The document provides a comprehensive overview of business law, focusing on company law, its evolution in India, and the various forms of business entities such as sole proprietorships, partnerships, and corporations. It outlines the objectives and learning outcomes for students, details the regulatory framework established by the Companies Act of 2013 and its amendments, and highlights key concepts such as one-person companies and corporate social responsibility. Additionally, it contrasts the characteristics and legal implications of different business structures, emphasizing the roles and responsibilities of shareholders and company directors.

1. OBJECTIVE & LEARNING OUTCOMES
Objective
•To provide the students a comprehensive introduction to the areas
of business law.
• The purpose is to give students an overview of legal matters relating
to companies that they will deal with in their personal and/or
professional life.
Learning Outcomes
 To be able to appreciate the role of law in economic, political and
social context.
 Be able to identify the fundamental legal principles behind formation
of the company.
 To be able to identify the legal issues arising in day to day business
dealings.
 To be able to familiarize with the management of the companies.

2. COMPANY
•A Company is a legal entity made up of an association of
persons for carrying on a commercial or industrial
enterprise.
•Company members share a common purpose and unite
in order to focus their various talents and organize their
collectively available skills or resources to achieve specific,
declared goals.
•Companies take various forms such as:
•Voluntary associations including non profit org.
•Business entities with an aim of gaining a profit
•Financial entities and banks.
• Meanings & Definitions : An "artificial person",
invisible, intangible, created by or under law, with a
discrete legal personality, limited liability, perpetual
succession, and a common seal. It is not affected by the
death, insanity, or insolvency of an individual member.

3. UNIT I: INTRODUCTION:
HISTORY OF COMPANY
LEGISLATION
(Seven Periods)

4. MEANING OF COMPANY LAW
• Company law is that branch of law which
deals exclusively with all aspects relating
to companies, such as incorporations of
companies allotment of shares and share
capital membership in companies
management and administration of
companies, winding up of companies. etc.
• Company law in India is that branch of
Indian law which regulates companies in
India.

5. COMPANY LAW IN INDIA
•Source of Origin: The English Common Law. Various
Companies Acts passed in India from time to time were
based on the English Companies Act.
• 1850: First law on ‘Regn of joint stock companies’ was
enacted in India, based on English Companies Act 1844
known as the Joint Stock Companies Act, 1844.
• 1850 Act recognized company as a distinct legal entity
but privilege of limited liability was not granted to
company.
•The principle of limited liability was recognized in India
by Joint Stock Companies Act, 1857, passed following the
English law, the Joint Stock Companies Act, 1856.
•The Companies Act 1866 legislated (based on English
Companies Act of 1862) ‘for consolidating and amending
the law relating to the incorporation, regulation and
winding up of trading companies and other associations.’

6. COMPANY LAW IN INDIA (contd)
• 1866 Act was amended and remodelled in 1882
and it remained effective till 1913.
•The Indian Companies Act of 1913 was legislated
following the English Companies (Consolidation) Act,
1908.
• This Act of 1913 was found to be highly inadequate
in the course of its operation and thus it went
through numerous amendments.
Post Independence
•The Companies Act, 1956 was enacted in compliance
of the recommendations of the Bhabha Committee,
came into force on 01 April 1956.
•The major amendments in this Act were brought in
2002 which provided for the constitution of the National
Company Law Tribunal in place of the Company Law
Board.

7. MAIN OBJECTIVES OF THE COMPANY
LAW 1956
• To sustain trust & faith of Shareholders
• To protect & preserve rights of Share
holders
• To make the drastic control over all the
activities of company
• To make regulation of an effective
Annual Meetings
• Investment of general public should be
used for the development of society or
social welfare

8. COMPANIES ACT, 2013
1
.
• It has replaced The Companies Act, 1956 (in a
partial manner) after receiving the assent of
the President of India on 29 Aug 2013.
• It extends to whole of India.
• An Act of the Parliament of India, it regulates
incorporation of a company, responsibilities of a
company, directors, dissolution of a company.
• Act comprises of 29 chapters, 470 Sections with 7
Schedules as against 658 sections and 14 Schedules
in the Companies Act, 1956.
• The Act came into force on 12 Sep 2013 with few
changes like earlier private companies maximum
number of member was 50 and now it will be 200.
• A new term of "one person company" is included in
this act that will be a private company.

9. APPLICABILITY OF COMPANIES ACT 2013
1
.
•Companies incorporated under this Act or under any
previous company law;
•Insurance Companies, except in so far as the said
provisions are inconsistent with the provisions of the
Insurance Act, 1938 or the IRDA 1999;
•Banking companies, except in so far as the said
provisions are inconsistent with the provisions of BRA1949;
•Companies engaged in the generation or supply of
electricity, except in so far as the said provisions are
inconsistent with the provisions of the Electricity Act, 2003;
•Any other company governed by any special Act for the
time being in force, except in so far as the said provisions
are inconsistent with the provisions of such special Act; and
such body corporate, incorporated by any Act for the time
being in force, as the Central Government may, by
notification, specify in this behalf, subject to such
exceptions, modifications or adaptation, as may be notified.

