Characteristics of a company

1. COMPANY LAW &
SECRETARIAL PRACTICE

2. SYLLABUS
UNIT I - INCORPORATION OF COMPANY AND ROLE OF COMPANY SECRETARY
Evolution of Company law – Meaning and characteristics of a company – Stages of
incorporation – e-filing – Memorandum of Association and Articles of Association – Alteration
– Effects of registration – Doctrine of constructive notice – Ultravires and indoor management
– lifting of Corporate veil. Role and importance of Company Secretary – Key Managerial
Personnel – Compliance officer – Compulsory Appointment - Qualification and
disqualifications – Powers, duties and responsibilities of Secretary – Resignation and removal
of Company Secretary – Officer in default.
UNIT II - PROSPECTUS & SHARECAPITAL Prospectus – Shelf Prospectus – Red herring
Prospectus – Civil & Criminal liability for misstatement in Prospectus – Statement in lieu of
Prospectus - Secretarial duties in the issue of Prospectus. Share capital – Alteration of Share
capital – rights issue, Bonus issue, Private and preferential allotment – Dividend, interim
dividends, warrants and mandates – Secretarial duties in the issue of share capital.
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3. SYLLABUS
UNIT III - MEMBERS AND SHAREHOLDERS Members – Rights and responsibilities – who
can be a member – member, shareholder, contributory – difference – transfer and
transmission of shares (including depository mode) – Nomination and its importance.
UNIT IV - KEY MANAGERIAL PERSONNEL AND MEETINGS Directors – Women Director –
Independent Director and Whole time Key Managerial Personnel – Director Identification
Number and its significance – duties, qualification and disqualification. Board meeting,
shareholder meeting, committee meeting, mandatory committee meeting – Role and
composition – Powers of the board – Notice , Agenda, minutes and resolution – Secretarial
duties in meetings.
UNIT V - WINDING UP Modes of Winding up - Winding up by the tribunal – Voluntary
Winding up – NCLT – Special courts – Mediation and Conciliation panel.
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4. MEANING
 A company is a group of persons associated together for the attainment of a common
goal.
 In other words , a company is registered association which is an artificial legal person,
having an independent legal entity with a perpetual succession, a common seal for its
signatures, a common capital comprised of transferable shares and carrying limited
liability.
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5. Characteristics of a Company
1. Separate Legal Entity
 A company is an artificial person as it is created by the law.
 Being an artificial person, a company is entirely distinct from its members. It has almost all
the rights and powers of a natural person.
 Any of its members can enter into contract with it.
 Members cannot be held liable for the acts of company and even they cannot claim any
ownership in the assets of the company.
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6. Characteristics of a Company
Case: Salomon Vs Salomon & Co Ltd
 The company as a separate entity was firmly established in the landmark decision in
Salomon Vs Salomon & Co Ltd. Salomon a sole trader, sold his manufacturing business
to Salomon & Co Ltd ( A company he incorporated).
 Salomon received debentures worth 10000 pounds.
 The business subsequently collapsed and salomon made a claim on the basis of the
debentures held, as a secured creditor
 Realisable value of Assets: £ 6,000; Liabilities: Debentures-£ 10,000; Unsecured Debts-
£ 7,000.
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7. Characteristics of a Company
Case: Salomon Vs Salomon & Co Ltd (Cont..)
 The liquidator argued that Salomon could not rank ahead of other creditors because, in
fact the company and Mr. Salomon were one and the same or alternatively that the
company carried on Business on Salomon’s behalf.
 On appeal, the House of Lords held that Salomon & Co ltd was not a sham; that the debts
of the corporation were not the debts of Mr. Salomon because they were two separate
legal entities and once the artificial person is created “ it must be treated like any other
independent person with its rights and liabilities appropriate to itself.
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8. Characteristics of a Company
2. Limited Liability
A company may be a company
1) Limited by shares or
2) Limited by guarantee
In a company limited by shares, the liability of the members is limited to the unpaid value of
shares.
Face value of share: Rs 10
Member paid : Rs 7 During wind up he is liable to pay Rs 3 alone.
Unpaid : Rs 3
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9. Characteristics of a Company
2. Limited Liability
2) Limited by guarantee
 In a company limited by guarantee, the liability of the members is limited to the such
amount as the members may undertake to contribute to the assets of the company in the
event of wound up.
 The companies which are formed for the purpose of charity , sports , culture comes under
this category.
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10. Characteristics of a Company
3. Perpetual succession
 A company is an artificial person, which is brought into existence by the law.
 It is not in any manner affected by death, insolvency, mental disorder or retirement of any
of its members. It is created by a process of law and can be put to an end only by law.
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11. Characteristics of a Company
4. Common Seal
 The directors of the company have the power to act on behalf of the company and sign
documents bearing it’s name called common seal.
 The common seal acts as an official signature of the company.
 The name of the company must be engraved on the common seal.
 Any document not bearing the seal of the company
may not be accepted as an authentic and may not have
legal force.
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12. Characteristics of a Company
5. Transferability of Shares
 The capital of a company is divided into parts called shares.
 These shares are subject to certain conditions, freely transferrable.
 However the articles shall prescribe the manner in which such transfer of
shares will be made and it may also contain bona-fide and reasonable
restrictions on the right of members to transfer their shares.
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13. Characteristics of a Company
6. Separate Property
 Company is a legal person separate from its members, it is capable of owning,
enjoying and disposing off property on its own.
 Although its capital and assets are contributed by its shareholders, they are
not the private and joint owners of its property.
 The company is the real person in which all its property is vested and by which
it is controlled, managed and disposed off.
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14. Characteristics of a Company
7. Capacity to Sue
 A company can file case against others and it can be sued by others in its corporate
name.
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15. Characteristics of a Company
8. Separate management
 A company is administered and managed by its managerial personnel i.e., the Board of
Directors.
 The shareholders are simply the holders of the shares in the company and need not be
necessarily the managers of the company
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16. Characteristics of a Company
9. One Share- One Vote
 The principle of voting in a company is one share- one vote i.e., if a person has 10
shares, he has 10 votes in the company.
 Whereas the voting principle in cooperative society, where ‘ One member- One Vote’
principle applies i.e., irrespective of the number of shares held, one member has only one
vote.
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