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COMPANY LAW
Aji R Lal
As association of many persons who contribute money or
moneyโ€™s worth to a common stock & employ it in some
common trade or business i.e. for a common purpose &
who share the profit or loss (as the case may be )arising
therefrom.
LINDLEYโ€™S DEFINITION
1. Separate legal entity.
2. Limited liability.
3. Perpetual succession
4. Common seal
5. Transferability of shares
6. Separate property
7. Capacity to sue
8. Not an citizen
9. Companyโ€™s action are limited.
CHARACTERISTIC OF A COMPANY
1. Protection of revenue
2. Prevention of fraud
3. Company avoiding of legal obligation
4. Where company is a sham
5. Where company is acting as the agent of the shareholder.
6. Avoidance of welfare legislature.
7. Protecting public policy.
8. Determination of character of a company whether it is a
enemy.
LIFTING OR PIERCING THE CORPORATE VEIL
๏€ช Number of member below statutory minimum.
๏€ช Private- 2 min 50 max
๏€ช public - 7 min unlimited max
๏€ช Failure of refund application money
๏€ช Mis description of companyโ€™s name.
๏€ช Fraudulent trading
๏€ช Holding & subsidiary companies
๏€ช Investigation into related companies
STATUTORY EXCEPTION
๏€ช INCORPORATED
1. CHARTERED COMPANIES
2. STATUTORY COMPANIES
3. REGISTERED COMPANIES
(A) Company with limited liabilities
(B) Unlimited liabilities
๏€ช UNINCORPORATED
KINDS OF COMPANIES
I CLASSIFICATION ON THE BASIS OF
INCORPORATION
II CLASSIFICATION ON THE BASIS OF LIABILITY.
III CLASSIFICATION ON THE BASIS OF NUMBER
OF MEMBERS
IV CLASSIFICATION ON THE BASIS OF CONTROL
CLASSIFICATION
1. PRIVATE COMPANY
2. PUBLIC COMPANY
III CLASSIFICATION ON THE BASIS
OF NUMBER OF MEMBERS
Private company
1. Minimum -2 , maximum-50.
2. Restricts the right to transfer its shares.
3. Add a wordโ€™ private limitedโ€™ at the end of its name.
4. Can commence its business after obtaining certificate of
incorporation.
5. Must have at least 2 directors.
PRIVATE COMPANY
6. No restrictions on the appointment of directors.
7. No restrictions on managerial remuneration.
8. Members are family members.
9. Not listed in stock exchange.
10. Prohibits any invitation to public to subscribe for any share.
11. Need not hold statutory meeting.
12. Enjoys same special privileges.
PRIVATE COMPANY
1. Minimum-7 , Maximum- unlimited.
2. Any public can acquire share on payment of share money
3. Ends with limited.
4. Can commence its business after obtaining certificate of
commencement.
5. Must have at least 3 directors.
6. Members are public.
PUBLIC COMPANY
7. Total managerial remuneration cannot exceed 11% of net
profit
8. Consent to act as directors to the register should be given
by the directors.
9. Should be listed in stock exchange.
10.Allowed to give invitation to the public to subscribe
shares.
11. Should hold statutory meeting and file with registrar.
DIFFERENCES BETWEEN PUBLIC &
PRIVATE COMPANY
PROPERTIES PUBLIC PRIVATE
MINIMUM
NUMBER
7 2
MAXIMUM
NUMBER
UNLIMITED 50
NUMBER OF
DIRECTORS
3 2
RESTRICTION ON
COMPANY NAME
ENDS WITH
LIMITED
ADD PRIVATE LIMITED
DIFFERENCES BETWEEN
PUBLIC & PRIVATE COMPANY
Properties Public Private
Restriction on
appointment of
directors
Director should file
with registrar for a
consent to act
No restriction
Commencement of
business
Certificate of
commencement
Certificate of
incorporation.
