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8/4/2019 Company Law- Assignment by Simon (BUBT)
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1
Definition of Company
The word “Company” is derived from the Latin word „Com‟ and „pany‟ . „Com‟ means
„simultaneously‟ and „pany‟ means „livelihood‟. So, company is such kind of business
organization where a group of people provides capital for earning profit and by this profit they
maintain their livelihood.
“Company means a company formed and registered under this Act or any existing company.” -Sec 2(1), Company Act, 1994.
“A company is an association of many persons who contribute money or money‟s worth to
common stock and employs it in Some trade or business and who share the profit or losses
arising there form .” -James Stephenson.
“A company is an artificial being, invi sible, intangible and existing only in contemplation of
law.” -Justice John Marshal.
“A company is an artificial person created by law, having a separate legal entity, with a
perpetual succession and a common seal”. -L.H. Haney.
“A corporation by nature an artificial person created or authorized by the legal statute for
some specific purpose.” -Kimball and Kimball.
“Company means an association of person united for a common object.” -James.
“A company is an association of many persons who contribute money or money‟s worth to
common stock and employs it for some common purpose.” -Lord Lindley.
“Corporation is a business that is a legal entity separate from its owner.” -New York Corporation Act-1860.
By analyzing above definitions we have got that company is:
An artificial entity created by law.
Has a perpetual succession.
Has a common seal.
So, the term Company is used to describe an association of a number of persons, formed for
some common purpose and registered according to the law relating to companies.
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Characteristics/Essential elements of a company
Company is such kind of business organization where a group of people provides capital for
earning profit and by this profit they maintain their livelihood. It has some legal and general
characteristics which separate it from other organizations. The characteristics of a company can
be summarized as follows:
Like other organizations, company also has some common
features:
1. Formation procedure : There are some formalities in the formation of a company.
Company is formats by following such an Act. Company Act, 1994 is followed in our
country to format a company.
2.
Voluntary Association: A group of people format company for earning profit.Shareholders can retake their capital at any time by selling their shares.
3. Distinct objectives: Company is formatted for some distinct objectives which are
mentioned in the Memorandum of Association. Company won‟t be able to do any kind of
activities for out of these activities.
4. Attainment of membership: Any qualified person may become a member of a company
by purchasing its share.
5. Amount of capital: Because of providing capital by a lot of people, comparatively the
amount of capital becomes huger.
6. Large scale organization: Company is a large scaled organization for huge capital,
limited liabilities, huge number of members etc.
7. Transferability of shares: A company‟s share is freely transferable. Any shareholder
may transfer his shares to others in that method which is mentioned in the Articles of
Association.
8. Democratic management: The management and responsibilities of a company is given to
the Board of Directors who are elected by the shareholders.
“The company is managed on the principle of democracy”
- J.K. Mitra.
General Characteristics
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9. Distribution of profit: The distributable portion of obtained profit of a company will be
distributed among the shareholders by that ratio which is fixed in the AGM.
10. Auditing accounts: The annual profit-loss account and balance sheet are audited by the
auditor for the interest of shareholders.
11. Taxation: In most cases the amount of charged tax on a company is comparatively more
than other organizations. Here, the tax is charged both on the obtained profit and the
shareholder‟s profit.
12. Growth & expansion: Company expands and develops its scope with the development of
management and by collecting huge amount of capital.
Company has some legal characteristics too according to the
law of relevant countries. The features are:
1. Created by law: Company is a business organization which is formatted with theprevalent Company Act of a country. “Company means a company formed and registered under this Act or any existing company.”
-Sec 2(1), Company Act, 1994.
2. Artificial legal personality: Company is an artificial entity which is created by law andhas its own name and common seal to deal a contract or case with the third party.
3. Separate legal entity: According to law, company‟s entity is distinct from the owner‟s
entity. For this distinction, it is not possible to blame the owners personally for
company‟s liabilities.
4. Registration: Registration is compulsory for a company. After registration under the
applicable Act, company can start its activities.
5. Perpetual succession: A company‟s succession doesn‟t depend on the shareholders‟succession for having separate entity. There is a proverb, “Members may go, members
may come but the company remains forever.”
