The companies act


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The companies act

  1. 1. Companies Act,1956 Presented by:- Doni Boje RMBA /10-20
  2. 2. Contents <ul><li>Introduction </li></ul><ul><li>Characteristics </li></ul><ul><li>Incorporation of company </li></ul><ul><li>Memorandum of Association </li></ul><ul><li>Articles of Association </li></ul><ul><li>Doctrine of Constructive Notice </li></ul><ul><li>Doctrine of Indoor Management </li></ul><ul><li>Doctrine of Ultra Vires </li></ul>1
  3. 3. Introduction <ul><li>The Company Act came into force from 1 st April 1956. </li></ul><ul><li>Section 3(1)(i) of the Companies Act, 1956 defines a company as: “a company formed and registered under this Act or an existing Company”. </li></ul><ul><li>‘ Existing Company’ means a company formed and registered under any of the earlier Company Laws. </li></ul>2
  4. 4. Characteristics <ul><li>Separate Legal Entity </li></ul><ul><li>Limited Liability </li></ul><ul><li>Perpetual Succession </li></ul><ul><li>Common Seal </li></ul><ul><li>Transferability of Shares </li></ul><ul><li>Separate property </li></ul><ul><li>Capacity to sue </li></ul>3
  5. 5. <ul><li>Separate legal entity </li></ul><ul><li>A company is a separate legal entity means it is different from its members. It works as an independent body. </li></ul><ul><li>The Company’s money and property belong to the company and not to the shareholders (although the shareholders own the company). </li></ul>4
  6. 6. 2. Limited liability <ul><li>It means that the liability of a member shall be limited to the value of the share held by him, he cannot be called upon to bear the loss from his personal property. </li></ul>5
  7. 7. 3. Perpetual succession <ul><li>It means that a company’s existence persists irrespective of the change. </li></ul><ul><li>The existence of company does not affected by death, insolvency, transfer of shares or retirement of the share holders. </li></ul>6
  8. 8. 4. Common seal <ul><li>A company being an artificial person cannot work as a natural being. </li></ul><ul><li>Therefore it has to work through its Directors, Officers and other employees. A common seal used as an official signature of the company . </li></ul>7
  9. 9. 5. Transferability of shares <ul><li>The shares of a company can be freely transferable to any other person by the shareholder, if he wants to. </li></ul><ul><li>A company cannot impose absolute restrictions on the rights of the members to transfer their share. </li></ul>8
  10. 10. 6. Separate property <ul><li>A company is a legal person, capable of owning, enjoying and disposing of property in its own name (although its capital and assets are contributed by its shareholders). </li></ul>9
  11. 11. 7. Capacity to sue <ul><li>A company can sue and be sued in its corporate name. </li></ul>10
  12. 12. Incorporation of company 11
  13. 13. Memorandum of association <ul><li>Every company has to have a Memorandum of Association, it is the first step in the formation of a company. </li></ul><ul><li>It is a vital document, that has to be filled by registrar at the time of incorporation of the company, it tells the objects of the company’s formation, the power of the company as well as the boundaries beyond which the action of the company can not go. </li></ul>12
  14. 14. Articles of association <ul><li>The articles of association of a company are the rules, regulations and bye-laws that govern the management of its internal affairs and the conduct of its business. </li></ul><ul><li>They are framed with the object of carrying out the aims and objects as set out in the M/A . </li></ul>13
  15. 15. Doctrine of constructive notice <ul><li>According to Section 610, every person or outsider dealing with the company is deemed to have notice of the contents of the M/A and A/A and understood the contents thereof in the correct perspective. </li></ul>14
  16. 16. Doctrine of Indoor Management <ul><li>The rule was first laid down in Royal British Bank v. Turquand. </li></ul><ul><li>Rule of Indoor Management is an exception to the Doctrine of Constructive notice. </li></ul><ul><li>An outsider can read/inspect the M/A and A/A of a company but he can not inspect and interfere the internal proceeding of the company. </li></ul>15
  17. 17. Doctrine of Ultra Vires <ul><li>‘ Ultra’ means ‘beyond’ and ‘vires’ means ‘power’. </li></ul><ul><li>An act of the company must not be beyond the objects clause, otherwise it will be ultra vires and, therefore, void and cannot be ratified even if all the members wish to ratify it. This is called the doctrine of ultra vires. </li></ul>16