10. NEW CONCEPTS: COMPANIES ACT 2013
• One Person Company (OPC): A company with only one
person as a member, who shall be the shareholder of the
company. It avails all the benefits of a private limited
company such as separate legal entity, protecting personal
assets from business liability, and perpetual succession. OPC
is classified as a private company under Companies Act.
• Woman Director: Every Listed Company /Public Company
with paid up capital of Rs 100 Crores or more / Public
Company with turnover of Rs 300 Crores or more shall have
at least one Woman Director.
• Corporate Social Responsibility (CSR) Clause (135): Every
company having net worth of Rs 500 crore or more, or
turnover of Rs 1000 crore or more or a net profit of Rs 5 crore
or more during any financial year shall constitute a CSR
Committee of the Board consisting of three or more
directors, out of which at least one director shall be an
independent director. by the High Court).

11. NEW CONCEPTS:COMPANIES ACT 2013 (contd)
• Valuation by Registered Valuers: A valuation is required to be made
in respect of any property, stocks, shares, debentures, securities or
goodwill or any other assets (herein referred to as the assets) or net
worth of a company or its liabilities under the provision of this Act, by
a person having such qualifications and experience and registered as
a valuer.
• Class action suits: For the first time, a provision has been made
wherein specified number of member(s), depositor(s) or any class of
them, may, if they are of the opinion that the management or control
of the affairs of the company are being conducted in a manner
prejudicial to the interests of the company or its members or
depositors, file an application before the Tribunal on behalf of the
members or depositors; Where the liability shall be of the firm as
well as of each partner who was involved in making any improper or
misleading statement of particulars in the audit report or who acted in
a fraudulent, unlawful or wrongful manner. The order passed by
Tribunal shall be binding on the company and all its members,
depositors and auditors including audit firm or expert or consultant
or advisor or any other person associated with the company.

12. NEW CONCEPTS:COMPANIES ACT 2013 (contd)
• Dormant Company: Where a company is formed and registered
under this Act for a future project or to hold an asset or
intellectual property and has no significant accounting
transaction, such a company or an inactive company may make an
application to the Registrar for obtaining the status of a dormant
company.
• Serious Fraud Investigation Office (SFIO): Statutory status to
SFIO has been proposed. Investigation report of SFIO filed with the
Court for framing of charges shall be treated as a report filed by a
Police Officer. SFIO shall have power to arrest in respect of certain
offences. Those offences shall be cognizable and the person
accused of any such offence shall be released on bail subject to
certain conditions provided.
• Fast Track Merger: Act 2013 has separate provisions of fast track
merger under S 233. The provisions are notwithstanding with the
normal provisions of merger under S 230 & 232 of Act. Under fast
this processes Central Government has power to sanction all such
scheme and there will be no requirement to approach National
Company Law Tribunal (powers presently exercised by HC)

13. COMPANIES (AMDT) ACT, 2015:KEY
HIGHLIGHTS
• CA Amendment 2015 received the assent from President of
India on 25 May 2015. It addresses concerns under CA 2013.
Key amendments in the CA Amendment 2015;
• Omitting requirement for minimum paid up share capital, and
consequential changes. (For ease of doing business). The
minimum paid-up share capital requirement of Rs 1 Lakh (in
case of a private company) and Rs 5 Lakh (in case of a public
company) under CA 2013 has been done away with.
Consequently, the definitions of private and public companies
stand amended.
• Making common seal optional and consequential changes for
authorization for execution of documents. (For ease of doing
business).
• Prescribing specific punishment for deposits accepted under
the new Act. This was left out in the Act inadvertently. (To
remove an omission).

14. COMPANIES (AMDT) ACT, 2015:KEY
HIGHLIGHTS (contd)
• Prohibition public inspection of Board resolution filed in the
Registry. (To meet corporate demand).
• Including provision for writing of past losses/depreciation
before declaring dividend for the year. This was missed in
the Act but included in the Rules.
• Prescribe thresholds beyond which fraud shall be reported
to the Central Government (below the threshold, it will be
reported to the Audit Committee). Disclosure for the latter
category also to be made in the BoD Report. (Demand of
auditors).
• Exemption u/s 185 (Loans to Directors) provided for loans
to wholly owned subsidiaries and guarantees/securities on
loans taken from banks by subsidiaries. (This was provided
under the Rules but being included in the Act as a matter
of abundant caution).

