Company organisation unit1 full

Prepared by
Dr S SHEIK FAREETH
Assistant Professor
Department of Business Admionistration
Arul Anandar College (Autonomous)
Karumathur – Madurai.
sheikfareeth@aactni.edu.in
*

*
*A company, abbreviated as co., is a legal entity representing an
association of people, whether natural, legal or a mixture of both,
with a specific objective.
*Company members share a common purpose and unite to achieve
specific, declared goals. Companies take various forms such as:
*voluntary associations, which may include nonprofit organizations
*business entities, whose aim is generating profit
*financial entities and banks
*programs or educational organisations.
Dr SHEIK FAREETH - BBA - AAC - COMPANY ORGANISATION

*A company can be created as a legal person so that the company itself
has limited liability as members perform or fail to discharge their duty
according to the publicly declared incorporation, or published policy. When a
company closes, it may need to be liquidated to avoid further legal obligations.
*Companies may associate and collectively register themselves as new
companies; the resulting entities are often known as corporate groups.

*
According to the definition of a company by the Indian Act 2013;
*‘‘A registered association which is an artificial legal person, having an
independent legal, entity with perpetual succession, a common seal for its
signatures, a common capital comprised of transferable shares and carrying
limited liability.’’
According to the US legal definition;
*‘‘A company can be a corporation, partnership, association, joint-stock
company, trust fund, or organized group of persons, whether incorporated or
not, and (in official capacity) any receiver, trustee in bankruptcy, or similar
official, or liquidating agent, for any of the foregoing.’’

*
*Artificial person
The law treats the company as a legal artificial person because it has its name and bank
accounts. It can also own property under its name, file a lawsuit against other companies
or personals, or be partnered up with other companies. It performs all of the activities
that a person can legally do; a company can do it well. Therefore, it acts as an artificial
individual.
*Separate Legal Entity
When we say legal entity, what it means that it’s completely independent of its people
who control its operations. In other words, the company won’t be responsible if its
members don’t pay their debt. The same goes for the company as well; that the members
don’t have to pay for the debt of the company, if it’s unable to pay to its creditors.
*Incorporated Association
A company starts its business operations when it is registered by the law and under the
ordinance of the companies act. The registration process of a company is lengthy; it
should have a memorandum of association, board of directors, share prices and
shareholders, a name, office, phone number, address, and other legal documentation.

*Limited Liability
*The liability of shareholders is limited to their share price only; it is in the
limited companies by share. On the other hand, in the case of limited
companies by guarantee, where the share of contributors is like an asset in the
company; if the company goes bankrupt, then the shareholders have to pay a
small amounts to cover up the loss of the company.
*Common Seal
*As we know that a company acts as an artificial legal individual, therefore, it
has a stamp or seal with the name and address engraved on it. This stamp
would be like the signature of the company. The stamp and company’s seal is
used for the verification and authorization of various documents.
*Perpetual Existence
*Unlike proprietorship, partnership or any other type of business, a company
doesn’t depend upon its owners, board of directors, shareholders, or
employees. Many people come and go in the company, but it stays. Therefore,
the existence of the company is much stable

*
*Artificial person
The law treats the company as a legal artificial person because it has its name and bank
accounts. It can also own property under its name, file a lawsuit against other companies or
personals, or be partnered up with other companies. It performs all of the activities that a
person can legally do; a company can do it well. Therefore, it acts as an artificial individual.
*Separate Legal Entity
When we say legal entity, what it means that it’s completely independent of its people who
control its operations. In other words, the company won’t be responsible if its members don’t
pay their debt. The same goes for the company as well; that the members don’t have to pay for
the debt of the company, if it’s unable to pay to its creditors.
*Incorporated Association
A company starts its business operations when it is registered by the law and under the
ordinance of the companies act. The registration process of a company is lengthy; it should
have a memorandum of association, board of directors, share prices and shareholders, a name,
office, phone number, address, and other legal documentation.

*Limited Liability
The liability of shareholders is limited to their share price only; it is in the limited
companies by share. On the other hand, in the case of limited companies by guarantee,
where the share of contributors is like an asset in the company; if the company goes
bankrupt, then the shareholders have to pay a small amounts to cover up the loss of the
company.
*Common Seal
As we know that a company acts as an artificial legal individual, therefore, it has a
stamp or seal with the name and address engraved on it. This stamp would be like the
signature of the company. The stamp and company’s seal is used for the verification and
authorization of various documents.
*Perpetual Existence
Unlike proprietorship, partnership or any other type of business, a company doesn’t
depend upon its owners, board of directors, shareholders, or employees. Many people
come and go in the company, but it stays. Therefore, the existence of the company is
much stable

*
*The various Kinds of companies that can be formed under the
Companies Act, 2013 are:
*Royal Chartered Company
*Statutory Company
*Registered Companies
*Company limited by shares
*Company limited by Guarantee
*Unlimited companies
*Holding and Subsidiary company

*Royal Chartered Company
These are companies formed under the Royal Charter of a company or by a
special order of king or queen. Eg. East India Company formed by the Royal
Charter of Great Britain.
*Statutory Company
It is incorporated by a special Act passed either by the Central or State
legislature. Companies intended to carry on some business of national
importance are formed this way to provide a service to its citizens. Eg. RBI
formed under RBI Act 1934.
*Registered Companies
*A company registered under the companies Act 2013 or any other existing
Act. It is governed by the companies Act 2013.

