Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Companies act of 1956


Published on

  • Be the first to comment

  • Be the first to like this

Companies act of 1956

  1. 1. COMPANIES ACT OF 1956By, Divya Devaiah Deepak.M.S Bhushan patil Ajay.S Goutham pai
  2. 2. CONTENTS  Directors: appointment, power, duties and liabilities  Meeting and resolutions, types of meeting  Auditor: appointment, rights and liabilities  Winding up of company: meaning, modes  Liquidator: powers and duties
  3. 3. Sec 2(13) of companies act of1956 Defines a director as ‘any person occupying the position of a director, by whatever name called’ In general ,a person is said to be occupying a position of a director, if he has been charged with the responsibility of directing, conducting and controlling the affairs of a company
  4. 4. QUALIFICATION OF DIRECTOR Under the act, only individuals can become directors There is no academic, technical qualifications for a director Section 270 of act, requires a director to hold qualification shares in the company, and it should be fixed by the articles of company The nominal or face value of the qualification shares of director fixed by articles should not exceed rs 5000. The qualification shares must be acquired by a person elected as a director within 2 months of his appointment As per section 149 , director appointed by promoters of a newly incorporated firm, director must pay for qualification shares before certificate to commence business is obtained
  5. 5. Contd….. For the purpose of the calculation of the qualification shares ,only shares included in the share certificate in the name of director are taken into account, share warrants in his name shouldn’t be taken into account Qualification shares held by director should be disclosed in the prospectus With in two months of his appointment, he should file with the registrar a declaration specifying the qualification shares held by him
  6. 6. Consequences of failure toacquire qualification shares He ceases to be a director automatically, soon after the prescribed period(2 MONTHS) Even after expiry of the stipulated period, if he continues to act as a director, he will be fined for period he was acting as a director. He can be restrained from acting as a director of company by an order of injunction issued by an competent court
  7. 7. DIFFERENT WAYS OFAPPOINTMENT OFDIRECTORS company By the promoters of By the subscribers to memorandum of association By deeming the subscribers to the memorandum as the first directors By the company in general meetings By the board of directors By third parties By the principle of proportional representation By the central government
  8. 8. Number of directorship Whole-time Directorship A person cannot be appointed as a whole-time director in more than one company. Part-time Directorship Not more than 15 companies excluding the directorships of,
  9. 9. Contd…………. private companies [other than subsidiaries or holding companies of public company(ies)].i. unlimited companies,ii. associations not carrying on business for profit or which prohibit payment of a dividend, andiii. alternate directorships (i.e., he is appointed to act as a director only during the absence or incapacity of some other director).
  10. 10. Duties of DIRECTORS1. Fiduciary duty Exercise powers honestly and bona fide for the benefit of the company They must not make any secret profit out of their positions1. Duties of care, skill and diligence Directors should carry out their duties with reasonable care and skill,deligence Standard of care: depending upon nature of work, division of power, customs and remunarations
  11. 11. Other duties To attend board meetings Not to delegate his functions except to the extent authorized by the act or constitution of company To disclose his interest
  12. 12. POWERS OF DIRECTORS General powers of board Powers to be exercised at board meetings Powers to be exercised with the approval of company in general meetings Political contributions
  13. 13. Liabilities of directors Liability to third party Liability to company Liability to breach of statutory duties Liability of acts of his co-directors De facto and De jure liability
  14. 14. REMOVAL OF DIRECTORS Directors can be removed by1. Share holders2. Central government3. Company law board
  15. 15. Disqualification of directors A person with unsound mind An un discharged insolvent Person who has applied to be adjudicated as an insolvent and his application is pending before court of law Person convicted by court for moral turpitude Person disqualified by order of an court to act as director A person who failed to pay call money, on his shares for six months from date the call became due
  16. 16. Disqualifications……………a person who is already a director of a public company which,— (i) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first day of April, 1999; or (ii) has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more.
  17. 17. Meetings Key and important matters of the company are discussed here.
  18. 18. Types of meetings1)General meetings of shareholders. a) Statutory meeting: (sec 165) b) Annual general meeting: (sec. 166 & 167)2)Extra-ordinary general meeting (sec. 169).3)Meeting of creditors and debenture holders.
  19. 19. Resolutions1)Ordinary resolution.2)Special resolution: (sec. 189(2))
  20. 20. AUDITOR The auditor is the servant of the shareholders entitled with the duty to examine the affairs of the company, on their behalf and report to them what he has found He is the only safeguard which the shareholders have against enterprise
  21. 21. Qualification Member of a Institute of Chartered Accountants of India A firm with all partners being members of ICAI, and any partner may act as auditor in the name of firm
  22. 22. DISQUALIFICATIONS:As per Sub section (3) of Section 226 , none of the following persons shall be qualified for appointment as Auditor of a Company.a) Body corporateb) An officer or employee of the companyc) A person who is a partner, or who is in the employment, of the officer or employees of the companyd) A person who indebted to the company for an amount of more than Rs.1000/-
  23. 23. A person who has given any guarantee or provided any security in connection with the indebtedness of any third person to the company for an amount exceeding Rs,1000/- A person holding any security of that company ( After a period of one year from the date of commencement of the Companies (Amendment ) Act, 2000)For the purpose of security means an instrument which carried voting rights.