15. COMPANIES (AMDT) ACT, 2015:KEY
HIGHLIGHTS (contd)
• Replacing ‘special resolution’ with ‘ordinary resolution’ for
approval of related party transactions by non-related
shareholders. (To meet problems faced by large
stakeholders who are related parties).
• Exempt related party transactions between holding
companies and wholly owned subsidiaries from the
requirement of approval non-related shareholders.
(Corporate demand).
• Bail restriction to apply only for offences relating to fraud
u/s 447. (Though earlier provision is mitigated, concession
is made too Law Ministry & ED).
• Winding Up case to be heard by 2-member Bench instead of
a 3-member Bench.(Removal of an inadvertent error).
• Special Courts to try only offences carrying imprisonment of
two years or more. (To let magistrate try minor
violations).

16. SOLE PROPRIETORSHIP,
PARTNERSHIP AND CORPORATION
• A sole proprietorship is a business that has
a single owner who is responsible for making
decisions for the company.
• A partnership consists of two or more
individuals who share the responsibility of
running the company.
• A corporation is one of the most recognizable
business structures and has a separate
identity from the owners of the company. One
or more owners may participate as
shareholders of a corporation.

17. COMPANY
• A Company is formed when registered under Companies
Act.
• A Private Company is formed with a minimum of 2 persons
and a public company with 7 persons at least.
• A private Company is limited to 50 members excluding its
present and past employees. There is no limit to the
maximum numbers of members in case of a public
company.
• A Company has a separate legal entity distinct from the
members who constitute it.
• Property belongs to the Company and not to the individual
members.
• The liability of the shareholders is limited.
• Shares are freely transferable. In a private company the
articles restrict the right of members to transfer their
shares.
• A Company has a perpetual succession. It comes to an end
in the event of winding up.
• Audit of account by qualified auditor is compulsory.
•

18. PARTNERSHIP
• Partnership is created when agreed between the
individuals. Registration of partnership firm is optional
under the partnership Act.
• A partnership can be created by two persons.
• The maximum number of members in a partnership firm is
limited to 10 in case of banking business and 20 in
case of any other business.
• A partnership firm has no legal exisitence apart from its
members i.e., the partners and the firms are one and the
same.
• Property of the partnership firm belongs to individual
partners comprising the firm.
• The liability of partnership is unlimited.
• The partner cannot transfer his share without the consent
of his co-partners.
• Partnership comes to an end when a partner dies or
becomes insolvent, unless otherwise provided in the
partnership deed.
• The capital of a partnership firm is limited, as it is
contributed only by a few persons
• Audit of account is not compulsory.

19. DIFFERENCE BETWEEN A PARTNERSHIP
& SOLE PROPRIETORSHIP
• Ownership: Sole proprietorships are owned and operated by
a single business owner, whereas two or more individuals
must participate in ownership of a partnership.
• Decisions: The owner of a sole proprietorship has
complete control over the company's finances and operations.
All partners of a partnership give input wrt how the company's
resources are used and other important business decisions.
• Liability: Sole proprietors and partners of a partnership
business have unlimited liability for business lawsuits,
obligations and liabilities, ie a partner or sole proprietor may
be required to sell personal assets to meet the company's
business obligations. In a partnership business, a partner may
be liable for another partner's negligent behaviorAny partner
may lose her personal assets, if the company's assets are not
sufficient to meet the partnership's existing obligations.

20. DIFFERENCE BETWEEN A PARTNERSHIP
& SOLE PROPRIETORSHIP (contd)
• Conflicts: There is NO conflicts wrt decisions making in
Sole Proprietors. It is unwise to run a partnership without a
partnership agreement in place. A partnership agreement may
help partners operate company without disputes and conflicts.
• Acquiring Capital: Since ownership interest in the business
cannot be offered to potential investors, it leads to difficulty in
raising capital. Partnerships may receive more funds than a
sole proprietorship because the partners may be able to get
personal loans. Furthermore, partnerships can attract
investors by offering ownership interest in the business.
• Continuity: Sole proprietorships end automatically if he
dies or decides to sell the business. Partnerships may
automatically dissolve if a partner dies or decides to
withdraw from the business. However, a partnership may
continue to exist after a partner dies or withdraws, if the
partnership agreement contains procedures for continuing the
business.

21. DIFFERENCES BETWEEN SOLE
PROPRIETORSHIP, PARTNERSHIP &
CORPORATION
Formation:
•There are no documents to file to begin a sole proprietorship or
a partnership. However, businesses are required to file articles
of incorporation, also known as a certificate of formation, to
legally form a corporation in any state. State charges a fee to file
articles of incorporation.
• Corporations are required to register with each state where the
company intends to make business transactions. This
requirement is not imposed on sole proprietorships or
partnerships.
•Can A Coy Become A Partner in Partnership Firm?:
A coy being a juristic person, is capable of contracting in its
own name, since the Partnership (S4, Partnership Act 1932)
between persons is a contractual relationship.