*Company limited by shares
It is a company in which the liability of the members (shareholders) limited
i.e. they are only liable for the unpaid value of shares held by the member.
*Company limited by Guarantee
In such a company the Liability of shareholders is limited up to the amount
guaranteed or invested by the shareholder towards the assets of the
company in the event of its being wound up.
*Unlimited companies
A company having no limit on the liability of its Shareholders is an unlimited
company. Thus the liability may extend to the personal property of the
Shareholders in case the company is not able to satisfy its claims at the time
of winding up.

*
*Memorandum of Association is simply the constitution or charter of a
company.
*According to the companies Act, 2013, “memorandum” means
“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.”
*The memorandum of association contains the fundamental provisions
of the company’s constitution and all those essential conditions upon
which the company can be incorporated. It determines the powers and
limitations of the company and determines the scope beyond which
company`s operations cannot go.

*It consists of the following:
*Name of the company
*Address of Registered Head Office
*Capital structure of the company
*Objects of the company
*Scope of its Operations
*Liability of its members

*
*The memorandum enables all those who deal with the company be it
shareholder or creditors to know the purpose of company and its range
of activities.
*The document of memorandum limits the company`s capacity to
contract, thereby restricting it to the activities mentioned in the
memorandum of association at the time of its formation.

*
*Memorandum of a company should is prepared according to the respective forms
specified in Tables A,B,C,D and E of the Schedule 1, Section 4 of the Companies
Act.
*Form in Table A is applicable to companies limited by shares
*Form in Table B is applicable to companies limited by guarantee and not having a share capital
*Form in Table C is applicable to the companies limited by guarantee and having a share capital
*Form in Table D is applicable to unlimited companies, not having a share capital
*Form in Table E is applicable to unlimited companies

*
*The memorandum of association must be printed and signed by each member (7 members in case
of Public Company and 2 in case of Private Company and 1 in case of One Person Company). The
memorandum should be signed in the presence of at least one witness who will attest the
signatures of the subscribers of memorandum.
*In case of one person company (OPC), the name of the nominee must be mentioned in the
Memorandum of Association. In case of death or incapability the nominee shall become the
member of the company.
*The address, occupation and the No. of shares held by each subscriber must also be mentioned in
the Memorandum of Association.
*Section 4 of the Companies Act states that the memorandum of association of every company must
contain various clauses

*
*According to the first clause the memorandum must state the name of the
company by which it wants to be known subjected to the following
restrictions:
*The name of the company must not be identical with an existing
company.
*No company will have the name which is undesirable in the opinion of the
government.
*The name must not mislead the public. For example, a company will not
be allowed to use a name, which is prohibited under the Emblems and
Names (Prevention of Improper Use) Act, 1950.
*The company must not use any names which suggest any connection with
the government or state Patronage without the prior approval of the
government.
*The name of a private company limited by shares, must end with ‘Private
Limited’

*
*This clause requires the memorandum to mention the name of the state in which
the registered office of the company is to be situated.
*A company must have its registered office ready within 15 days from its
incorporation and within 30 days of its incorporation, the verification of its
registered office should be done.
*It must be noted that the domicile is the place of registration of the company and
may or may not be the residence of the company. Residence of the company will
be the place from where the management and control of the business is carried
out.

*
*The object clause determines the purpose for which the
company has been set up and it determines the capacity
of the company.
*A company is not legally entitled to conduct any business
activity that is not specifically mentioned in its object
clause.
*The objects are classified into three categories: main
object, ancillary object, and other objects that will be
pursued to accomplish the main object.

*
*The fourth clause of memorandum of every company states the
liability of its members, i.e. whether the liability of its members is
limited by shares, or limited by guarantee or is unlimited.
*In case of company limited by shares, members cannot be called upon
to pay more than what remains unpaid. If his shares are fully paid, the
liability of shareholders is nil.
*In case of company limited by guarantee, the liability clause must
state the amount each member has to pay at the time of the
liquidation of the company.
*In case of unlimited company, the liability of members is unlimited
and personal assets of the members can be used.

