COMPANY LAW

DEFINITION

A voluntary association of persons formed for some common purpose. It has capital divisible into parts, known as shares. The Act extends to whole of India except as regards to state of Nagaland, Goa, Daman and Diu and Jammu & Kashmir. Kashmir.

CHARACTERISTICS OF A COMPANY

Separate legal entity- Salomon vs Salomon & Co. Ltd entityLimited liability Perpetual succession Common seal Transferability of shares Separate property Capacity to sue

KINDS OF COMPANIES
Companies are classified on the basis of following Incorporation Liability Number of members Control Ownership

Statutory

Unlimited Limited

Private Public

Holding

Govt Non Govt

Registered

Subsidiary

By shares

By guarantee

Associations not for profit- sec 25 profitThe CG may grant license when it is proved to the satisfaction of CG That ititIS about to be formed as a limited company for promoting commerce, science, religion, charity or any other useful object and Intends to apply its profits, if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members ONE MAN COMPANY

FORMATION OF COMPANY
Documents to be filed with the Registrar MOA

AOA AGREEMENT LIST OF DIRECTORS DECLARATION Within 30 days of the date of incorporation of the Company, a notice of the situation of the registered office of the Company shall be given to the Registrar who shall record the same. certificate of in corporation is conclusive evidence that all the requirements of the Companies Act have been complied. (Sec 35) Jubilee Cotton Mills Ltd Vs Lewis

Effects of registration Sec34 Distinct legal entity Perpetual succession Companys property is not the property of the shareholders

PrePre-incorporation or preliminary contracts position of promoters as regards pre-incorporation contracts preCompany not bound by pre-incorporation contract preCompany cannot enforce pre-incorporation contract prePromoters personally liable Kelner Vs Baxter Provisional contracts Refer to contracts entered into by a public company after its incorporation but before it is issued the certificate of commencement of business

MEMORANDUM OF ASSOCIATION
CONTENTS OF MEMORANDUM Sec13 Name clause Registered office clause Objects clause Capital clause Liability clause Association clause DOCTRINE OF ULTRA VIRES A Company has the power to do all such things as are Authorized to be done by the Companies Act, 1956 Essential to the attainment of its objects specified in the MOA Reasonably and fairly incidental to its objects

ARTICLES OF ASSOCIATION
Doctrine of constructive notice Every outsider dealing with a company is deemed to have notice of contents of the MOA and AOA. These documents, on registration assume the character of public documents. Doctrine of Indoor Management There is one limitation to the doctrine of constructive notice of the MOA and AOA. The outsiders dealing with the company are entitled to AOA. assume that as far as the internal proceedings of the company are concerned, everything has been regularly done. done. Royal British Bank Vs Turquand Exceptions to the doctrine of indoor management Knowledge of irregularity Negligence Forgery Acts outside the scope of apparent authority.

SHARE CAPITAL

Authorised or Nominal

Called-up

Uncalled

Issued & subscribed

Paid-up

Reserve

Kinds of share capital

Equity

Preference

ALTERATION OF CAPITAL
If so authorised by AOA, alter capital. Increase nominal share capital by issuing new shares. Consolidate and of larger amount. Convert fully paid-up shares into stock or vice versa. paidSubSub-divide its shares divide all or any part of its share capital into shares into shares of smaller amount. Cancel shares which have not been taken up. The company shall give notice of the alteration of capital to the Registrar within 30 days after doing so.

REDUCTION OF CAPITAL
A. With the consent of the Tribunal

It may extinguish or reduce the liability of any of its shares in respect of share capital not paid up . or Cancel any paid up share capital which is lost, or is unrepresented by available assets . or Pay off any paid up share capital which is in excess of the wants of the company

B. without the sanction of the Tribunal. Forfeiture of shares. surrender of shares. cancellation of shares. purchase of shares by company u/s 402(b). Redemption of redeemable preference shares. BuyBuy-back of shares.