22. DIFFERENCES BETWEEN SOLE
PROPRIETORSHIP, PARTNERSHIP &
CORPORATION (contd)
Liability:
•Sole proprietors and partners in a partnership business
have unlimited liability for all debts and liabilities that
occur while operating the business and thus may lose
their personal assets, if the company's assets are
insufficient to cover the company's debts.
•Corporations provide owners of the company with limited
liability protection against business losses and obligations
ie owners of a corporation will not lose their personal
assets, if the company goes bankrupt.
•Owners of a corporation are liable for company debts and
obligations up to extent of their investment in company.

23. DIFFERENCES BETWEEN SOLE
PROPRIETORSHIP, PARTNERSHIP &
CORPORATION (contd)
Taxation:
•Partnerships and sole proprietorships are referred to as
pass-through entities. This is because sole proprietors
and partners in a partnership report their share of
company profits and losses directly on their personal
income tax return. Sole proprietorships and partnerships
are not required to file business taxes with the Internal
Revenue Service.
• Corporations are subject to double taxation. This
occurs when the corporation pays taxes on the
company's profits at the business level, and shareholders
pay taxes on income received from the corporation on
their personal tax return.

24. DIFFERENCES BETWEEN SOLE
PROPRIETORSHIP, PARTNERSHIP &
CORPORATION (contd)
Structure:
•Corporations have a structure consisting of shareholders,
directors, officers & employees. Every corporation must select
at least one person to serve on its board of directors (BoD).
• BoD is responsible for allocating the company's resources
and increasing the shareholders' profits. Officers are required
to manage the day-to-day activities of the company and
implement the decisions made by the company's shareholders
and directors.
•Sole proprietorships and partnerships have a more informal
structure that does not require the selection of officers and
directors.
•Sole proprietors have full control over every aspect of their
business, whereas partnerships and corporations have to vote
on important company issues.

25. DIFFERENCES BETWEEN SOLE
PROPRIETORSHIP, PARTNERSHIP &
CORPORATION (contd)
Formalities:
•Partnerships and sole proprietorships have far less
paperwork and fewer ongoing formalities to adhere to in
comparison to a corporation.
•Corporations are required to hold at least one annual
meeting, while sole proprietorships and partnerships do
not have to hold company meetings.
•A corporation must keep strict financial records and
keep a ledger detailing how the company reached certain
decisions.
•Unlike a corporation, sole proprietorships and
partnerships are not required to file annual reports with
the state or create financial statements.

26. DIFFERENCE BETWEEN A COMPANY &
LIMITED LIABILITY PARTNERSHIP
LLP Company
Regulating Act regulated by LLP Act 2008 governed by CA, 2013
Min & Max No
of Members
min two and NO limit on
max
Public Coy: min seven.
Private Coy: max 200.
Internal
Governance
Structure
Contractual Agreement
between Partners
regulated by CA 2013
Management Those partners auth by
LLP Agreement
BoD elected by the
Shareholders
Transfer of
Interests
Econ rights are transferable,
but it shall not cause
disassociation & winding up/
dissolution as also not make
transferee a partner
Shares can be transferred
freely and transferee
succeeds to all rights of
membership.
Audit of
Accounts
Not must unless; Capital
Contribution exceeds Rs 25
Lakhs/Annual Turnover
exceeds Rs 40 Lakhs.
Legal necessity

27. CHARCTERISTIC FEATURES OF A COMPANY
• Artificial Person: Being an artificial person, it has to depend upon
natural persons (Directors, Managers, Officers, Shareholders, for
getting its various works done.
• Legal Entity (distinct from person who constitute it): Capable of
enjoying rights & Subject to duties.
(although a company is regarded as a legal person (though artificial), it is
not a citizen either under Constitution of India or the Citizenship Act 1955)
• Incorporated Association: Incorporated or Regd under CA;
– OPC.
– Pvt (minimum two members).
Public (minimum seven members).
• Limited Liability: where a person's financial Liability is limited to a
fixed sum, most commonly the value of a person's investment in a
company or partnership.
• Separate Property: Shareholders are not part owners.
• Transferability of Shares: Being movable property as per AoA.
• Perpetual Succession: “King is Dead, Long Live the King”.
• Common Seal (made optional wef 29 May 2015 vide C(Amdt)A 2015)

28. LIFTING THE CORPORATE VEIL
Corporate Veil:
• A legal concept that separates the personality of a
corporation from the personalities of its shareholders,
and protects them from being personally liable for the
company's debts and other obligations.
• This protection is not ironclad or impenetrable.
• Where a court determines that a company's business was
not conducted in accordance with the provisions of
corporate legislation (or that it was just a façade for illegal
activities), it may hold the shareholders personally liable
for the company's obligations under the legal concept of
lifting the corporate veil.
• The Circumstances under which Courts may lift Corporate
Veil;
– Under Statutory Provisions.
– Under Judicial Interpretations.

