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THE

COMPANY

ACT 1956

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Propaganda of Presentationy COMPANY

y COMPANY ACT 1956

y

OBJECTIVES OF COMPANY ACT 1956.yADVANTAGES A COMPANY HAVE THROUGH

INCORPORATION

y TYPES OF COMPANIES.

y MEMORANDAM OF ASSOCIATON.yACTICLE OF ASSOCIATION.

y STEP OF INCORPORATION OF A COMPANY.

y DOCUMENTS NEEDED FOR REGISTRATION.

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COMPANY

y In a simple words a company may be defined as avoluntary association of persons who have come togetherfor carrying on some business like the promotion ofcommerce , art ,science, religion, charity or any otherobject and sharing the profits there from.

y Section 3(1)(i) of the Companies Act, 1956 defines a

company as: a company formed and registered under thisAct or an existing Company.

y Existing Company means a company formed and

registered under any of the earlier Company Laws.

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Company act 1956y The company act came into force from 1 April 1956.

y The act was based upon the recommendation of company

law committee appointed under the chairmanship of Mr.

C. H. Bhaba on 25 -10-1950.

y The committee submitted its report in 1952. The Indian

company act extends to the whole India.

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Objective of company act 19561. Development of a company because a corporate

form of business organisation constitute a very

important sector of economy.

2. Protect the interest of large number of share holderas they have a separate ownership from managementin joint stock companies.

3. Safe guard the interest of the creditors so that theyhave there money on time

.

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4. To equip the government with necessary powers so

that the interest of the consumer, labors and

suppliers can be protected.

5. To attain the ultimate goal of the economic policy that

is establishing a socialistic pattern of society

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ADVANTAGES THAT A ORGANISATION ENJOY THROUGH

INCORPORATIONUNDERCOMPANY ACT 1956..

1 SEPERATE LEGAL ENTITY

2.ARTIFICIAL PERSON3.PERPETUAL EXISTENCE

4.COMMAN SEAL

5.LIMITED LIABILITY

6.CAPACITY TO SUE OR TO BE SUED

7.TRANSFERABILITY OF SHARE

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Separate legal entityyA company is an separate legal entity means

it is different from its members. It works as a

individual body.y It can make contracts, open a bank account,

can sue and be sued by others.

y

The law has recognised that even if a personholds virtually all the shares, the right andobligations of the company shall be differentfrom its members.

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Artificial personyA company is a purely a creation of law. It is invisible,

intangible and exists only in the eyes of law.

y It has no soul, no body, but has a position to enter orexit into a contract, to appoint a people as itsemployees

y In short it can do every thing just like a natural

person.

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Perpetual existence [sec 34(2)]y Section 34(2) of the act states that an incorporated

company has perpetual life.

yThe life of the company is not related to the life of themembers . Law create the company and law alone candissolve it.

y The existence of the company is not affected b y death,

insolvency, retirement or transfer of share of members.

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Limited liability

y It means that the liability of a member shall

be limited to the value of the share held byhim, he cannot be called upon to bear the

loss from his personal property.

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Common sealyA company being an artificial person can

not work as a natural being.

yTherefore, it has to work through itsdirectors, officers and other employees.Common seal used as a official signature of

a company.

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Transferability of share sec(82)yThe share of a company are freely

transferable. The shareholder can transfer

his share to any person without the consentof other members.

yA company cannot impose absolute

restrictions on the rights of member totransfer their shares

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Capacity to sue and be sued

yWhen a company incorporated it acquire a

separate and independent legal personality.As a legal person it can be sue and be sued

in its own name.

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Types of companies

(Registered under company act 1956)

COMPANIES

Incorporated

C artered

co panies

Statutoryco panies

Registeredco panies

Liability

li ited liability

unli itedliability

Nu ber of

e bers

private

public

Control

olding

subsidiary

owners ip

govern ent

non govern ent

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INCORPORATEDy 1.CHARTERED COMPANIES

These companies are incorporated under a special

charter such as the east India company. The bankof England. the company act does not apply to it.

2.STATUTORY COMPANIES

These companies are incorporated by special act oflegislature( act of parliament or state legislature)

example of such companies are RBI, UTI, LCI

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y REGISTERED COMPANIES

companies registered under the Indian Companies

Act, 1956 are called registered companies.To become a registered company one has to take thecertification of incorporation from the registrar.

