Introduction

• Definition & Meaning

• Salient Features
• Types of Companies
• MoA & AoA
• Membership
• Shares & Share capital
• Meetings
• Accounts & Audit
• Liquidation of Company
• Case Study
 Meaning of company

A company is a groups of persons

associated together for the attainment
of a common goal
Characteristics of a company
• Incorporated Association
• Artificial person
• Separate Legal Entity
• Perpetual Succession i.e. continued existence
• Limited Liability
• Common Seal
• Transfer of Shares
• Separation of ownership from its management
• Capacity to Sue
 On the Basis of incorporation
 Statutory (created by special act of the legislature.ex: RBI ,SBI,LIC)
 Registered(Formed under the companies act 1956)

 On the Basis of liablity

 Limited Co.(The liablity is limited to the unpaid capital in the shares only)
Unlimited Co(Liablity is unlimited.even the personal belongings can be adjusted for the outstanding)

 On the Basis of number of members

 (i) Public
 Minimum paid up capital-Rs 1lakh
 Restricts transfer of shares
 Minimum no of persons is 2
 Limits the members to 50

• Limitation of Liability
(i).

• Country of formation
(i) Domestic Co.
(ii) Foreign Company
 contd
(ii) Private
Minimum paid up capital is Rs 5 lakh
Minimum no of members is 7&no maximum numbers
Allows the transfer of shares
On the Basis of ownership
Government Company(not less than 51% of the
ownership with the govt)
Foreign company
Company incorporated outside india with place of
business in india
Minimum of 50% of the share with the indian citizen
MOA - Charter of the company and explains
the reason of its existence
Contents
• Name of the company
• State of its registered office
• Objects of the company
• Liability Clause
• Capital Clause
 Name clause
• Undesirable name to be avoided
• Use of limited in case of public limited
company and use of private limited in case
of private company
• Authorized capital to change according to
the key words in its name.
 Registered office
• Every company should have a registered
office within 30 days from the date of
incorporation
 Objects clause
• Should mention clearly the
• Main objects
• Other objects
 Capital clause
• Should mention the authorised capital of
the company beyond which the company
cannot issue shares
 Liability clause
• Mention about the liability of the members
 Association clause
• Gives the details about the names of the
share holders ,their address and the total
no of shares they have taken
 Doctrine of ultra vires
• All the acts which is outside the purview of
companies act, Memorandum of
association and reasonably fair is
ultravires.
• ultra vires means beyond power
AoA – (i) Rules & Regulation for the internal
Management of the affairs of the company.
(ii)controlled by the memorandum
 Contents

• Business of the company

• Amt. of capital issued & the classes of shares
• Rights of each class of share holder & procedure for
variation
• Allotment ,Calls, Forfeiture of shares
• Transfer of shares
• Companies lien on shares
• Exercise of borrowing powers including issue of
debentures.
• General Meeting, Notices, Quorum, Proxy, Voting,
resolution, Minutes etc.
• Appointment, No., & Powers of Directors.
• Dividends- Interim & Final- General Reserve.
• Accounts & Audits.
• Keeping of books.
 Criteria for membership

• The subscriber of the memorandum of a company who shall be

entered as members in it’s register of members.
• Who agrees in writing to become a member of a company.
• Every person holding equity share capital of a company and
whose name is entered as beneficial owner in the records of
depository.

“Every shareholder is a member but every member need not

be a shareholder”
 Articles and Memorandum
difference
• Memorandum
• Charter of the company
• Supreme document
• Must have MOA
• Alteration is difficult
• Act against Memorandum
is ultra vires
• Articles
• Regulations for internal
management
• Subordinate to MOA
• No need in case of co
limited by shares
• Can be altered easily by
passing resolution
• Act if it is intravires to the
memorandum can be
ratified by share holders
 Constructive notice of MOA&AOA

• It is the presumption that all the persons

have a notice of contents of the
MOA&AOA.
Doctrine of indoor management
• Exception to the rule of constructive notice
• Share-”Share in the share capital of a
company and includes stock except where a
distinction between stock and share is
expressed or implied” [Sec. 2 (46)]
• Types of shares-
(1) Equity
(2) Preferential
Under Companies Act, a meeting means a gathering of two or more
persons, convened in accordance with the provisions of the act
and the articles of the company, for transacting some lawful
business.

Requisite of a valid general meeting

(i) Meeting must be properly called – Proper authority & Proper
Notice
(ii)Must be properly convened – Proper Quorum & Proper
Chairman
(iii)Must be properly conducted – Business must be validly
transacted i.e. resolutions must be properly moved & passed,
and voting by show of hands & Proper minutes must be
prepared.
• Meetings of members
(i) Statutory meeting
(ii) AGM
(iii) EGM
• Meetings of Directors
(i) Meetings of BoD
(ii) Meetings of committees of Board
• Other Meeting
(i) Meeting of debenture holders
(ii) Meeting of creditors
• Maintenance of Accounts as per AS
prescribed by ICAI.
• Form of Bal. Sheet & P/L as per Schedule
VI of the Companies Act,1956.
• 3 copies of B/S and P/L A/c within 30 days
from the date of AGM to Registrar.
• 1st auditor(s) by BOD within 1month of incorporation.
• Qualification of Auditors:- Must be a CA.
Can’t be an auditor:
(i) Body Corporate
(ii)Officer or Employee of the org.
(iii)A person who owes the Company more than Rs.1000.
(iv)A person holding any security carrying voting rights of the company.
(v)A person who is disqualified for appointment as auditor in any
subsidiary or holding company.
• Right of free and complete access to the
books & accounts.
• Right to require from the officers of the
company such information & explanation.
• Entitled to receive notice of and to attend
general meetings of the company.
• Based on the recommendation of Kumarmangalam
Birla Committee report on Corporate Governance, the
Companies (Amendment) Act, 2000 has introduced
this sec.
• Every public company paid up cap. Of more than 5
crores shall constitute an Audit Committee.
• Penalty for non Compliance:-
Every officer in default shall be punishable up to
one year of imprisonment or Rs. 50,000 or both.
• Compromise – It means an amicable settlement of
differences by mutual concessions by the parties to
dispute or difference by agreeing not to try it out.

• Arrangement – It is of wider import than

compromise and includes a reorganization of the
share capital of the company by the consolidation of
shares of different classes.

Arrangement & Compromise may take place for the

purpose of Reconstruction & Amalgamation of
companies.
• Reconstruction
(i) The transfer of undertaking of an existing
company to another company.The old
company ceases to exist.
(ii) The rights of shareholders in the old
company is being satisfied by issuing shares
in new co.
• Amalgamation – It is the blending of two or
more undertakings into one undertaking,
the shareholders of each blending co.
becoming substantially the shareholders
of the other company which holds blended
undertakings.
 Modes of winding up
(i)Compulsory winding up by Court [Sec.433]
(ii)Voluntary winding up
Members voluntary winding up
Creditors voluntary winding up
(i)Voluntary winding up under supervision of the
court.
• Special Resolution.
• Default in holding statutory meeting.
• Failure to commence business.
• Reduction in membership.
• Inability to pay debts.
• Just & equitable.
• Ordinary resolution passed where the
period fixed by the Articles for the
duration.
• If the company resolves by special
resolution that it shall be wound-up
voluntarily [sec.484]
Members Creditors
• Solvent companies • Insolvent Companies
• No need of creditors • Creditors meeting
meeting necessary
• Liquidator appointed • Liquidator appointed
by the member by the creditor
• No committee of • If wish can formed a
inspection can be Committee of
formed. inspection.
• Based on AGM Notice
• Based on separate legal entity