  24. 24.  According to Sub section (4 ) of Section 226 provides that if a person disqualified as a Auditor for the reasons enumerated in sub section (3) of Section 226 then he cannot be appointed as Auditor of any body corporate which is 1) A subsidiary of that company or 2) Holding company of that company or 3) A subsidiary of that company’s holding company
  25. 25. Appointment of First Auditor According to sub section 5 of Section 224, the board is vested with power to appoint first auditor within one month of incorporation of the company. The date of appointment to be within one month from the date mentioned in Certificate of incorporation issued by Registrar of Companies i.e. existence of the company from date i. e legal entity.
  26. 26. Certificate to be obtainedunder Section 224 (1B) This provision will not be applicable to Private company on and after the commencement of Companies (Amendment) Act, 2000 . The public limited companies are supposed to receive the certificate from the Auditor before appointment that if they are appointed as a Auditor of the Companies the appointment will be within limits specified in sub section (1B) of Section 224 of the Companies Act, 1956. Explanation to Specified number There are two categoriesa) A person or firm can audit twenty such companies have paid up capital of less than Rs.25 lakhsb) In any other case in the specified limit, out of twenty companies not more than 10 shall be companies each of which has a paid up share capital of Rs.25 lakhs or more.
  27. 27. Rights of an auditor Right to access books Right to obtain information and explanation from officers, directors etc Right to visit branch office at all times and access books,reciepts,vouchers etc Right to receive notice and other statements relating to general meetings Right to receive remuneration
  28. 28. Duties Acquaintance with articles of companies act Report to members in general meeting Examine trueness of balance sheet and profit and loss account, if any misuse of funds found by him report same to shareholders Be honest, perform his duty with care and caution
  29. 29. Special audit The central government may in certain cases direct special audit: If it shall have a opinion that ,the affairs of company is not being managed with sound business principle or prudent business practices Practices of company likely to cause serious injury or damage to trade, industry The financial position of company is such as to endanger its insolvency Special audit can be conducted by appointed c.a by government or by company auditor if government directs him.
  30. 30. Company secretary As per sec2(45) a company secretary is a person who is a member of Institute of Company secretaries of India or any other person possessing the required qualifications, appointed to perform duties imposed on him by the companies act, the ministerial or administrative duties and managerial functions that are delegated to him by the board
  31. 31. qualification According to the companies(appointment and qualifications of secretary)rules1993, every company with a paid up share capital of rs 50lakh or more shall have a whole time secretary, who is member of ICSI(Institute of Company Secretaries of India)
  32. 32. Other qualifications Sound general education Command of language Knowledge of office administration Knowledge of procedures of meetings Knowledge of accounts Knowledge of banking and finance Knowledge of company law Various labour laws Taxation laws Knowledge of industry and general managerial ability
  33. 33. DISMISSAL OF SECRETARY Expiry of term of appointment Insanity of secretary Insolvency Permanent disability Serious incompetence Breach of terms of contract on part of secretary Gross negligence Willful disobedience of lawful orders Misconduct Moral turpitude Dishonesty, fraudulent practices Making of secret profits
  34. 34. Rights and powers of auditor Right of access to books. Right to obtain information and explanation. Right to visit branch offices and access of branch books. Right to receive notice of general meetings and to attend them. Right to receive remuneration.
  35. 35. Remuneration of auditors It shall be fixed by the directors in a general meeting. Any sums paid by the company in respect of the auditor’s expenses shall be deemed to be included in the remuneration.
  36. 36. WINDING UP OF COMPANY The legal process by which a joint stock company is brought to an end, that is completely closed down, is called liquidation In other words, Liquidation is a process by which a business of company is wound up And in the course of winding up, its assets are realised,liabilities are paid off and the surplus if any, is distributed among the members in accordance with
  37. 37. Modes of winding up Compulsory winding up or winding up by order of the tribunal Voluntary winding up Winding up subject to the supervision of the tribunal
  38. 38. Circumstances leading toCompulsory winding up If the company has passed a special resolution that it should be wound up by tribunal If a public company has failed to hold statutory meeting or file statutory report to registrar of companies If it has not commenced business within year of its incorporation If the number of members has fallen below seven in case of public company and below 2 in pvt ltd If the company is unable to pay debts If the tribunal is of the opinion that it is just and equitable that the company should be wound up
  39. 39. Voluntary winding up Winding up which is brought about voluntarily without interference of the tribunal of companies through any order, but winded up voluntarily by members of company or by the creditorsVoluntary winding up is of 2 types: Members voluntary winding up Creditors voluntary winding up
  40. 40. Circumstances of voluntarywinding up When company is solvent, and winding up decision is brought in by members. When the period for which the company has been formed has expired and company has passed ordinary resolution When the event on happening of which the company should wound up has occurred and company has passed ordinary resolution When a company has passed a resolution that it should wound up voluntarily
  41. 41. Winding up subject tosupervision If a member or creditor puts an application for supervision of tribunal, after company has passed special resolution for voluntary winding up, tribunal can entertain the same and pass such order to protect interest of, company, members and creditors. Tribunal can exercise full control over winding up of company Can appoint new liquidator in the place of existing liquidator Can put restrictions on existing liquidator Or appoint additional liquidator to act on behalf of tribunal, along with existing liquidator
  42. 42. Thank you