PROCEDURE FOR REDUCTION OF SHARE CAPITAL

Special resolution. Application to the Tribunal. Interest of the shareholders. Registration of order of Tribunal with Registrar.

SHARES
Share means share in the share capital of a company it includes stock. It is evidenced by share certificate. Issued under its common seal. It specifies the shares held by a member, distinguished by appropriate number. Stock is aggregate of fully paid up shares, for the purpose of convenient holding into different parts. A company limited by shares may if so authorised by AOA, by ordinary resolution passed convert its fully paid up shares into stock. Notice shall be given to the registrar within 30 days of conversion.

TYPES OF SHARES
Preference shares and Equity shares Preference shares ::i.

They have a preferential right to be paid dividend during the life time of company preferential right to the return of the capital when the company goes into liquidation.

ii.

KINDS OF PREFENTIAL SHARES

CUMULATIVE PS:- These are the shares on which PS: dividend goes on accumulating till it is fully paid. It is bound to pay only when they are having sufficient profits for distribution. NonNon-cumulative PS:-No dividend to be accumulated. PS: Participating PS:-These shares are not only entitled to a fixed PS:rate of dividend but also to a share in the surplus profits which remain after the claims of the equity shareholders have been met.

NonNon-participating ps:- These shares are entitled to only a ps:fixed rate of dividend. Convertible ps :- Shares which entitle their holder to convert :them into Equity shares within a certain period. NonNon-convertible ps: No conversion. Redeemable pc: The following are the conditions. Shares to redeemed must be fully paid up. Shared can be redeemed only out of i. Profits of company. ii. Proceeds of a fresh issue of shares. iii. Share premium.

Application and Allotment of Shares

Minimum subscription. Application money. Effect of irregular allotment. Opening of Subscription list. Application to one or more stock exchanges. Return as to allotment.

BUYBUY-BACK OF SECURITES
A company may purchase its own shares u/s 77 A from Out of its free reserves or Out of securities premium account or Out of proceeds of an earlier issue other than fresh issue CONDITIONS FOR BUY-BACK BUYAOA must authorise. A special resolution has been passed in general meeting of the company. The buy-back does not exceed 25% of the total paid-up capital buypaidand free reserves. All shares are fully paid-up. paidBuyBuy-back of shares listed on a stock exchange.

PROHIBITION FOR BUY-BACK IN CERTAIN BUYCIRCUMSTANCES U/S 77B. 77B.

Through any subsidiary company including its own subsidiary companies or Through any investment company or group of investment companies or If a default ,in repayment of deposit or interest, redemption of debentures or preference shares or repayment of a term loan or interest to any financial institutions or bank is subsisting.

ISSUE OF SHARES AT A PREMIUM U/S78

No need for AOA. Share premium account to be utilised for Issue of bonus shares Writing off the preliminary expenses. Writing off expenses or commission paid or discount allowed on any issue of shares or debentures of the company. Redemption of redeemable preference shares or debentures.

ISSUE OF SHARES AT A DISCOUNT U/S79

CONDITIONS:CONDITIONS:1.

Shares to be a class already issued. Resolution of the company and sanction of CG. Maximum rate of discount is 10%. Company must have been working for at least a year. Shares to be issued within two months of sanction of the CG.

2.

3.

4.

5.

ISSUE OF SWEAT EQUITY SHARES U/S79A

Meaning :- Equity shares issued at a discount or for :consideration other than cash for providing know how or making available rights in the nature of intellectual property rights or value additions by what ever name called. CONDITIONS:CONDITIONS:-1) Authorised by a resolution. 2) Resolution specifies the number of shares ,current market price, consideration, if any,and the class of directors or employees to whom such equity shares are to be issued. 3)Sweat equity shares are listed in stock exchanges in accordance with regulations made by SEBI. 4)Not less than one year has at the date of issue elapsed since the date on which the company was entitled to commence business.