6. Common seal: Though company can‟t give a signature as like as an individual in case of
contracting with third party for that it uses a common seal in lieu of signature. Here, at
least 2 directors have to sign on behalf of the company.
Legal Characteristics
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7. Registered office: Company must have a registered office from where it conducts its
activities. A notice has to published to the people in case of changing office. (Section-
77).
8. Number of members: According to Company Act, in case of Public limited Co. the
minimum number of members is 7 and maximum is limited by shares. In case of Private
limited Co. the minimum number of members is 2 and maximum is 50.
9. Share capital: The total amount of the capital of a company is divided among many
equal portions; every portion of that capital is called a share. Company collects its capital
by selling these shares.
10. Liability of the members: The liabilities of the members of a company are limited by
their purchased shares. But liabilities may also be limited by assurance. (Section-5).
11. Management & Regulations: The management and ownership of a company is totally
different. The Board of Directors controls the management. The activities of a company
are mentioned in the Memorandum of Association and Articles of Association.
12. Winding up: Though a company is formatted under an Act as well as it is also wound up
under that Act.
For above characteristics, a company has obtained universally more acceptability than other
organizations.
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Classification of Company
To remove the obstacles of sole proprietorship and partnership business, the company was
implemented. After that, for the growth and expansion of business sector several types of company was created. Company is classified on the basis of ownership, liabilities, formation,
nature etc. which are described below:
Company
On the basis
of
formation
On the basis
of liability
On the basis
of
nationality
On the basis
of
ownership
On the bas
of number
members
A. Company on the basis of formation: Company is generally three (3) types on the basis of
formation. They are:
1. Chartered Company: It is the most back-dated company. The company which isformatted by the Head of the Govt. or by the special permission of the king or queen
of a country or by the power of royal registration is called a chartered company such
as East-India Co., the Chartered Bank Of England, Royal Nepal Airlines etc. This
type of company is not seen right now.
Chartered
Company
Statutory
Company
Registered
Company
Company
with
Limited
Liability
Company
with
Unlimited
Liability
Domestic
Company
Foreign
Company
Multinational
Company
Govt.
Company
Non-Govt .
Company
Priva
Limite
Compa
Publi
Limite
Compa
Miscellaneous
Company
Holding company
Subsidiary company
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2. Statutory Company: The Company which is formatted and conducted through special
Act of parliament by the govt. for the welfare of people, then it is called statutory
company.
“A statutory company is established by a special Act of Parliament”
- J.K. Mitra.
3. Registered Company: When a company is formatted and conducted under the
Company Act, then it is called registered company. Most of the companies of
Bangladesh is registered under Company Act, 1994.
There are 3 kinds of registered company, which are:
I. Company limited by shares: In these companies there is a share-capital, and
each share has a fixed nominal value which the shareholders pay at a time or
by installments. The member is not liable to pay anything more than the fixed
value of the share, whatever may be the liabilities of the company.
II. Company limited by guarantee: In these companies, each member promises
to pay a fixed sum of money in the event of liquidation of the company. This
amount is called guarantee. Sometimes the members are required to buy a
share of a fixed value and also give a guarantee for a further sum in the event
of liquidation. There is no liability to pay anything more than the value of the
share and the guarantee.
III. Unlimited Company: In these companies the liability of the shareholder is
unlimited, as in partnership firms. Such companies are permitted under the
Company Act but are not known.
B. Company on the basis of liability: On the basis of liability of members there are two
types of company(Sec. 5) which are discussed below:
1. Company with limited liability: The liabilities of members of these types of companyremain limited till a fixed area. It has also 2 types:
Company limited by shares
Company limited by guarantee.
2. Company with unlimited liability: The Company whose members‟ liabilities areunlimited indicates this type of company.
C. Company on the basis of number of members: On the basis of number of members
company can be classified into two categories:
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1. Private Limited Company: A private company is just a private affair of members and
public at large is not involved at all. The minimum number of members is 2 andmaximum is 50.
2. Public Limited Company: A public company is a company the membership of which
is open to the general public under the provisions of its Articles. Its shares aretransferable. The minimum number of members is 7 and maximum number is limited
by shares.