PROPERTIES PUBLIC PRIVATE
INVITATION
TO PUBLIC
ALLOWED TO
GIVE
INVITATION TO
SUBSCRIBE
SHARES
NO SUCH
THINGS
TRANSFERAB
ILITY OF
SHARES
SHARES
TRANSFER HIS
POSSIBLE
SHARES
TRANSFER IS
NOT POSSIBLE
STATUTORY
MEETING
HOLD
STATUTORY
MEETING
NEED NOT
CONDUCT { NOT
COMPULSORY}
PROPERTIES PUBLIC PRIVATE
MANAGERIAL
REMUNERATION
11% OF NET
PROFIT
NO
RESTRICTION
SPECIAL
PREVILAGE
NO SUCH
PREVILAGES
ENJOYS
SPECIAL
PREVILAGES
FURTHER ISSUE
OF SHARES
MUST OFFER TO
THE EXISTING
MEMBERS
DOESNโ€™T APPLY
QUORAM 5 MEMBERS 2 MEMBERS
1. Minimum number of members in a private company
can be 2 only as against 7 in case of a public
company.
2. Provision regarding minimum subscription before
allotment of share do not apply to a private company.
3. Private company need not file prospectus with the
registrar.
SPECIAL PREVILAGE FOR PRIVATE
COMPANY
4. Further issue of shares need not be offered to
the existing member.
5. Private company can commence its business
immediately on getting certificate of
incorporation.
6.If need not keep an index of members.
7.Need not hold any statutory meeting or nor file
statutory reports.
SPECIAL PREVILAGE FOR PRIVATE
COMPANY
8. Minimum number of directors is only 2 for a
private company.
9. Director consent to act as such is not required.
10. Provision as to proportion of director liable to
retired by rotation do not apply to a private
company.
11. Restriction on appointment of directors as
regards the consent and holding share qualification
do not apply to a private company.
12. Directors contract to take up qualification shares
need not to be file with the registrar.
SPECIAL PREVILAGE FOR PRIVATE
COMPANY
13. Provision regarding loan to director do not apply.
14. Provision required from the government for the
approval of increasing remuneration of director.
15. Provision regarding interested directors not to
participate or vote in boards proceeding do not
apply.
16. Accounts such as balance sheet and profit & loss
accounts cannot be inspected by the public.
17. Restriction on advancing loans to other companies
do not apply.
SPECIAL PREVILAGE FOR PRIVATE
COMPANY
I CONVERSION BY CHOICE.
๏ถ If a private company deletes from its articles
by passing a special resolution
๏ถ private company becomes a public company
comply will all the provisions of the companies act
applicable to a public company
CONVERSION OF PRIVATE COMPANY
INTO A PUBLIC COMPANY
๏ถ within 30 days (after becoming public company) file with
registrar.
๏ถ prospectus
๏ถPrinted or written copy of the special resolution.
๏ถFOLLOWING REQUIREMENTS SHOULD BE MADE:
๏ถNO.OF MEMBERS <7 RAISED ATLEAST
TO 7
๏ถNO. OF DIRECTORS < 3 RAISED
ATLEAST TO 3
๏ถTHE WORD PRIVATE SHOULD BE
DELETE BEFORE THE WORD LIMITED
IN ITS NAME.
๏€ช Private company enjoys certain previlages.
If any default is made with these provisions
II CONVERSION BY DEFAULT
๏€ช If public money is invested in a private company these is
no reason for treating such companies as private
company.
๏€ช Where it invites public deposits through an advertisement.
๏€ช Where it holds 25% of share capital of a public company.
๏€ช Where average turnover is not less than 10 crores for 3
consecutive financial year.
III CONVERSION BY OPERATION OF LAW
INFORMATION TO REGISTRAR.
Such private company within 3 months from the
date on which it has become a public company---
inform the registrar that it has become a public
company.
On such information the registrar shall delete the
word โ€˜privateโ€™ before the word โ€˜limitedโ€™ in the
necessary documents of the company.
๏ƒ˜any default- the officer who is in default is liable to
a fine up to Rs.500 for each day of default
A public company may be converted into a private company by
altering the articles.
๏‚ง
such alteration of articles will be made by a special
resolution and the approval of central government.
๏‚ง A copy of special resolution has to be filed with registrar
within 30 days and when approval of the central government for
conversion of public company into private company is obtained
๏‚ง A copy of such approval shall be filled by the company within one
month.