29. LIFTING THE CORPORATE VEIL
UNDER STATUTORY PROVISIONS
• Mis-statement in prospectus (S 34 & 35).
• Failure to return application money (S 39).
• Misdescription of Name (S 12).
• Punishment for Contravention of S 73 or 76 (S 76A).
• For facilitating the task of an Inspector appointed U/S 212 or
213 to investigate affairs of company (S 219).
• For investigation of Ownership of Company (S 216).
• Fraudulent Conduct (S 339).
• Liability of Ultra Vires Acts: The Directors & other officers
of a company will be personally liable for all those acts which
they have done on behalf of a company if the same are ultra
vires the company.
(Ultra vires : a latin phrase meaning "beyond the powers". If an
act requires legal authority and it is done with such authority, it is
characterised in law as intra vires ("within the powers“ ie valid). If
it is done without such authority, it is ultra vires ie invalid).

30. LIFTING THE CORPORATE VEIL UNDER
JUDICIAL INTERPRETATIONS
• Protection of Revenue.
• Prevention of Fraud/Improper Conduct.
• Determination of the Enemy Character of a Company.
• Formation of Subsidiaries to act as an Agent.
• Where a company acts as an agent for its shareholders.
• In case of an economic offence.
• Where company is used to avoid welfare legislation.
• Where company is used for some illegal or improper purpose.
• To punish for contempt of court.
• For determination of technical competence of the company.
• Where company is mere Sham or Cloak.

31. ADVANTAGES OF INCORPORATION
• Independent Legal entity.
• Limited Liability.
• Perpetual Succession.
• Transferability of Shares.
• Infinite Membership.
• Mobilisation of huge resources.
• Separate property.
• Ease in control & management.

32. DISADVANTAGES OF INCORPORATION
• Formalities & expenses.
• Loss of privacy.
• Divorce of control from ownership.
• Detailed winding up-procedure.
• Control by few.
• Greater public accountability.
• Possibility of frauds.

33. KINDS OF COMPANIES
• CA 2013: Two Prominent Types of Companies;
– Private Companies : OPC & Small Company.
– Public Companies.
• These Companies may be incorporated either as;
– Limited Liability Companies:
• Companies limited by Shares.
• Companies limited by Guarantee.
• Companies limited by Guarantee & Shares.
– Unlimited Liability Companies.
• Companies may also be classified as;
– Statutory Companies.
– Registered Companies.
– Existing Companies.
– Govt Companies.
– Foreign Companies.
– Holding & Subsidiary Companies.
– Associations not for profit.

34. PRIVATE COMPANY (CA2013 S2 (68), CA(A)2015)
• Restricts the rights to transfer its shares, if any (not a ban
on transfer of shares). Applicable to Pvt Coy having Share
Capital and not incorporated as Pure Guarantee Coy.
• Except OPC, limits number of members to 200 (excludes
debenture holders), not including;
– Persons in employment of Coy.
– Ex Employees who were member of the coy while in
employment and have continued to be members after
employment has ceased.
• Prohibits invitation to the public to subscribe for any
securities of the company (No Public Issue/ advt inviting
investment by public in its shares or debentures). Thus collect
capital through private approach.
• Where two or more persons hold one or more share(s) in a
coy jointly, they shall for the purposes of membership, be
treated as single member.
(In view of the above, a pvt coy must, in its articles, incorporate the above
Restrictions, Limitations & Prohibitions)

35. PRIVATE COMPANY:OTHER REQUIREMENTS
• Minimum No of Members:
– Minimum Two, to form a Coy, subscribing their names
to MoA.
– Any person competent to contract can subscribe (A coy
being a legal person can subscribe).
– Minor ineligible to contract, thus cannot subscribe.
• Use of Words ‘Private Limited (Pvt Ltd)’:
– It must be added at the end of the name of the coy.

36. ONE PERSON COMPANY (OPC):
CA 2013 S 2(62) & 3 (1) (c)
• OPC introduced by CA 2013, enabling Entrepreneur(s)
carrying on the business in the Sole-Proprietor form of
business to enter into a Corporate Framework.
• Hybrid of Sole-Proprietor and Company form of business, has
been provided with concessional/ relaxed requirements.
Features of One Person Company (OPC)
• Only One Shareholder:Only a natural person, who is an
Indian citizen and resident in India (means a person who
has stayed in India for a period of not less than 182 days
during the immediately preceding one calendar year) shall be
eligible to incorporate a OPC.
• Nominee for the Shareholder: Shareholder nominate
another person (a natural person, an Indian citizen & resident
in India, with his/ her consent) who shall become the
shareholders in case of death/ incapacity of the original.
• Director: Must have a minimum of One Director, the Sole
Shareholder can himself be the Sole Director. The Company
may have a maximum number of 15 directors.

