherwise than for cash.

Cash Received: Total amount of cash received by the company in respect of all the shares allotted.

Abstract of Receipt and Payment Account

Statutory meeting(Section 165) contd..

Names, addresses and occupations of the company’s Directors, Auditors and all other managerial personnel.

To approve the preliminary contracts specified in the prospectus of the company with modification if any.

The extent to which the Underwriting Contracts has been carried out and the reasons thereof.

The calls in arrears, if any, due from any Director and the Managers of the co.

Commission and brokerage paid to any Director or Manager on the issue of shares or debentures of the company.

4.Certification of Statutory report: By not less than two directors , one of whom shall be the Managing Director. The Auditor of the co shall certify the particulars regarding the issue of shares, receipts and payment etc. And a copy of certified statutory report must be sent to the Registrar of company immediately after it is sent to the members of the company.

5. Penalty: Maximum of Rs. 5000/-

ANNUAL GENERAL MEETING (SECTION 166)• Objectives: 1. Presentation of Annual Accounts for the Approval. 2. Declaration of Dividend 3. Appointment of Auditors 4. Appointment of Directors in place of retiring by rotation. 5. Special BusinessProvisions:1. First Annual General Meeting of the co should be held within a

maximum period of 18 Months from the date of its incorporation2. Subsequent AGM: There cannot be a gap more than 15 months

between the dates of two AGMs. 3. Power to convene the AGM: Only Board of Directors of the

company has to power to convene AGM of the company4. Notice: Atleast 21 days prior notice must be sent to all the

member of the company. However, if all the members having the voting rights gives their consent, the meeting can be called at a shorter notice.

5. Date, Time and Place of holding AGM:

ANNUAL GENERAL MEETING (SECTION 166)

6. Postponement: where an AGM is convened for a particular date and notice is issued to the members, the Board of Directors may cancel or postpone an AGM provided that it is being done for bonafide reasons.

7. Adjournment: An AGM can be adjourned by chairman for bonafide reasons only. Where a meeting is adjourned, the adjourned meeting shall be held on the same day next week at the same place at the same time.

8. Where a company fails to hold its AGM within the prescribed period of time, The National Tribunal on the application of any member, may either call or direct the co to call its AGM.

9. Penalty: If Director of officers of the co who is in default is made in complying with the provisions of Sec 266 the co and its default shall be punishable with a fine which may extend to Rs. 50,000/-

10. Even when the Annual Accounts are not ready, co should held AGM to transact all other business and then to adjourn the meeting to some future date when the accounts will be ready for shareholders approval.

EXTRA-ORDINARY GENERAL MEETINGAny general meeting other than an annual general meeting

is called an Extra-ordinary General Meeting. A statutory Meeting and annual general meeting of company are called Ordinary meetings.

OBJECTIVE: Meeting is called for transacting some urgent or special business of the co for which it is not advisable to wait till the next AGM of the company. Hence, Extra-ordinary general meeting is a meeting which is held between two consecutive annual general meetings.

An Extra-ordinary general meeting can be convened. By the Board of Directors, OR on the Requisition of Members OR By the National Tribunal

REQUISTIES OF A VALID MEETINGA general meeting of the shareholders of the company must

be called and held in the manner which is provided in the Articles of Association of the company must follow the procedure laid down in the Indian companies Act,1956.

1. Meeting must be Convened by Proper Authority i.e., Board of Directors or The National Tribunals may also call the meeting.

2. Members are served with Proper Notice ( Atleast 21 days prior notice)

3. Quorum must be present

QUORUM FOR A MEETING

Dictionary – least number of members required to carry on a meeting or for doing business.

Minimum number of members required in order to consider a meeting valid.

Generally, Articles provide for larger quorum. But not smaller than statutory minimum ,i.e., Five members personally present in case of Public Limited and two for a Private limited.

What happens if the Quorum is not presenting in a meeting?

if within half an hour a quorum is not present by requisitions of the members it shall stand adjourned to same day, place and time in the next week.

If at the adjourned meeting also, a quorum is not present within half an hour, the members present will be the quorum.

When should Quorum be present?Article 49(1) of Table A requires a quorum to be present at the

time when the meeting proceeds to transact business . It need not be present throughout the meeting

Hartley Bairld v. London Flats Limited , ‘leaving of quorum does not invalidate proceeding after the departure.

Can one constitute a quorum?Rule in ‘Sharp v. Dawes’ and in ‘D K Chatterji v. Rapti Supertonics’

Ltd. Resolution without requisite quorum is void ipso facto.

Exceptions- Where there is a class meeting of shareholders of that class are held by one person. (East v. Bennett Bros Limited)

Article 77 Table A states that a committee of a person can constitute a quorum.