A printed copy of the articles are altered has to be filed by the
company with the registrar
CONVERSION OF PUBLIC COMPANY
INTO A PRIVATE COMPANY
1. HOLDING COMPANY
2. SUBSIDIARY COMPANY
A company which controls another company is known as the
holding company & the company so controlled is termed
as subsidiary company.
board of director---control--- hold more than ยฝ of the
share capital--- control more than ยฝ of voting power
CLASSIFICATION ON THE BASIS OF
CONTROL
not less than 51% of share capital is held by central
government or
state government or
partly by state govt. & partly by central govt.
GOVERNMENT COMPANY
SHOULD FOLLOW:
(a) Auditor of a government company shall be appointed by central
government . On advice of comptroller & audit general (CAG)
of India.
(b) Auditor will submit a copy of an audit report to CAG in turn
submitted in Annual General Meeting (AGM).
(c) If the central government is the member of the government
company, then audit report will be submitted in the parliament.
The report should be prepared within 3 months of
AGM
๏€ช Incorporated outside India but having business in India.
PROVISIONS:
1. DOCUMENTS:
1. EVERY FOREIGN COMPANY WITHIN 30 DAYS OF
ESTABLISHMENT FURNISH WITH THE REGISTER FOR
REGISTRATION.
(i) A CERTIFIED COPY OF MOA & AOA OF THE COMPANY-------- if
not english language then a certifies translation
(ii) THE FULL ADDRESS OF THE REGISTERED PRINCIPAL OFFICE
OF THE COMPANY.
(iii) A LIST OF DIRECTOR AND SECRETARY OF THE COMPANY.
(iv) NAME AND ADDRESS OF THE PERSON OR PERSONS
RESIDENT OF INDIA.
(v) FULL ADDRESS OF THE PLACE OF BUSINESS OF INDIA
Any change --- file with registrar
FOREIGN COMPANY
2. ACCOUNTS:
(i) Every foreign company shall file the accounts with the
registrar every year.
- 3 copies of balance sheet profit & loss accounts &
other documents.
(ii) documents must be in english
(iii) along with the documents.
3 COPIES OF A LIST OF ALL PLACES OF BUSINESS
๏ƒ˜ send the information to registrar for registrar for
registration
3. NAME:
(i) Every foreign company exhibit outside of every office โ€“
name and country of incorporation in english and in
local language.
(ii) Name of the company and country incorporation should
be in english on business letters, bill heads, letters notice
and other official publication
4. WINDING UP:
By the order of the court.
(i) if unregistrar or
(ii) not according to the law of
incorporation
For non-trading business like promotion of art, science,
education, commerce, charitable association, sports club,
trade-association, chamber of commence are not for
profit.
--- such company can be formed only on obtaining the
licensen from central government or state government.
LICENSED COMPANY
ONE- MAN COMPANY-
FAMILY COMPANY
1. NOT REGISTRAR
2. CANNOT ENTER INTO ANY CONTRACT
3. CANNOT SUED OR BE SUED
ILLEGAL ASSOCIATION
๏€ช The application for registration of the company-registrar
of the state.
THE APPLICATION CONSISTS OF THE FOLLOWING DOCUMENT
1. Memorandum of association
2. Articles of association
3. Statement of authorised capital.
4. Address of the registrar office.
5. List of directors.
6. In writing by director to take qualification
shares.
FORMATION COMPANY
7. Declaration
such a declaration may be signed by a
advocate of the supreme court or charactered accountant
practising in India.
If the registrar is satisfied by the following;
a. Relevant provision
b. Object is lawful
c. Memorandum & articles of association are proper.
d. Requisite number
e. Name selected by the company is accepted.
Then the company will be registrar.
On registration --- registrar issue- certificate of incorporation
From the dateโ€“ company becomes separate legal person (or)
entity.
Hence it is the birth of the company
CERTIFICATE OF INCORPORATION
Private company โ€“ commence its business immediately after
obtaining certificate of incorporation but a public
company cannot do so, after incorporation unless it
obtains certificate of commencement of business [
trading certificate] from the registrar it cannot
commence.