37. TERMS & RESTRICTIONS OF OPC
• A person shall not be eligible to incorporate more than a
OPC or become nominee in more than one such company.
• Minor cannot become member or nominee of the OPC or
can hold share with beneficial interest.
• An OPC cannot be incorporated or converted into a Coy U/S
8 of the Act [Company not for Profit].
• An OPC cannot carry out Non-Banking Financial
Investment activities including investment in securities of
any body corporate.
• An OPC cannot convert voluntarily into any kind of
company unless two years have expired from the date of
incorporation of OPC, except threshold limit (paid up
share capital) is increased beyond Rs.50 Lakhs or its
average annual turnover during the relevant period exceeds
Rs.2 Crores i.e., then the OPC has to invariably file
forms with the ROC for conversion in to a Private or
Public Company, with in a period of Six Months on
breaching the above threshold limits.•
•

38. RELAXATIONS AVAILABLE TO OPC
• No need to prepare Cash Flow Statement (S 2 (40).
• The annual return can be signed by Director and not
necessarily CS (S 92).
• No necessity for AGM to be held (S 96).
• Special Provisions related to General Meetings &
EOGM would not apply (S 100 to 111).
• Compliance accepted as done if the resolutions are
entered in the Minute’s Book of coy (S 122).
• Audited Financial Statements signed by one director
(S 134).
• Financial Statements can be filed within six months
from the close of the FY as against 30 days (S 137).
• An OPC need to hold only one meeting of the BoD in
each half of calendar year and the gap between the
two meetings should not be less than 90 days
(S173).

39. STEPS TO INCORPORATE OPC
• Obtain Digital Signature Certificate (DSC) for the
proposed Director(s).
• Obtain Director Identification Number (DIN) for the
proposed director(s).
• Select suitable Company Name, and make an application
to Ministry of Corporate Office for availability of name.
• Draft MOA & AOA.
• Sign and file various documents including MOA & AOA
with the Registrar of Companies electronically.
• Payment of Requisite fee to Ministry of Corporate Affairs
and also Stamp Duty.
• Scrutiny of documents at Registrar of Companies (ROC).
• Receipt of Certificate of Registration/Incorporation from
ROC.

40. SMALL COMPANY : S 2 (85)
• Small Coy introduced by CA 2013.
• It means coy other than Public Company;
– Paid-up share capital of which does not exceed Rs 50
Lakh, and,
– Turnover of which as per its last PLA does not exceed
Rs 2 Crore (higher amount but not exceeding Rs20
Crores may be prescribed).
• Small Company shall not include;
– A holding company or a subsidiary company.
– Non-Profit Association.
– A company or body corporate governed by any special
act.

41. PUBLIC COMPANY:
S 2 (71) & C (A) A 2015
• Public Company means a company which is not a
private company.
• A company which is subsidiary of a company, not being a
private coy shall deemed to be public company for
purposes of this act even where such subsidiary
company continues to be a private company in its
articles.

42. DISTINCTION BETWEEN PRIVATE &
PUBLIC COMPANY
PRIVATE COY PUBLIC COY
Min No of Members Two Seven
Max No of Members 200 No Restrictions
Transferability of
Shares (S 44)
Restrictions as
per AoA
Movable property,
transferable as per
AoA.
Prospectus (S2(68) Cannot issue Through Prospectus
invite general public
to subscribe for
securities
Min No of Directors Two Three

43. DISTINCTION BETWEEN PRIVATE &
PUBLIC COMPANY (contd)
PRIVATE COY PUBLIC COY
Retirement of
Directors (S 152)
Not Required At least 2/3 of Directors
must be such whose
period of office is subject
to retmt by rotation.
Quorum for GM
(S 103)
Two Members
Personally
present
Personally present
5/ upto 1000,
15/ upto 5000,
30/>5000
(unless AoA provide for higher numbers)
Managerial
Remuneration
(MR) (S 197)
No Restrictions Total MR not to exceed
11% of Net Profit &
MD/Whole time Director
>5%
Public Deposits Can not accept Free to accept

44. SPEC PRIVILEGES & EXEMPTION
AVAILABLE TO PRIVATE COMPANIES
• Min No of Members: Two (7 in case of Public Coy) (S 3).
• Min No of Directors: Two (3 in case of Public Coy) (S 149).
• Quorum for GM (S 103).
• Managerial Remuneration (S 197).
• Rotational Retirement of Directors (S 152).
• Filling Casual Vacancies: NA to private company (S 161).
• Spec disqualification: appt as Director: Pvt coy by AoA
provide Spec disqualification (S164(3).
• Restriction on No of Directorship: Whereas max 10 for
Public Coy, it is 20 for pvt coy (none a public coy) (S 165).
• Indep Directors: Pvt Coy exempted from requirement of ID
(S 149).
• Audit Committee of The Board : Pvt Coy not required to
constitute (S 177).