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COMPANY WITH LIABILITYy COMPANY LIMITED BY SHARE [sec12(2)a]

companies in which the liability of its members is limited to the extent ofthe amount unpaid on the shares held by a particular member.

y COMPANY LIMITED BY GUARANTEE

The liability of members is limited to a fixed amount which membersundertake to contribute to the assets of the company in case of its windingup.

y

UNLIMIT

ED COMPANIESwherein members are liable for the debts of the company irrespective oftheir interest in the company

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Number of membersy PRIVATE COMPANIES [sec 3(1)(iii)]

A private company is one which, by its Article of

association- restricts the right to transfer its share, if any

- limits the maximum number of its member to fifty

- prohibits any invitation to the public to subscribe for

any share or debenture of the company.

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y PUBLIC COMPANY [SEC 3(1)(iv)]

A public company means a company which is not a

private company. In other words, a public company,means a company which by its article does not-

(i) limit the number of its member.

(ii) prohibit any invitation to the public to subscribe for

any share in, or debentures, of the company.

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companies according to controly HOLDING AND SUBSIDIARY COMPANY

where a company has control over another company, it

is known as the holding companyThe company over which control is exercised is calledthe subsidiary company.

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ownershipy GOVERNMENT COMPANY (sec617)

a government company means any company in which

at least 51% of the paid up share capital is held by thecentral government or by any state government orpartly by one or more state Government.

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MEMORENDUMOF ASSOCIATIONy The first step in the formation of the company is to

prepare memorandum of association. it is one of the

documents which has to be filed with registrar of thecompanies at the time of incorporation of a company.

y It is vital document, tell about the object of thecompanys formation ,the power of the company as

well as the boundaries beyond which the action of thecompany can not go.

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Importance of memorandumy It defines the rights and liabilities of the members.

y It shows the capital structure of the company

y It shows the object of the companyy It specifies the state in which the registered office of

the company is situated.

y It shows the constitution of the company

y It specify the conditions under which the company hasbeen incorporated.

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Article of associationy The article of association are the bye laws of the

company according to which director and other

officers are required to perform their functions asregards the management of the company, its accountsand audit.

y Article of association of the company as originally

framed or as attained from time to time in presence ofany previous companies law or of this act.

Sec2(2) of company act 1956

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Contents of article of associationy Rights of different classes of shareholder.

y Use of common seal of the company.

y

Different classes of shares and their right.yAppointment , powers, duties, salary of MD, manager,

and secretary.

y Borrowing power of directors.

y

Voting rights of member .y Board meetings and proceedings.

y Winding up company.

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Step of incorporation of company1

PUBLI

/ PRI

PANY

2S

ATE F REGISTERED FFI

E

3NAME F THE

MPANY

4 Letter of intant

5

FIXUNDERWRITRS,BROKERS, BANKERS, AUDITORS AND SIGNATORIESOF THEMEMORANUM

6 PREPARATIONOF MEMORANDUMAND ARTI

LEOF ASSOCIATION

7SUBMISSIONOF FINALDOCUMENTS TOTHEREGISTRAR

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Incorporation of a company1. First of all promoter has to decide whether they want to

form a public company or a private company.

2. Decide the state wherein the registered office of thecompany is to be situated.

3. Name of the company. The promoters should decideupon at least three suitable names and ascertain from theRegistrar of companies whether the name by which the

company is to be started is available or not .Necessary care should be taken while selecting the namethat it must not be identical or too nearly resemble thename of any existing company.

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Cont.4. The promoter should obtain a letter of intent(to be converted

into an Industrial license) under industry act 1951, if thecompanys business comes within the licensing requirement ofthis act.

5. The promoters should also fix UNDERWRITRS, BROKERS,BANKERS, AUDITORS AND SIGNATORIESOF THE MEMORANUM.

6. Then Company should prepare Memorandum of association and article

of association.

7. Finally submit all the required documents to the registrar.

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Documents needed for Registrationy Memorandum and article of article and association

duly stamped, signed and witnessed.

y

Statement of nominal capital of the company.yAgreement (if any) with any individual for

appointment of any manager and director.

yAny other agreement, if referred to in the memora..

And article of associationy The statutory declaration in form no 1 is to filled

stating that all the requirement of the company actand the rules three under have been complied with.