It cannot commence it business until
1. Share payable in cash have allotted.
2. Every shareholder paid in cash the application on share.
3. No money liable to be prepaid.
4. Statutory declaration is verified.
CERTIFICATE OF COMMENCEMENT OF BUSINESS

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Company law

  • 2. As association of many persons who contribute money or moneyโ€™s worth to a common stock & employ it in some common trade or business i.e. for a common purpose & who share the profit or loss (as the case may be )arising therefrom. LINDLEYโ€™S DEFINITION
  • 3. 1. Separate legal entity. 2. Limited liability. 3. Perpetual succession 4. Common seal 5. Transferability of shares 6. Separate property 7. Capacity to sue 8. Not an citizen 9. Companyโ€™s action are limited. CHARACTERISTIC OF A COMPANY
  • 4. 1. Protection of revenue 2. Prevention of fraud 3. Company avoiding of legal obligation 4. Where company is a sham 5. Where company is acting as the agent of the shareholder. 6. Avoidance of welfare legislature. 7. Protecting public policy. 8. Determination of character of a company whether it is a enemy. LIFTING OR PIERCING THE CORPORATE VEIL
  • 5. ๏€ช Number of member below statutory minimum. ๏€ช Private- 2 min 50 max ๏€ช public - 7 min unlimited max ๏€ช Failure of refund application money ๏€ช Mis description of companyโ€™s name. ๏€ช Fraudulent trading ๏€ช Holding & subsidiary companies ๏€ช Investigation into related companies STATUTORY EXCEPTION
  • 6. ๏€ช INCORPORATED 1. CHARTERED COMPANIES 2. STATUTORY COMPANIES 3. REGISTERED COMPANIES (A) Company with limited liabilities (B) Unlimited liabilities ๏€ช UNINCORPORATED KINDS OF COMPANIES
  • 7. I CLASSIFICATION ON THE BASIS OF INCORPORATION II CLASSIFICATION ON THE BASIS OF LIABILITY. III CLASSIFICATION ON THE BASIS OF NUMBER OF MEMBERS IV CLASSIFICATION ON THE BASIS OF CONTROL CLASSIFICATION
  • 8. 1. PRIVATE COMPANY 2. PUBLIC COMPANY III CLASSIFICATION ON THE BASIS OF NUMBER OF MEMBERS
  • 9. Private company 1. Minimum -2 , maximum-50. 2. Restricts the right to transfer its shares. 3. Add a wordโ€™ private limitedโ€™ at the end of its name. 4. Can commence its business after obtaining certificate of incorporation. 5. Must have at least 2 directors. PRIVATE COMPANY
  • 10. 6. No restrictions on the appointment of directors. 7. No restrictions on managerial remuneration. 8. Members are family members. 9. Not listed in stock exchange. 10. Prohibits any invitation to public to subscribe for any share. 11. Need not hold statutory meeting. 12. Enjoys same special privileges. PRIVATE COMPANY
  • 11. 1. Minimum-7 , Maximum- unlimited. 2. Any public can acquire share on payment of share money 3. Ends with limited. 4. Can commence its business after obtaining certificate of commencement. 5. Must have at least 3 directors. 6. Members are public. PUBLIC COMPANY
  • 12. 7. Total managerial remuneration cannot exceed 11% of net profit 8. Consent to act as directors to the register should be given by the directors. 9. Should be listed in stock exchange. 10.Allowed to give invitation to the public to subscribe shares. 11. Should hold statutory meeting and file with registrar.
  • 13. DIFFERENCES BETWEEN PUBLIC & PRIVATE COMPANY PROPERTIES PUBLIC PRIVATE MINIMUM NUMBER 7 2 MAXIMUM NUMBER UNLIMITED 50 NUMBER OF DIRECTORS 3 2 RESTRICTION ON COMPANY NAME ENDS WITH LIMITED ADD PRIVATE LIMITED
  • 14. DIFFERENCES BETWEEN PUBLIC & PRIVATE COMPANY Properties Public Private Restriction on appointment of directors Director should file with registrar for a consent to act No restriction Commencement of business Certificate of commencement Certificate of incorporation.