When a Tribunal orders a meeting (sec.186),it may direct that even one member present in person/proxy shall be deemed to constitute a meeting.

ResolutionsQuestions which generally come for consideration at the

general meeting of a company are presented in the form of proposals called Motions.

A motion proposed by the chairman of the meeting/any other member . After discussions put to vote, final result accepted becomes Resolutions.

Kinds of resolutions; Ordinary resolution[sec.189(1)].., Special resolution[sec189(2)].., Resolutions requiring special notice[sec190].

When is an Ordinary resolutions required?Is passed in a general meeting by a simple majority of votes.

Votes cast in person/by proxy , and required notice of resolution duly given.

It is required for.., matters concerning with Name Clause…, Capital Clause.., for appointing auditors and fixation of their remuneration…., appointing of first directors who are liable to retire by rotation….., for increasing/decreasing in number of directors….., appointment of managing director, removal of a director …, for winding up of a company voluntarily in certain events…, appointing and fixing of remuneration of liquidators

Special resolutionsIs required for changing the place of registered

office from one state to another.., for alterations of ‘Objects clause’…,omission/addition of ‘private’ from name.., alteration of Articles.., conversion of any portion uncalled capital into reserved capital..,

for payment of interest out of capital.., applying to Central Govt for an inspector to investigate in company affairs.., for applying in court to wind up.,

for authorizing a liquidator to accept shares as consideration for transfer of its assets.., and for disposal of books and papers of a company in voluntary winding up after completion of the process.

Resolutions requiring special noticeIts only a different kind of ordinary resolutions of which notice of the

intention to move a resolution has to be given. Notice shall be given not less than 14days before the meeting to the members as notice of meeting is given/by advertisement.Is required for appointment of an auditor other than retiring ones.., to

re-appoint the retiring auditor…, for removal of a director before expiry of his period.., for appointment of a director in place of who is removed.

Passing of Resolutions by Postal Ballot[sec.192-A]a listed company may conduct it by postal ballot. It has send a notice along with a draft resolution explaining the reasons, which should be returned within a period of 30days from the date of posting of the ballot.

.

INTRODUCTION

MEANING OF WINDING UP:

Process of putting an end to the life of a company.

In the course of such a dissolution, its assets are collected and debts are paid off.

Winding up is the prior stage and dissolution is the next.

1.Compulsory2.Voluntary

CIRCUMSTANCES FOR WINDING UPON PASSING OF A SPECIAL RESOLUTION.

FAILURE TO HOLD STATUTORY MEETING.

FAILURE OF THE COMPANY TO COMMENCE BUSINESS.

REDUCTION IN NUMBER OF MEMBERS BELOW MINIMUM.

CIRCUMSTANCES FOR WINDING UPCOMPANY ACTING AGAINST THE INTEREST OF

SOVEREIGNTY AND INTEGRITY OF INDIA.

WHEN SICK INDUSTRIAL COMPANY IS UNABLE TO MAKE ITS NETWORTH EXCEED ITS ACCUMULATED LOSSES WITHIN A REASONABLE TIME.

Petition(439)

“It’s an application to wind up the company.”

WHO CAN FILE WINDING UP PETITION?COMPANY

CREDITORS

CONTRIBUTORY

REGISTRAR OF COMPANIES

CENTRAL GOVERNMENT

WHO CAN BE APPOINTED AS OFFICIAL LIQUIDATORA MEMBER FROM THE PANEL OF THE

PROFESSIONAL FIRMS OF CHARTERED ACCOUNTANTS, ADVOCATES, COMPANY SECRETARIES, COST AND WORK ACCOUNTANTS WHICH THE CENTRAL GOVERNMENT MAY CONSTITUTE.

BODY CORPORATE APPROVED BY CENTRAL GOVERNMENT.

WHOLE-TIME OR PART-TIME OFFICER APPOINTED BY THE CENTRAL GOVERNMENT.

DUTIES OF LIQUIDATOR•To submit preliminary report•To takeover company’s assets•To convene meetings of creditors and contributories

•To keep proper books•To submit accounts•To submit information in pending liquidation

POWERS OF LIQUIDATORTo be exercised by sanction of court ( 457.1)

Institute and defend suits, prosecutions in the name and on behalf of the company

Carry on business for the beneficial winding upSell movable & immovable property by public

action or private contractRaise money on the security of any asset of the

companyDo all other acts necessary to wind up & to

distribute assets

To be exercise without the sanction of the court(457.2)

•Do all acts & execute in the name of the company all deeds, receipts and documents

•Inspect records & returns on the files of the Registrar•Draw, accept, make & endorse bill of exchange

•To appoint agents where necessary

II. VOLUNTARY WINDING UP

MEMBERS VOLUNTARY WINDING UP.

CREDITORS VOLUNTARY WINDING UP.