*
* This clause requires all companies limited by liability to mention the amount of
capital with which the company is formed. The capital of the company must be
divided into smaller fixed value units which are known as shares. There is no legal
limit on the amount of share capital. A company cannot issue share capital
exceeding the amount mentioned in the capital clause

*
*According to this clause the memorandum must mention the
amount of authorised share capital and the amount of shares
taken by each subscriber/member. The following are the
statutory requirements regarding subscription-
*The memorandum must be signed by each subscriber in the presence of at
least one witness who attest the signatures.
*Each subscriber must take at least one share; and
*Each subscriber must write the number of shares held by him

*
*According to this clause the memorandum must state the name
of the person who shall become the member of the company in
the event of death of the subscriber.

*
*Articles of association is a secondary document (primary document – memorandum)
containing the laws regarding internal management of the company.
*According to sec 2(5) of the Companies Act, 2013 ‘Articles’ means the“Articles Of
Association of a company as originally framed or as altered from time to time in
pursuance of any previous companies law or of this Act.”
*Articles of Association is a public document which can be examined from the
registered office of the company. Articles help to establish the relationship between
the company and internal management.
*According to companies Act 2013, it is compulsory for every company to have its own
Articles of Association and file the same with Registered Office for registration

*
*According to sec 5 of the companies Act, the Articles of Association of a company can
be in respective Forms specified in Table F, G, H, I and J of Schedule 1 of the Act.
*Form in Table F is applicable to companies limited by shares;
*Form in Table G is applicable to companies limited by guarantee and having share
capital
*Form in Table H is applicable to the companies limited by guarantee and not having a
share capital
*Form in Table I is applicable to unlimited companies and having a share capital
*Form in Table J is applicable to unlimited companies and not having a share capital

*
*Share Capital and different classes of
shares
*Procedure for Issue of share capital
*Procedure of making share allotment
*Forfeiture of share and procedure for
re-issue
*Procedure for Transfer and
Transmission of shares
*Voting rights of members
*Alternation of Share capital and Lien
on Shares
*Use of common seal of company
*Payment of dividend
*Qualification, appointment, removal of
Directors
*Rules for adopting preliminary contracts
*Alteration in share capital
*Procedure regarding call on share
*Procedure regarding passing of resolution
*Appointment, Duties, Powers,
Remuneration of the Director, Manager,
*Secretary
*Appointment, Duties, Powers,
Remuneration of the auditors
*Underwriting commission and Arbitration
provisions
*Board meetings and the proceedings
*Winding up
*Capitalisation of profits

*In addition to the above the articles also contain details about the number of
members with which the company is formed. However, it must not contain any
provision against the company’s Act or public policy. It must be prepared in true and
fair manner and must not contain any provision against the memorandum.

*
*S.2(70) defines Prospectus as- "Any document described or issued as a
Prospectus and includes a red herring prospectus or any notice,
circular, advertisement or other document inviting offers from public
for the subscription or purchase of any securities of a body corporate”
*Thus, a Prospectus is not merely an advertisement, it may be a
circular or even a notice. A document shall be called a Prospectus if it
satisfies 2 things.
1.It invites subscription to or purchase of shares or debentures or any other
security of a body corporate.
2.The aforesaid invitation is made to the public.

*
*Information to be given in a Prospectus
*Name and address of the registered office of the Company, CS,
auditors, etc.
*Dates of the opening and closing of issue (made by the Board).
*Statement by the Board of Directors about separate bank account
*Disclosure of the details of money.
*Details about underwriting of the issue.
*Consent of auditors, Directors, bankers, etc.
*Details of the resolution passed.
*Procedure and time schedule for allotment and issue of security.
*Capital structure of the Company.
*Details of the Directors, including their appointment and remuneration.

*Particulars such as:
*Present business and location
*Object of the issue
*Purpose of funds
*Schedule of implementation
*Funding plan
*Summary of project
*Interim use of funds
*Particulars relating to:
*Management
*Litigation or legal matter
*Gestation period
*Extent of progress
*Deadlines for completion of project

*
*Reports by the auditors of the Company with respect to its profits, losses,
assets and liabilities.
*Reports made in the prescribed manner by the auditors upon the profits
and losses for each of the 5 financial years immediately preceding
financial year of issue of Prospectus, including reports of subsidiary.
*Reports made in the prescribed manner by the auditors upon the profits
and losses of the business of the Company for each of the 5 financial years
immediately preceding the issue and assets and liabilities of the business.
*Reports about the business or transactions to which the proceeds of the
securities are to be applied directly or indirectly.

*c. Declaration:
*There shall be included a declaration about the compliance of the
provisions of this Act and a statement to the effect that nothing in the
Prospectus is contrary to the provisions of this Act, the SCRA, 1956 and
the SEBI, 1992 and rules and regulations made thereunder.
*d. Other Matters:
*Prospectus shall also state such other matters and set out such other
reports as may be prescribed.

Company organisation unit1 full

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Company organisation unit1 full

Similar to Company organisation unit1 full (20)

More from Sheik fareeth

More from Sheik fareeth (6)

Recently uploaded

Recently uploaded (20)

Company organisation unit1 full