  • 15. PROPERTIES PUBLIC PRIVATE INVITATION TO PUBLIC ALLOWED TO GIVE INVITATION TO SUBSCRIBE SHARES NO SUCH THINGS TRANSFERAB ILITY OF SHARES SHARES TRANSFER HIS POSSIBLE SHARES TRANSFER IS NOT POSSIBLE STATUTORY MEETING HOLD STATUTORY MEETING NEED NOT CONDUCT { NOT COMPULSORY}
  • 16. PROPERTIES PUBLIC PRIVATE MANAGERIAL REMUNERATION 11% OF NET PROFIT NO RESTRICTION SPECIAL PREVILAGE NO SUCH PREVILAGES ENJOYS SPECIAL PREVILAGES FURTHER ISSUE OF SHARES MUST OFFER TO THE EXISTING MEMBERS DOESNโ€™T APPLY QUORAM 5 MEMBERS 2 MEMBERS
  • 17. 1. Minimum number of members in a private company can be 2 only as against 7 in case of a public company. 2. Provision regarding minimum subscription before allotment of share do not apply to a private company. 3. Private company need not file prospectus with the registrar. SPECIAL PREVILAGE FOR PRIVATE COMPANY
  • 18. 4. Further issue of shares need not be offered to the existing member. 5. Private company can commence its business immediately on getting certificate of incorporation. 6.If need not keep an index of members. 7.Need not hold any statutory meeting or nor file statutory reports. SPECIAL PREVILAGE FOR PRIVATE COMPANY
  • 19. 8. Minimum number of directors is only 2 for a private company. 9. Director consent to act as such is not required. 10. Provision as to proportion of director liable to retired by rotation do not apply to a private company. 11. Restriction on appointment of directors as regards the consent and holding share qualification do not apply to a private company. 12. Directors contract to take up qualification shares need not to be file with the registrar. SPECIAL PREVILAGE FOR PRIVATE COMPANY
  • 20. 13. Provision regarding loan to director do not apply. 14. Provision required from the government for the approval of increasing remuneration of director. 15. Provision regarding interested directors not to participate or vote in boards proceeding do not apply. 16. Accounts such as balance sheet and profit & loss accounts cannot be inspected by the public. 17. Restriction on advancing loans to other companies do not apply. SPECIAL PREVILAGE FOR PRIVATE COMPANY
  • 21. I CONVERSION BY CHOICE. ๏ถ If a private company deletes from its articles by passing a special resolution ๏ถ private company becomes a public company comply will all the provisions of the companies act applicable to a public company CONVERSION OF PRIVATE COMPANY INTO A PUBLIC COMPANY
  • 22. ๏ถ within 30 days (after becoming public company) file with registrar. ๏ถ prospectus ๏ถPrinted or written copy of the special resolution. ๏ถFOLLOWING REQUIREMENTS SHOULD BE MADE: ๏ถNO.OF MEMBERS <7 RAISED ATLEAST TO 7 ๏ถNO. OF DIRECTORS < 3 RAISED ATLEAST TO 3 ๏ถTHE WORD PRIVATE SHOULD BE DELETE BEFORE THE WORD LIMITED IN ITS NAME.