45. CONVERSION OF PRIVATE COMPANY
INTO A PUBLIC COMPANY (S 14)
• Special Resolution:
– To be passed to amend AoA (No of members, free
transferability of shares or inviting public deposits).
– Becomes Public Coy from date of alteration.
– Cease to enjoy privileges & exemptions.
• Increase in Membership: If No of Members <7, it should
be raised to 7 (S3).
• Increase in No of Directors: If No of Directors <3, it should
be raised to 3 (S149).
• Filing of Altered Articles: Every alteration of the Articles
filed with Registrar together with a printed copy of the altered
article within 15 days.
• Alteration to be noted in every copy: Every alteration
made in the Articles of a company shall be noted in every copy of
articles.

46. CONVERSION OF PUBLIC COMPANY INTO
A PRIVATE COMPANY (S 14)
• Passing of Special Resolution: In GM of
Shareholders
– Authorising conversion and altering AoA (three
restrictive clauses).
– Becomes Public Coy from date of alteration.
– Cease to enjoy privileges & exemptions.
• Changing the name of the Coy: Adding ‘Pvt’
before Ltd.
• Obtaining the approval of Tribunal: Conversion
shall not have effect until Tribunal has approved it,
which shall make such order as it may deem fit.
• Filing with the Registrar: Every alteration of
articles and a copy of order of Tribunal approving the
alteration shall be filed with the Registrar within 15 days.

47. STATUTORY COMPANY
• Each Statutory Company is governed by the
provisions of its special act.
• CA 2013 is applicable to the extent that they are
not inconsistent with the special act under which the
company is formed.
• Eg: LIC Act, RBI Act
REGISTERED COMPANY
• A company registered under the CA is known as
such.
• Registered Companies can be incorporated as;
– Limited or Unlimited Liability Companies.
– Private or Public Companies.

48. LIMITED LIABILITIES COMPANIES
Coy Ltd by Shares (also called Ltd Liability Coy).
• A LLC is a corporate structure whereby the members of the
company cannot be held personally liable for the company’s
debt or liabilities.
• LLC are essentially hybrid entities that combine the
characteristics of a corporation and a partnership or sole
proprietorship.
Coy Ltd by Guarantee.
• (unlike LLC), A guarantee company has NO share capital or
shareholders.
• Instead, it has members who undertake to contribute a
nominal amount towards any shortfall in the company’s assets
to settle its debts in the event of its being wound up.
Coy Ltd by Guarantee having Share Capital.
• The liability of member is not merely ltd to amount as in r/o
Guarantee Coy not having share capital.
• Member(s) may be called upon to also contribute to the extent
of any sum remaining unpaid on shares held by him.

49. UNLIMITED LIABILITY COMPANY(ULC):(S 3 (2)
• A coy having NO limit on the liability of its members.
• Liability of each member extends to the whole amount of the
company’s debt & liabilities (similar to that or partners, but
unlike partners, members of company cannot be directly
proceeded against).
• An ULC may or may not have share capital.
Conversion of an ULC into LLC (S 18)
• Subject to provisions that any debt, liabilities, applications or
contracts by or on behalf of ULC before such conversion are
not affected by conversion.
• An ULC having share capital, by a resolution do following;
– Increase the nominal amount of its share capital by
increasing nominal amount of each of its share (with
condition that increased capital shall only be called for the
purposes of coy being wound up.

50. ASSOCIATION NOT FOR PROFIT
• It is an association which is formed not for profit but for
promotion of art, charity, commerce, edn, envt protection,
religion, research, Sc, social welfare or any such object.
• May or may not be regd as a coy under the CA, however,
when regd (as a coy with ltd liability), it may be given
licence by central govt (S 8). Eg: Bombay Gymkhana.
• Conditions for licence;
– Has in its object promotion of art, charity, commerce,
edn, envt protection, religion, research, Sc, social welfare
or any other such object.
– Intends to apply its profit, if any, or other income in
promoting its objects, and,
– Intends to prohibit payment of any dividend to its
members.
• Such an association cannot alter its MoA & AoA without
previous approval of Central Govt.

