What Do you mean by Company??
What are the Characteristics of the
Q.1 Write Short Notes:
Q.2 Conversion of Private
Company into Public
– Pros & Cons
In the 17th and 18th centuries, chartered companies
could be established under a special Royal charter
issued by the king. These are incorporated under a
special charter by a monarch.
The East India Company and
The Bank of England of chartered
companies incorporated in England. The charter
defined their powers and area of operation.
The Company formed/incorporated under the
Company’s Act 1956 or any other Company’s Act
passed earlier is called Registered Company.
Such co. came into existences only when they are
registered under the Act and a certificate of
incorporation has been issued by the registrar.
Every co. registered under the Act has to prepare a
Registered co. may further divided into 4 sub
1. Classification of companies by liability of members
– Companies limited by shares
– Companies limited by guarantee
• not requiring large-scale capital
• non-trading companies are formed with a
• These types of companies are formed for the
promotion of art, science, culture and sports etc
• Company’s purpose
• Such companies may be registered with or without
a share capital.
– Unlimited liability companies
2. Classification of companies by number of members
As per Section 3 of the Act. “ Private Company ” means a
Company which, by its articles…
I. Restricts the right of transfer of its share,
II. Limits the number of its members between 2
to 50 and
III. Prohibits any invitation to the public to
subscribe for any shares or debentures of the
− Public company
• A “ Public Company ” means a company ,
which is not a Private company.
I. The shares of company’s members are fully
II. The minimum number of members required in public
company is seven (Maximum, no limit) .
III. Company can invite the general public for the
subscription of its shares and debentures
3. Classification of companies by control
– Government company
• Either central or state government held 51
% or more than 51 % share of any company,
it is known as a Government Company. A
company subsidiary of a government
company is also a government company.
– Holding company & Subsidiary company
4. Classification of companies by other consideration :
Deemed Public company
Conversion of Private Company
into a Public Company
• Conversion by default
• Conversion by choice
• Conversion by operation of law
Conversion by default
Stipulates that the Articles of a private company shall
provide for four restrictions:• Restrictions on transfer of shares;
• Restrictions on invitation to public to subscribe to the
shares or debentures of the company;
• Restrictions on the maximum number of members which
should not exceed 50 excluding members who are
employees or ex-employees of the company; and
• Prohibition on any invitation or acceptance of deposits
from persons other than its members, directors or their
• It shall pass a sp. Resolution. To alter its articles so as
to eliminate the provisions relating to a pvt. Co.
• Within 30 days, prospectus or a statement in lieu of a
prospectus together with a copy of special resolution
and a copy of special resolution and a copy of altered
articles should be filed with the registrar.
• It shall increase the no. of members to at least 7 if it is
less than 7. and also increase the no. of directors to 3.
• The co. shall have to increase its paid-up capital to at
least rs 5 lakh.
• It shall delete the word “PRIVATE” from its name.
• The company shall cease to be a private company
from the date of the alteration.
Conversion by operation of
• There are 4 circumstances mentioned, which would
force a pvt co. to become a public co.
1. Where 25% more its paid-up share capital is held by
1 or more bodies corporate or public co.
2. Where the average annual turnover is more than 25
crores for 3 consecutive financial years.
3. Where a pvt. Co. holds out more than 25% of the
paid- up share capital of a public co.
4. Where the pvt. Co. accepts by invitation or renew
deposits from the public, other than from its members
or directors and their relatives, than the pvt. Co. will
become a public co., the day it accepts the deposits.
Incorporation of Company
• Company Incorporation procedure is divided
into 3 parts
II. Incorporation of company
III. Certificate of Company
• Begins with potential business idea.
• Certain feasibility test/studies are conducted to
determine the idea can be profitably exploited.
• In case the test results in favorable results, promoters
may decide to form the co.
• The person who conceive the business idea, decide to
form a co. take necessary steps for the same, and
assume associated risks, are called promoters.
Incorporation of Company
• Minimum paid-up capital
• Number of members
• Every directors of a company is required to obtain a
unique identification number called DIN from
Ministry of Corporate affairs.
• Ministry of Corporate Affairs has launched an egovernance project in the year 2006. with the
implementation of this project e-filing of all the
documents with the documents with the registrar of
companies has been made mandatory using digital
Step – 1 Name approval
• Submission of application for name availability.
• Online form submission i.e form no. 1A to RoC to
ascertain the availability of the name along with filing fee
• The application should mention at least 4 names up to 6.
• Once the promoter gets name approved from the RoC, it
will remain valid for the period of 6o days, however they
can apply for the revalidation of name for further 30 days
on payment of rs. 250 as filling fee.
Step -2 Memorandum &
Articles of Association
• Drafting of MoA and AoA of the co.
• Stamping and dating of MoA & AoA.
• The MoA and AoA should be stamped as per indian
stamp act and at the notified rate as per provisions of
stamp duty rates of that state.
• The MoA and AoA should be subscibed by at least 2
persons in case of pvt. Ltd. Co. and 3 in case of public ltd
• Each subcriber should take atleast 1 share and will wite
opposite to his name the number of shares he takes.
• All the personal details should be given with his sign. But
in the presence of 1 witness.
Step 3 – Incorporation Forms
• Form – 1 for declaration of compliance the act.
• Form -18 for situation of the registered office of the
• Form – 32 for particulars of directors
Step - 4 Certificate of
• The RoC shall verify the documents and suggest
modifications wherever required.
• If any then it will be e-filed again.
• Thereafter, Registrar on being satisfied that all the
requirements for the registration of the co. as laid down
under the act and have been duly complied.
• Then he will certify under his hand that Company is
incorporated and issue a certificate of incorporation to