  • 23. ๏€ช Private company enjoys certain previlages. If any default is made with these provisions II CONVERSION BY DEFAULT
  • 24. ๏€ช If public money is invested in a private company these is no reason for treating such companies as private company. ๏€ช Where it invites public deposits through an advertisement. ๏€ช Where it holds 25% of share capital of a public company. ๏€ช Where average turnover is not less than 10 crores for 3 consecutive financial year. III CONVERSION BY OPERATION OF LAW
  • 25. INFORMATION TO REGISTRAR. Such private company within 3 months from the date on which it has become a public company--- inform the registrar that it has become a public company. On such information the registrar shall delete the word โ€˜privateโ€™ before the word โ€˜limitedโ€™ in the necessary documents of the company. ๏ƒ˜any default- the officer who is in default is liable to a fine up to Rs.500 for each day of default
  • 26. A public company may be converted into a private company by altering the articles. ๏‚ง such alteration of articles will be made by a special resolution and the approval of central government. ๏‚ง A copy of special resolution has to be filed with registrar within 30 days and when approval of the central government for conversion of public company into private company is obtained ๏‚ง A copy of such approval shall be filled by the company within one month. A printed copy of the articles are altered has to be filed by the company with the registrar CONVERSION OF PUBLIC COMPANY INTO A PRIVATE COMPANY
  • 27. 1. HOLDING COMPANY 2. SUBSIDIARY COMPANY A company which controls another company is known as the holding company & the company so controlled is termed as subsidiary company. board of director---control--- hold more than ยฝ of the share capital--- control more than ยฝ of voting power CLASSIFICATION ON THE BASIS OF CONTROL
  • 28. not less than 51% of share capital is held by central government or state government or partly by state govt. & partly by central govt. GOVERNMENT COMPANY
  • 29. SHOULD FOLLOW: (a) Auditor of a government company shall be appointed by central government . On advice of comptroller & audit general (CAG) of India. (b) Auditor will submit a copy of an audit report to CAG in turn submitted in Annual General Meeting (AGM). (c) If the central government is the member of the government company, then audit report will be submitted in the parliament. The report should be prepared within 3 months of AGM
  • 30. ๏€ช Incorporated outside India but having business in India. PROVISIONS: 1. DOCUMENTS: 1. EVERY FOREIGN COMPANY WITHIN 30 DAYS OF ESTABLISHMENT FURNISH WITH THE REGISTER FOR REGISTRATION. (i) A CERTIFIED COPY OF MOA & AOA OF THE COMPANY-------- if not english language then a certifies translation (ii) THE FULL ADDRESS OF THE REGISTERED PRINCIPAL OFFICE OF THE COMPANY. (iii) A LIST OF DIRECTOR AND SECRETARY OF THE COMPANY. (iv) NAME AND ADDRESS OF THE PERSON OR PERSONS RESIDENT OF INDIA. (v) FULL ADDRESS OF THE PLACE OF BUSINESS OF INDIA Any change --- file with registrar FOREIGN COMPANY
  • 31. 2. ACCOUNTS: (i) Every foreign company shall file the accounts with the registrar every year. - 3 copies of balance sheet profit & loss accounts & other documents. (ii) documents must be in english (iii) along with the documents. 3 COPIES OF A LIST OF ALL PLACES OF BUSINESS ๏ƒ˜ send the information to registrar for registrar for registration
  • 32. 3. NAME: (i) Every foreign company exhibit outside of every office โ€“ name and country of incorporation in english and in local language. (ii) Name of the company and country incorporation should be in english on business letters, bill heads, letters notice and other official publication
  • 33. 4. WINDING UP: By the order of the court. (i) if unregistrar or (ii) not according to the law of incorporation
  • 34. For non-trading business like promotion of art, science, education, commerce, charitable association, sports club, trade-association, chamber of commence are not for profit. --- such company can be formed only on obtaining the licensen from central government or state government. LICENSED COMPANY
  • 36. 1. NOT REGISTRAR 2. CANNOT ENTER INTO ANY CONTRACT 3. CANNOT SUED OR BE SUED ILLEGAL ASSOCIATION
  • 37. ๏€ช The application for registration of the company-registrar of the state. THE APPLICATION CONSISTS OF THE FOLLOWING DOCUMENT 1. Memorandum of association 2. Articles of association 3. Statement of authorised capital. 4. Address of the registrar office. 5. List of directors. 6. In writing by director to take qualification shares. FORMATION COMPANY
  • 38. 7. Declaration such a declaration may be signed by a advocate of the supreme court or charactered accountant practising in India. If the registrar is satisfied by the following; a. Relevant provision b. Object is lawful c. Memorandum & articles of association are proper. d. Requisite number e. Name selected by the company is accepted. Then the company will be registrar.
  • 39. On registration --- registrar issue- certificate of incorporation From the dateโ€“ company becomes separate legal person (or) entity. Hence it is the birth of the company CERTIFICATE OF INCORPORATION
  • 40. Private company โ€“ commence its business immediately after obtaining certificate of incorporation but a public company cannot do so, after incorporation unless it obtains certificate of commencement of business [ trading certificate] from the registrar it cannot commence. It cannot commence it business until 1. Share payable in cash have allotted. 2. Every shareholder paid in cash the application on share. 3. No money liable to be prepaid. 4. Statutory declaration is verified. CERTIFICATE OF COMMENCEMENT OF BUSINESS