2. Contents
UNIT 1
1. ORIGIN
2. EVOLUATION
3. MEANING OF COMPANY
4. FEATURES OF COMPANY
5. FORMATION OF COMPANY
6. TYPES
7. MOA
8. AOA
9. PROSPECTUS
10. DOCTRINES
11. SHARES & DEBENTURES
4. ORIGIN OF COMPANIES ACT
The history of Indian company law began with the
Companies act of 1850, modeled on British
Companies act of 1844.
• The Indian Companies act of 1913 was based on the
British Companies act of 1908.
After independence it was found that the company
law should again be amended.
5. CONT…
On the basis of the recommendations of the joint
parliamentary committee, the parliament passed the
new act in November, 1955 which received the
presidents assents on 18th January, 1956, this act came
into force with effect from April, 1956.
It consists of 658 sections and 14 schedules.
It also helps the growth of companies on healthy
business principles.
7. EVOLUATION OF COMPANIES ACT
• After a run of around 56 years the Indian companies act, 1956
is now in the process of being substituted by a new law.
• The new companies Bill 2012 was approved by the Lok Sabha
on 18 Dec 2012 & by the Rajya Sabha on 9 Augest 2013.
• On 29 Aug 2013 to become Law i.e, Indian companies act
2013.
• 2013 Act has 470 sec and 7 Schedules as against 658 sections
and 15 Schedules in 1956 Act.
8. To sustain trust & faith of Shareholders
To protect & preserve rights of Share holders
To make the drastic control over all the activities of
company
To make regulation of an effective Annual Meetings
Investment of general public should be used for the
development of society or social welfare
Main objectives of the Company
Law 1956
10. MEANING OF COMPANY
• The word ‘companis’ is an amalgamation of
the Latin word ‘com’ meaning “With Or
Together” and ‘pains’ meaning “Bread”.
• A Company is a voluntary association of
persons formed for the purpose of doing
business, having a distinct name and limited
liability.
11. DEFINITION OF THE COMPANY
• 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”.
• They can be incorporated/Registered under
the Companies Act.
looksvivek@gmail.com
12. FEATURES
• Separate legal entity
• Limited liability
• Separate property
• Transferability of shares
• Perpetual succession
• Common seal
• Can sue and be sued
13. 1. Separate Legal Entity
• The company is different and distinct from its
members in law. It has its own name and its
own seal, its assets and liabilities are separate
and distinct from those of its members.
• It is capable of owning property, incurring
debt, borrowing money, having a bank
account, employing people, entering into
contracts and suing and being sued separately.
14. 2. Limited Liability
• The liability of the members of the company is
limited to contribution to the assets of the
company up to the face value of shares held
by him.
• A member is liable to pay only the uncalled
money due on shares held by him when called
upon to pay and nothing more, even if
liabilities of the company far exceeds its
assets.
15. 3. Perpetual Succession [sec 34(2)]
• A company does not die… Death or insolvency
of member does not affect the existence of
the company.
• Membership of a company may keep on
changing from time to time but that does not
affect life of the company.
• There is a very good saying. Even where
during war all the members of a private
company, while in general meeting was killed
by a bomb, the company survived; not even a
hydrogen bomb could have destroyed it.
looksvivek@gmail.com
16. 4. Separate Property
• A company is a distinct legal entity. The company’s
property is its own. A member cannot claim to be
owner of the company’s property during the
existence of the company
5. Transferability of Shares sec(82)
• Shares in a company are freely transferable, subject
to certain conditions, such that no shareholder is
permanently or necessarily wedded to a company.
17. 6. Common Seal
•A company is a artificial person and does not
have a physical presence. Therefore, it acts
through its Board of Directors for carrying out its
activities and entering into various agreements.
•The common seal is the official signature of the
company. The name of the company must be
engraved on the common seal.
7. Capacity to sue and Being Sued
• A company can sue or be sued in its own
name as distinct from its members.
18. ADVANTAGES OF COMPANY
1. Limited Liability:
The liability of the members is limited to the
face value of the shares held by them.
2. Easy mobilization of resources:
The capital is divided in to a number of small
parts known as shares. Therefore even
people with limited resources can afford to
subscribe for the shares of the company.
looksvivek@gmail.com
19. 3. Possibilities for Expansion:
The corporate form of organization also paves
way for expansion in future.
4. Long Life:
The company continues to be in existence
irrespective of the changes in its membership.
5. Easy transferability of shares:
The shares of a company can be transferred
form one person to another person in the
manner provided in the AOA.
20. DISADVANTAGES OF THE COMPANY
1. Company’s Formation requires many formalities
and is expensive:
2. Company is not citizen and can not have the benefit
of fundamental rights:
3. Company’s social responsibility is greater:
4. Company’s members can not have effective control:
5. Company’s tax burden is heavy:
6. No Business Secrecy:
7. Company’s winding up procedure is expensive and
time consuming: