company law and secretarial practice

1. COMPANY LAW
AND
SECRETARIAL PRACTICE
BY : SUGIRDHA NELSON MANOKAR
BBA.,D.cop.,
BON SECOURS COLLEGE FOR WOMEN
THANJAVUR

3. The Companies Act 2013 of India defines a company
as-
A 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.
A company is not merely a legal institution. It
is rather a legal device for the attainment of
the social and economic end. It is, therefore,
a combined political, social, economic and
legal institution.

5. Nature and Characteristics of a Company :

6. Corporate personality
Limited Liability
Perpetual
Succession
Separate
PropertyTransferability of
Shares
Common Seal
Capacity to sue or
be sued
Contractual Rights
Limitation of Action
Separate Management
 Voluntary
Association for
Profit
Termination of Existe

8. We can classify all these companies in
various categories -
Companies on the Basis of Liabilities :
a) Companies Limited by Shares
Sometimes, shareholders of some companies
might not pay the entire value of their shares in
one go. In these companies, the liabilities of
members is limited to the extent of the amount
not paid by them on their shares.

9. c) Unlimited Companies
Unlimited companies have no limits on their
members’ liabilities. Hence, the company can use
all personal assets of shareholders to meet
its debts while winding up. Their liabilities will
extend to the company’s entire debt.
b) Companies Limited by Guarantee
In some companies, the memorandum
of association mentions amounts of money that some
members guarantee to pay.
In case of winding up, they will be liable only to pay only
the amount so guaranteed. The company or its creditors
cannot compel them to pay any more money.

10. Companies on the basis of members :
a) One Person Companies (OPC)
These kinds of companies have only one member as
their sole shareholder. They are separate from sole
proprietorships because OPCs are legal entities
distinct from their sole members. Unlike other
companies, OPCs don’t need to have any minimum
share capital.
b) Private Companies
Private companies are those whose articles of
association restrict free transferability of shares. In
terms of members, private companies need to have
a minimum of 2 and a maximum of 200.

11. c) Public Companies
In contrast to private companies, public
companies allow their members to freely
transfer their shares to others. Secondly, they
need to have a minimum of 7 members, but
the maximum number of members they can
have is unlimited.

12. Companies on the basis of Control or Holding :
a) Holding and Subsidiary Companies
Here, the company owning these shares
becomes the holding or parent company.
Likewise, the company whose shares the parent
company owns becomes its subsidiary company.
b) Associate Companies
Associate companies are those in which other
companies have significant influence. This
“significant influence” amounts to ownership of at
least 20% shares of the associate company.

13. Other Types of Companies
a) Government Companies
Government companies are those in which more
than 50% of share capital is held by either the
central government, or by one or more state
government, or jointly by the central government
and one or more state government.
b) Foreign Companies
Foreign companies are incorporated outside
India. They also conduct business in India using a
place of business either by themselves or with
some other company.

14. c) Charitable Companies (Section 8)
Certain companies have charitable purposes as
their objectives. These companies are called
Section 8 companies because they are registered
under Section 8 of Companies Act, 2013.
Charitable companies have the promotion of arts,
science, culture, religion, education, sports, trade,
commerce, etc. as their objectives. Since they do
not earn profits, they also do not pay any dividend
to their members.

15. d) Dormant Companies
These companies are generally formed for future
projects. They do not have significant accounting
transactions and do not have to carry out all
compliances of regular companies.
e) Nidhi Companies
A Nidhi company functions to promote the habits of
thrift and saving amongst its members. It receives
deposits from members and uses them for their own
benefits.
f) Public Financial Institutions
Life Insurance Corporation, Unit Trust of India and
other such companies are treated as public financial
institutions. They are essentially government
companies that conduct functions of public financing.

16. difference between a private limited and a public limited
company are:
Features Public Limited
Company
Private Limited
Company
Minimum
members
7 2
Minimum
directors
3 2
Maximum
members
Unlimited 200
Minimum capital 5,00,000 1,00,000
Invitation to public Yes No

17. Issue of prospectus Yes No
Quorum at AGM 5 members 2 members
Certificate for
commencement of
business
Yes No
Term used at the end
of name
Limited Private limited
Managerial
remuneration
No restriction Can not exceed
more than 11%
of net profits
Statutory meeting
(mandatory)
Yes No

18. 1. Promotion of a Company:
A business enterprise does not come into existence on its
own. It comes into existence as a result of the efforts of an
individual or group of people or an institution. That is, it has
to be promoted by some person or persons. The process of
business promotion begins with the conceiving of an idea
and ends when that idea is translated into action i.e., the
establishment of the business enterprise and
commencement of its business.

19. Who is a Promoter in a Company?
A successful promoter is a creator of wealth and an economic
prophet. The person who is concerned with the promotion of business
enterprise is known as the Promoter. He conceives the idea of starting
a business and takes all the measures required for bringing the
enterprise into existence.
Types of Promoters
Promoters are different types such as professional
promoters, occasional promoters, promoter
companies, financial promoters, entrepreneurs,
lawyers and engineers.

20. Procedure of Registration
1. Memorandum of Association: It is to be signed by a minimum of
7 persons for a public company and by 2 in case of a pvt company. It
must be properly stamped.
2. Articles of Association: This document is signed by all those
persons who have signed the Memorandum of Association.
3. List of Directors: A list of directors with their names, address and
occupation is to be prepared and filed with the Registrar of
Companies.
4. Written consent of the Directors: A written consent of the
directors that they have agreed to act as directors has to be filed with
the Registrar along with a written undertaking to the effect that they
will take qualification shares and will pay for them.
5. Notice of the Address of the Registered
Office: It is also customary to file the notice of
the address of the company’s registered office at
the time of incorporation. It is to be given within 30 days after
the date of incorporation

21. 4. Certificate of Commencement of Business :
As soon as a private company gets the
certification of incorporation, it can can
commence its business. A public company can
commence its business only after getting the
‘certificate of commencement of business‘.

22. MemorandumOf Association :
The Memorandum of Association or MOA of a company
defines the constitution and the scope of powers of the
company. In simple words, the MOA is the foundation on
which the company is built. In this article, we will look at
the laws and regulations that govern the MOA.
Format of Memorandum of Association (MOA)
According to Section 4 of the Companies Act, 2013,
companies must draw the MOA in the form given in
Tables A-E in Schedule I of the Act. Here are the details
of the forms:
n unlimited company and having share capital.

23. Table A: Form for the memorandum of
association of a company limited by shares.
Table B: Form for the memorandum of
association of a company limited
by guarantee and not having a share
capital.
Table C: Form for the memorandum of
association of a company limited by
guarantee and having a share capital.
Table D: Form for the memorandum of
association of an unlimited company.
Table E: Form for the memorandum of
association of a

24. Contentof the MOA -
Name Clause
For a public limited company, the name of
the company must have the word ‘Limited’
as the last word
For the private limited company, the name of
the company must have the words ‘Private
Limited’ as the last words.

25. Registered Office Clause :
It must specify the State in which the registered
office of the company will be situated.
Object Clause :
It must specify the objects for which the company
is being incorporated. Further, if a company
changes its activities which are not reflected in its
name, then it can change its name within six
months of changing its activities. The company
must comply with all name-change provisions.

26. Liability Clause
It should specify the liability of the members of the company,
whether limited or unlimited. Also,
For a company limited by shares – it should specify if the
liability of its members is limited to any unpaid amount on the
shares that they hold.
For a company limited by guarantee – it should specify the
amount undertaken by each member to contribute to:
The assets of the company when it winds-up. This is provided
that he is a member of the company when it winds-up or the
winding-up happens within one year of him ceasing to be a
member. In the latter case, the debts and liabilities considered
would be those contracted before he ceases to be a
member.The costs, charges, and expenses of winding up and
the adjustment of the rights of the contributors among
themselves.

27. Capital Clause
This is valid only for companies having share
capital. These companies must specify the
amount of Authorized capital divided into
shares of fixed amounts. Further, it must state
the names of each member and the number of
shares against their names.
Association Clause
The MOA must clearly specify the desire of the
subscriber to form a company.

28. Understanding Articles of Association :
Articles of association often identify the manner in
which a company will issue shares, pay dividends,
audit financial records, and provide voting rights.
This set of rules can be considered a user's manual
for the company because it outlines the
methodology for accomplishing the day-to-day
tasks that must be completed.
Company Name :
As a legal entity, the company must have a
name that can be found in the articles of
association. All jurisdictions will have rules
concerning company names. Usually, a suffix
such as "Inc." or "Ltd." must be used to show
that the entity is a company.

29. Purpose of the Company :
The reason for the creation of the company must
also be stated in the articles of association.
Share Capital :
The number and type of shares that comprise a
company's capital are listed in the articles of
association. There will always be at least one
form of common share that makes up a
company's capital.

30. Shareholder Meetings
The provisions for the first general meeting
of shareholders and the rules that will
govern subsequent annual shareholder
meetings—such as notices, resolutions, and
votes—are laid out in detail in this section.
Organization of the Company
The legal organization of the company, including its address,
the number of directors and officers, and the identity of the
founders and original shareholders, are found in this
section.

31. Types of Shares
Share, as defined in the Companies Act 2013, is
the measure of a shareholder’s interest in a
company’s assets. In other words, shares
represent a shareholder’s stake of ownership of a
company.

32. Preferential Share Capital :
The preferential share capital is that part of the
Issued share capital of the company carrying a
preferential right for:
Dividend Payment – A fixed amount or amount
calculated at a fixed rate. This might/might not
be subject to income tax.
Repayment – In case of a winding up or
repayment of the amount of paid-up share
capital, there is a preferential right to the
payment of any fixed premium or premium on
any fixed scale. The Memorandum or Articles of
the company specifies the same.

33. Equity Share Capital – Equity Shares
All share capital which is NOT preferential share capital is
Equity Share Capital. Equity shares are of two types:
With voting rights
With differential rights to voting, dividends, etc., in
accordance with the rules.
In 2008, Tata Motors introduced equity shares with
differential voting rights – the ‘A’ equity shares. According to
the issue,
Every 10 ‘A’ equity shares have one voting right
‘A’ equity shares get 5 percentage points more dividend than
the ordinary shares.
Due to the difference in voting rights, the ‘A’ equity shares
traded at a discount to ordinary shares with complete voting
rights.

34. Premium Vs. Discount Bonds
Premium and discount refer to the price of a
bond and can often mean the difference
between a gain and a loss on your
investment.
A bond with a price below 100 is a discount bond,
while price above 100 means the bond is premium.
Bond prices move in the opposite direction of interest
rates: When interest rates rise, bond prices fall, and
vice versa. When a bond is downgraded, its price
usually drops. Discounts usually indicate a high-
interest-rate environment or lower quality bonds;
premiums suggest low interest rates.

35. Understanding Bond Par Value
Pricing :
Most bonds are available in $1,000
denominations; $1,000 is the face value, or
bond par value -- the amount to be repaid at
maturity. Bonds prices are expressed as a
percentage of par: a price of 100 means that a
bond costs 100 percent of the face value, or
$1,000 for each $1,000 of face value. A bond
priced at 96 means it costs $960 for each
$1,000 of face value; a bond priced at 105
means the cost is $1,050 for each $1,000 of
face value.

36. Minimum subscription is the term
which is used to represent the
amount of the issue which has to
be subscribed or else the shares
can't be issued if it is not being
subscribed. Company which is
offering the shares to the public
then they set a specific amount
for the subscription which can be
taken by the public in order to
issue the shares.

37. Allotment of Shares :
Allotment of shares is an appropriation of a certain
number of shares to an applicant and distribution of
shares among those who have submitted written
application. It is governed by companies act, 2013 and
rules & regulations incorporated therein and for Listed
Companies) whose shares are listed on the NSE and
BSE or any other applicable Stock exchanges in India
and whose shares are freely tradable without any
restrictions) and Subsidiary of Listed Companies the
provisions of SEBI act, 1992 and the securities contracts
(regulation) act, 1956, are also applicable

39. Debentures : are a debt instrument used by
companies and government to issue the loan.
The loan is issued to corporates based on
their reputation at a fixed rate of interest.
Debentures are also known as a bond which
serves as an IOU between issuers and
purchaser. Companies use debentures when
they need to borrow the money at a fixed rate
of interest for its expansion. Secured and
Unsecured, Registered and Bearer,
Convertible and Non-Convertible, First and
Second are four types of Debentures.

41. Understanding Dividends :
A dividend is a token reward paid to the
shareholders for their investment in a
company’s equity, and it usually originates
from the company's net profits. While the
major portion of the profits is kept within
the company as retained earnings–which
represent the money to be used for the
company’s ongoing and future business
activities–the remainder can be allocated
to the shareholders as a dividend.

43. The major categories of secretary are as
follows:
oPrivate secretary.
oSecretary of an association.
oSecretary of embassy.
oSecretary of a cooperative society.
oSecretary of local body.
oSecretary of Government department.
Company Secretary:
A Company Secretary means “a
person who is a member of the
Institute of Company Secretaries of
India”. [Sec. 2(i) (c) of the Company
Secretaries Act, 1980],

44. According to the law of the land, a
secretary is merely a servant of the com-
pany working under full control of the
Board of Directors of the company.
Legal Status:
He is no longer a mere clerk. He regularly makes
representations on behalf of the company and
enters into contracts on its behalf which come
within the day-to-day running of the company’s
business, so much so that he may be regarded as
having authority to do such things on behalf of the
company.

45. CompanySecretary(CS) EligibilityCriteria:
After Class 12:
Students applying for the Company Secretary Course after
10+2 will have to register for the Foundation Programme to
start with. Students of science, commerce as well as arts
can apply for the course.
After Graduation: If candidates seek Company Secretary
course after graduation they can apply straight away for the
Executive Programme and continue with the Professional
Programme after pursuing graduation in any field apart from
fine arts.
Final Programme: Candidates who have not passed the
executive programme after graduation or those who have not
passed the foundation and executive programme after 10+2
will not be allowed to pursue the Professional Programme.

46. Appointmentof CompanySecretary as per Companies Act 2013:
A Person who is member of ICSI can be
appointed as CS.
Every Listed company must have appointed CS
Every unlisted Company /Private limited
Company having paid-up capital 5 Crore or more
must also have a full time CS.
A CS is not allowed to hold office more in than
one company.
In case of default in complying above provision
the company shall be fined from 1 to 5 Lakh
Rupees.

48. Powers and Rights of Company Secretary
Supervision and control: As a head of the office,
a company secretary has the rights to supervise,
direct and control all office activities of subordinate
offices.
Singing authority: Being a principal officer, a
company secretary can sign contracts,
proceedings of the company meeting, files and
documents on behalf of the company.
Exercising power: He has the right to apply
power as authorized by the board of directors.

49. Issuing testimonial: A company secretary can
issue testimonials to employees on behalf of the
company.
Claiming salary and damages: As per contract, he
has the right to claim his salary and other
allowances. He can also take legal action against
the company if there is any breach of contract.
Preferential creditor: During winding up of a
company, company secretary can claim his legal
dues as like as a preferential creditor.
Attending meeting: He has the right to be present
in the meetings of the shareholders and board of
directors.

50. Thank you