51. ASSN NOT FOR PROFIT:COY FORMED U/S 8
Conversion of S 8 Coys
• A Coy regd U/S 8, intending to convert into any other kind
can do so by;
– passing a resolution at a GM.
– Complying with th prescribed procedure (Rule 21 of the Coys
(Incorporation) Rules 2014).
Exemptions to S 8 Coys
• CS: Appt of CS not mandatory.
• AGM:
– May hold AGM with mere 14 (instead of 21) days notice.
– With flexibility of time, day & place, if decided by BoD beforehand.
• Recording of Minutes (S 118): NA, recorded in 30 days, if AoA
provide for confirmation of minutes.
• Appt of Min & Max No of Director & ID (S149&150):NA.
• Consent to act as Director filed with RoC (S152(5): NA.
• BoD Mtgs: only two (one every six months) instead of four.
• Quorum- BoD Mtgs: 8 Members or 25% of total strength
(whichever is less) but not less than 2 as against 1/3rd of total
strength or 2 Director (which ever is higher).

52. GOVT COYs: S 2 (45)
• Any coy in which not less than 51% of the paid
up share capital is held by;
– Central Govt.
– Any State Govt or Govts.
– Partly by Central Govt & partly by one or more State
Govts.
• A subsidiary of a Govt Coy is also treated as Govt
Coy.
• Legal status of a Govt Coy (GoI/ State only holds
shares and not infrastructure).
• Govt Coy- Private or Public:
– May be incorporated any way.
– Incorporating as Pvt Coy more convenient as only
two members needed to constitute it.

53. EXEMPIONS TO A GOVT COYs
Min of Corporate Affairs vide Notification dated 05 Jun 0215
• Use of word(s) ‘Ltd’ or ‘Pvt Ltd’: A Govt Coy is not
required to use ‘Ltd’ or ‘Pvt Ltd’ at the end of its name.
• AGM (S96): At Regd Office/ such other place as Govt
may approve.
• Dividends (S123(4): When 100% paid up share Capital is
with Govt, they need not deposit Dividend with Schedule
Bank in five days from date of declaration.
• Board’s Report: Requirement of Report to contain info on
policy on Director’s appt & remuneration and indep is NA.
• IDs (S149 (6) (a): A person shall be considered as ID if
Min/ Deptt of GoI (adm I/C of Coy) or State Govt is a
person of integrity, possess relevant epertise & experience.
• Managerial Remuneration (S 197): NA.
• Other Exemptions: Provisions of S 160, 162,163,170,
171, 185 & 186 are NA to a Govt Coy.

54. FOREIGN COY: S 2 (42)
• Any coy or body corporate incorporated outside
India which;
– Has a place of business in India whether by itself or
through an agent, physically or through electronic
mode.
– Conducts any business activity in India in any other
manner.
• Having a share transfer/ registration office will
constitute a business.
• Mere holding property cannot amount to having
a place of business.

55. SPEC PROVISIONS: FOREIGN COYs
To furnish following docus to Registrar within 30 days of est of business
• Certified copy of Charter, Statute or MoA & AoA (and
if not in English then certified translated copy thereof).
• Full address of Regd or Principal Office of the Coy.
• A list of Directors and Secretary of the Coy.
• Name(s) & address(es) of one or more persons resident in
India auth to accept, on behalf of coy, to accept Notice &
Document (S 383).
• Full address of the office of the coy in India which is
deemed to be principal place of business in India.
• Particulars of opening & closing of a place of business in
India on earlier occasion(s).
• Declaration that none of the Directors or the auth rep in
India have ever been convicted or debarred from
formation of coys & mgt in India or abroad.
• Any other information as may be prescribed.

56. OTHER OBLIGATIONS: FOREIGN COYs: S382
• Display of its name & country of incorporation at every
office and place of business(English & Vernacular).
• Publication of name & country of incorporation in all
business letters, letters heads & papers in English.
• Liability of Members: If liability is ltd, it shall cause notice
of the fact;
– In Prospectus, business letters, letters heads & papers and other
official publications (English).
– Outside every office and place of business(English & Vernacular).
• Obligations Regarding Accts (S381): In calendar year
make out Balance Sheet & PLA and deliver a copy to
Registrar.
• Books of Acct & Other Records (S384): Available
at principal place of business.
• Prospectus: It is to be registered before Registrar prior to
issue complying provisions of (S 387-389).

57. OTHER OBLIGATIONS: FOREIGN COYs (contd)
• Foreign Coys in which not less than 50% of Paid
Up Share Capital is in Indian hands (S379): Coy
shall be required to comply with all the provisions of
CA 2013 asif it was a coy incorporated in India.
• Penalty (S 392): Contravening any provisions
punishable with
– A fine not less than Rs One Lakh extendable to Rs
Three Lakh.
– In case of continuing offence upto Rs 50K everyday.
– Defaulting Officer punished with six months
imprisonment or fine ranging from Rs 25 K to Rs Five
Lakh.
• Winding Up (S 375): It may wound up as an
unregistered company.

58. HOLDING & SUBSIDIARY COMPANY
• Subsidiary Coy (S 2(87) means a coy in which
the holding coy;
– Controls the composition of BoD, or,
– Exercises or controls more than half of the share
capital either at its own or together with one or more
of its subsidiary coys.