Intoduction to Company Law

1. COMPANY LAW
DR. D. JANIS BIBIYANA

2. DEFINITION OF A COMPANY
• A company is defined as a group of people that contributes money or the worth of
money to a common stock to employ it in some trade or business. The people in this
group share the profit or loss (as the case may be) arising as a result.
• The common stock is usually denoted in terms of money and is the capital of the
company.
• The persons who contribute to the common stock are the members.
• The proportion of the capital entitled to each member is called the member’s share.
• Shares are always transferrable subject to the restrictions and liabilities offered by
the rights to transfer shares.

3. CHARACTERISTICS OF COMPANY
• Incorporated Association.
• Artificial Person.
• Separate Legal Entity.
• Limited Liability.
• Separate Property.
• Transferability of Shares.
• Perpetual Existence.
• Common Seal.
• The company may sue and be sued in its name.

4. ADVANTAGES OF A COMPANY
• liability for shareholders is limited
• it's easy to transfer ownership by selling shares to another party
• shareholders (often family members) can be employed by the
company
• the company can trade anywhere in world
• taxation rates can be more favourable
access to a wider capital and skills base.

5. DISADVANTAGES OF A COMPANY
•the company can be expensive to establish, maintain and
wind up
•the reporting requirements can be complex
•financial affairs are public
•if directors fail to meet their legal obligations, they may
be held personally liable for the company's debts
•profits distributed to shareholders are taxable.

6. FORMATION OF A COMPANY UNDER THE COMPANIES ACT, 2013
•The stage of conceiving an idea to start a business and
its working up is termed as promotion. The person, who
assumes the task of promotion, are termed as
“Promoters”. Therefore, promoter is a person, who
conceives an idea of starting a business, plans the
formulation of co. and actually brings it into an
existence.

7. INCORPORATION OF A COMPANY
Incorporation of a company is a process by which a
company becomes a legal entity, It can be compared
to the birth of a company. It is a legal process and is
governed by The Companies Act 2013.

8. PROCESS OF INCORPORATION
• Approval of Name:
• Preparation of documents
• Filling of the SPICe+ (Inc-32) form
• Preparation of Memorandum and Article of
Association( MoA and AoA)
• Filling of e-Form No.32 – Consent of directors, e-Form No.18 –
Notice of Registered Address, e-Form No.32. – Particulars of
Directors and Statutory Declaration in e-Form No.1.
• Payment of Registration Fees
• Certificate of Incorporation from RoC

9. ROLE OF PROMOTER
A promoter is like the starter or parent of the company. It is defined in section 2(69)
“Promoter” means a person-
(a) someone whose name is in the AR of the company or in the prospectus referred to in
Sec 92; or
(b) Someone who has influence over the BoD as a shareholder or a director and is able
to control the affairs; or
(c) As per the accordance to his guidance, advice and instructions, the BoD are
supposed to act: Provided that nothing in sub-clause (c) shall apply to a person who is
acting merely in a professional capacity

11. MEMORANDUM OF ASSOCIATION
As per section 2(56) of the companies act,2013 “memorandum” means the memorandum
of association of a company as originally framed or as altered from time to time in pursuance of
any previous company law or of this act

12. ARTICLES OF ASSOCIATION

13. MOA AOA
MOA is defined in Section 2 (56). AOA is defined in Section 2 (5).
It is subordinate to Companies Act.
It is subordinate to the
memorandum.
It can be amended later on. It can be amended in some cases.
It should have at least six clauses.
You can draft it as per Rules and
Regulations.
It is mandatory for all companies.
If you are a public company that is
limited by shares you can use Table A
rather than AOA.
You have to file it for sure at the time
of registration.
You have to file it for sure at the time
of registration.
You need the approval of central
government or Company Law Board
(CLB) in order to alter it.
Such approval is not needed in order
to alter it.
It defines the relation that a company
has with outsiders.
It deals with the relationship that a
company has with its members as
well as between the members.

14. ALTERATION OF MOA (PROCEDURE)

15. How can be altered article of association
according to the Companies Act 2013?
Company can alter its Article by way of
addition, deletion, modification,
substitution, or in any other way, only if it
wants. To alter the Article of association of
Company By giving Notice of at least 7
days. At the Board meeting, the given
resolutions in respect of alteration in AOA
must be passed.

16. DOCTRINE OF CONSTRUCTIVE NOTICE
• The constructive notice is a legal entity shall have the knowledge or should
be known, as a reasonable person would have known of a legal action
taken or going to be taken, even if they don’t have any real or actual
knowledge of it.
• The doctrine of constructive notice as according to the companies law is a
doctrine where all persons dealing with a company are deemed to have
knowledge of articles of association and memorandum of association of the
companies.

17. THE DOCTRINE OF ULTRA VIRES
• A Memorandum of Association of a company is a basic charter of the company. It is a binding
document which describes the scope of the company among other things. If a company departs
from its MOA such an act is ultra vires.
• An act, legal in itself, but not authorized by the object clause of the Memorandum of
Association of a company or statute, is Ultra Vires the company. Hence, it is null and void.
• An act ultra vires the company cannot be ratified even by the unanimous consent of all
shareholders.
• If an act is ultra vires the directors of a company, but intra vires the company itself, then the
members of the company can pass a resolution to ratify it.
• If an act is Ultra Vires the Articles of Association of a company, then the same can be ratified
by a special resolution at a general meeting.