Companies Act 1956


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Companies Act 1956

  1. 1.
  2. 2. INTRODUCTION <ul><li>Cherished child of English parents </li></ul><ul><li>First passed in India in 1850 </li></ul><ul><li>First amendment in the year 1857 </li></ul><ul><li>Amended several times later </li></ul>
  3. 3. THE COMPANIES ACT 1956 <ul><li>Came into force on 1 st april 1956 </li></ul><ul><li>Based largely on the recommendations of company law committee (Bhabha committee) </li></ul><ul><li>Largest piece of legislation (658 sections and 15 schedules) </li></ul>
  4. 4. FEATURES <ul><li>Full and fair disclosure of various matters in the prospectus </li></ul><ul><li>Detailed information of financial affairs of the company to be disclosed in its accounts </li></ul><ul><li>Provision for intervention and investigations by the government into the affairs of the company </li></ul>
  5. 5. FEATURES (Contd…) <ul><li>Restrictions on powers of managing agents and other managerial personnel </li></ul><ul><li>Enforcement of proper performance of their duties by company management </li></ul><ul><li>Protection of minority shareholders </li></ul>
  6. 6. FORMATION OF COMPANY <ul><li>Documents to be filed </li></ul><ul><ul><li>MOA (Memorandum Of Association) </li></ul></ul><ul><ul><li>AOA (Articles Of Association) </li></ul></ul><ul><ul><li>A statement of the normal / authorized capital </li></ul></ul><ul><ul><li>A notice of address of the registered office of the company </li></ul></ul><ul><ul><li>List of directors* </li></ul></ul><ul><ul><li>An undertaking* </li></ul></ul><ul><ul><li>A declaration </li></ul></ul>
  7. 7. FORMATION OF COMPANY ( contd… ) <ul><li>Certificate of Incorporation </li></ul><ul><li>Certificate of Commencement of Business </li></ul><ul><li>Promoter </li></ul><ul><ul><li>Liability of Promoters </li></ul></ul><ul><ul><li>Remuneration of Promoters </li></ul></ul><ul><li>Preliminary or Pre-Incorporation contracts </li></ul><ul><li>Provisional contracts </li></ul>
  8. 8. KINDS OF COMPANIES <ul><li>BASED ON “ MEMBERSHIP ” </li></ul><ul><ul><li>Private Company </li></ul></ul><ul><li>-Min no. of members: 2 </li></ul><ul><li>-Max no. of members: 50 </li></ul><ul><li>-Restricts right to transfer its shares </li></ul><ul><li>-Prohibits public issue of shares or debentures </li></ul><ul><ul><li>Public Company </li></ul></ul><ul><li>-Min no. of members: 7 </li></ul><ul><li>-Max no. of members: Unlimited </li></ul><ul><li>-Doesn’t restrict right to transfer its shares </li></ul><ul><li>-Doesn’t Prohibit public issue of shares or </li></ul><ul><li>debentures </li></ul>
  9. 9. KINDS OF COMPANIES ( contd…) <ul><li>BASED ON “ INCORPORATION ” </li></ul><ul><ul><li>Chartered companies - companies which are incorporated under a special charter granted by the king or queen in exercise of royal power. </li></ul></ul><ul><li>-East India Company(1600) </li></ul><ul><ul><li>Statutory Companies -which are created by special act of parliament or state legislature at central or state govt. level </li></ul></ul><ul><li>-Reserve Bank of India </li></ul><ul><ul><li>Registered Companies – are companies which are registered under the co.’s act of 1956 </li></ul></ul>
  10. 10. KINDS OF COMPANIES ( contd…) <ul><li>BASED ON “ LIABILITIES ” </li></ul><ul><ul><li>Co.’s limited by SHARES –companies in which the liability of its members is limited to the extent of the amount unpaid on the shares held by a particular member. </li></ul></ul><ul><ul><li>Co.’s limited by GUARENTEE -the liability of members is limited to a fixed amount which members undertake to contribute to the assets of the company in case of its winding up. </li></ul></ul><ul><ul><li>Unlimited Co.’s –wherein members are liable for the debts of the company irrespective of their interest in the company </li></ul></ul>
  11. 11. <ul><li>BASED ON “ CONTROL ” </li></ul><ul><ul><li>Holding Company -51% of the share capital </li></ul></ul><ul><ul><li>Subsidiary Company –less that 51% </li></ul></ul><ul><ul><li>Govt. Companies – MNTC, ONGC </li></ul></ul><ul><ul><li>Foreign Companies – IBM, MICROSOFT </li></ul></ul> A) B)
  12. 12. PUBLIC CO. VS. PRIVATE CO. <ul><li>Number of members </li></ul><ul><li>Commencement of business </li></ul><ul><li>Invitation to public </li></ul><ul><li>Transferability of shares </li></ul><ul><li>Number of directors </li></ul><ul><li>Statutory meeting </li></ul><ul><li>Restrictions on appointment of directors </li></ul><ul><li>Managerial remuneration </li></ul><ul><li>Further issue of capital </li></ul>
  13. 13. PARTNERSHIP VS. COMPANY <ul><li>Registration </li></ul><ul><li>Number of members </li></ul><ul><li>Legal status </li></ul><ul><li>Property </li></ul><ul><li>Contracts </li></ul><ul><li>Management </li></ul><ul><li>Life duration </li></ul><ul><li>Liability </li></ul><ul><li>Creditors </li></ul><ul><li>Dissolution on death </li></ul><ul><li>Agency relationship </li></ul><ul><li>Transfer of interest </li></ul><ul><li>Statutory obligations </li></ul>
  14. 14. MERGERS AND ACQUISITIONS <ul><li>MERGER : </li></ul><ul><li>Combination of two companies to form new company or to run business under any one of the merging companies’ name. </li></ul><ul><li>Eg.:1. NBC Universal; NBC and Vivendi Universal </li></ul><ul><li>Entertainment </li></ul><ul><li>2. US Airways; with America West Airways </li></ul><ul><li>3. Sony Ericson; Sony and Ericson </li></ul><ul><li>4. NSN; Nokia and Siemens </li></ul>
  15. 15. <ul><li>ACQUISITION : </li></ul><ul><li>Purchase of one company by another with no new company being formed. </li></ul><ul><li>Eg.:1. P&G buys Gillette </li></ul><ul><li>2. Tata steel acquires Corus </li></ul><ul><li>3. Google buys Youtube </li></ul><ul><li>4.Vodafone acquires Hutch </li></ul>
  16. 16. MOTIVES AND BENEFITS OF M&A <ul><li>Economies of scale </li></ul><ul><li>Improved market reach </li></ul><ul><li>Reduction in Tax liability </li></ul><ul><li>Diversification of risk </li></ul><ul><li>Limit competition </li></ul><ul><li>Eliminating the financial constraints </li></ul><ul><li>Synergy </li></ul>
  17. 17. TYPES OF MERGES <ul><li>Horizontal merger </li></ul><ul><li>Vertical merger </li></ul><ul><li>Market-extension merger </li></ul><ul><li>Product-extension merger </li></ul><ul><li>Conglomerate merger </li></ul>
  18. 18. M&A -ITS FINANCING <ul><li>All Shares Deals </li></ul><ul><li>Cash </li></ul><ul><li>Hybrids </li></ul><ul><li>DEMERGER/SPIN-OFF/SPIN-OUT: </li></ul><ul><li>-Effective opposite of a merger </li></ul><ul><li>-One Co. splits into two </li></ul>