MANAGEMENT AND ADMINISTRATION

Director U/S 2(13) includes any person occupying the position of director, by whatever name called . He is a person having control over the direction , conduct, management of the affairs of company. Every public company shall have at least three directors and in case of private company at least 2 directors. A public company having a paid up capital of Rs 5cr or more and 1000 or more small share holders shall have at least one director elected by such small share holders in the manner as may be prescribed. Small shareholder means a shareholder holding shares of nominal value of Rs 20000 or less in a public company

QUALIFICATIONS AND DIS QUALIFICATIONS

A director must be an individual, competent to contract and hold a share qualification, if so, required by AOA. Disqualifications A person of unsound mind. An undischarged insolvent. Application pending with respect to a person to be adjudicated as an insolvent. A person who has been convicted by a Tribunal of any offence involving moral turpitude and sentenced for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence. A person calls in arrear held for more than six months.

A person who is disqualified for appointment as director by an order of Tribunal. A person who is a director of a public company which 1) Has not filed returns for any three continuous financial years or 2) Has failed to repay its deposits or interests. Number of Directorships:-15 Directorships:Note:Note:-The following companies shall be excluded A private company which is neither a subsidiary or holding company of a public company. An unlimited company. Sec 25 companies. An alternate director. Duration of directorship 5years

APPOINTMENT OF DIRECTORS
1.First directors AOA MOA Subscribers of the Memorandum. 2.By the Company At least 2/3rds of the total number of directors shall be liable to retire by rotation , Rotational directors. 3. By directors As additional directors As alternate director In a casual vacancy

4. By third parties.

5. By proportional representation- appointment shall be made representationonce in three years as provided in AOA. 6. By CG- appointment will be for a period not exceeding three CGyears on any one occasion. POSITION OF DIRECTORS As agents. As employees. As officers. As trustees. Removal of directors Shareholders . CG. Tribunal.

MEETINGS AND PROCEEDINGS

1)

2)

3)

Statutory Meeting- This is the first meeting of share Meetingholders of a public company and is held only once in lifetime of a company. Meeting shall be called upon within a period of not less than one month nor more than six months from the date at which the company is entitled to commence business. Annual General Meeting- There shall not be an interval of Meetingmore than 15 months between one AGM of the company and the next . A company may hold its first AGM within a period of 18 months from the date of its incorporation. Extraordinary General Meeting- To be convened by the MeetingBOD

REQUISITES OF A VALID MEETING

Proper authority BOD should pass resolution. Notice of meeting- Not less than 21 days notice in writing. meetingQuorumQuorum- public company 5 members personally present and in case of any other company to Chairman of the meeting- Presiding officer. meetingMinutes of meeting-record of what the company and directors meetingdo in meetings.

RESOLUTIONS
The Questions which generally come for consideration at the general meeting of a company are presented in the form of proposals called motions. The motion after close discussion, is formally put to vote by a show of hands. The final result is declared after the poll is taken. If a motion is carried. It becomes a resolution

KINDS OF RESOLUTIONS
Ordinary resolution-passed at a general meeting resolutionof a company by simple majority of votes. WHEN REQUIRED ? Rectification of name or adoption of new name Issue of shares at discount Alteration of share capital Adoption of statutory report.

Passing of annual accounts. Appointment of auditors and fixation of remuneration. Appointment of first directors who are liable to retire by rotation. Increase reduction in the number of directors within the limit fixed by AOA. Removal of a director and appointment in his place. Appointment of managing director. Winding up of a company voluntarily.

Special resolution
Within 30 days of passing of the resolution, be filed with the registrar. When required ? Alteration of MOA&AOA. Payment of interest out of capital. Reduction of share capital. Appling to the court to wind up a company.

RESOLUTIONS REQUIRING A SPECIAL NOTICE. The notice shall be given not less than 14 days before the meeting at which the resolution is to be moved. When required ? Appointment of an auditor other than retiring ones. Retiring auditor shall not be re appointed. Removal of a director before the expiry of his period. Appointment of a director in place of one who is removed