D. Company on the basis of Ownership: Company is classified into two categories on thebasis of ownership:
1. Government Company: If the 51% or more shares are owned by the govt. of a
company, then it will be called Government Company. It is also called Public Sector
Company. Though it is formatted under the Company Act, but the conduction and
management is directly controlled by the govt. Example: DESA, WASA etc.
2. Non-government Company: The Company in which there is no interfering of govt. in
management and conduction, and then it is called Non-government Company. It is
also called Private Sector Company. Example: BEXIMCO pharmaceutical ltd.,
Singer Bangladesh ltd. etc.
E. Company on the basis of Nationality: There are three kinds of company on the basis of
nationality:
1. Domestic Company: The Company which is formatted under the Company Act of its
state, then it is called the domestic company. This type of company can conduct itsbusiness in the country or abroad.
2. Foreign Company: If a company formatted and registered in a company but runs its
business by establishing office and registering in another country, then it is called
foreign company. Example: Pan Pacific, Unicall etc.
3. Multinational Company: The Company which is formatted and registered under the
ownership of one or more people of different countries is known as multinational
company. Example: Coca cola, HSBC, Unilever Bangladesh ltd. etc.
F. Miscellaneous Company: There are some other companies except above:
1. Holding Company: The Company which owns more than 50% shares of another
company or control the management of another company, then that company will
be called holding Company.
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2. Subsidiary Company: Any company owned or controlled by another to the extent
that it is a mere instrument to carry out the orders of the owing Company, iscalled a subsidiary.
There are also some other company except the above such as non-business company, special
company etc.
Private Ltd. Company VS Public Ltd. Company
Public Ltd. Co. and Private Ltd. Co. both are the companies which are limited by their shares.
Though both have perpetual succession and created under the Company Act but there are somedifferences in their formation process and activities. The differences between them are shown
below:
No. Topic Public Ltd. Company Private Ltd. Company01. Formation
Procedure
The formation procedure is
complex due to the excessive legal
activities.
Comparatively its formation
procedure is easy.
02. Number of
members
Minimum 7 and maximum is
limited by shares.
Minimum 2 and maximum 50.
03. Scope &
nature of
ownership
The owners live in a vast area and
different kind of people may be its
member.
Owners may be limited between
family and friends.
04. Size Normally it is a large sizedbusiness.
It is a middle sized business.
05. Secrecy Here maintaining secrecy isn‟tpossible.
Maintaining secrecy of businessinformation is possible here.
06. Expansionfacility
Because of low risk, there is agood opportunity of expansion.
Though risk is high so that there isless scope of expansion.
07. Decision
making
For bureaucratic problem the
decision making process is time-
costing.
Here it is possible to take decision
and implement it fast.
08. Legal
restriction
Here it is need to be followed more
legal restriction.
Here the legal restriction is less
than the Public Ltd. co.
09. Safety of
members
For lawful control the safety of
members are more here.
Here the safety of members is less
than the Public Ltd. Co.
10. Use of the
word
„Limited‟
The word „Limited‟ is only writtenafter this company.
The word „Pvt. Ltd.‟ is written after this company.
11. Preparationof Articles
It can use „Table A‟ instead of Articles of Association.
It is compulsory for this companyto prepare Articles of Association.
12. IssuingProspectus
Issuing prospectus is compulsoryhere.
No need to issue prospectus.
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No. Topics Public Ltd. Co. Private Ltd. Co.
13. Minimum
subscription
Public ltd. co. needs to collect
minimum subscription beforedistributing shares.
Private ltd. co. can distribute shares
without minimum subscription.
14. Capital
collection
It can collect shares by addressing
people for purchasing shares.
It can collect shares only from the
members.15. Share transfer Its shares are transferable. Its shares are not transferable.
16. Share warrant It can issue share warrant with thefull value.
It can‟t issue share warrant.
17. Issuingdebenture
It can issue debentures to thepublic.
It can‟t issue debentures to thepeople.
18. Member‟s list It is compulsory to make list if thenumber of members exceed over
50.
There is no need of keeping the
member‟s list.
19. Number of
Directors
Minimum number of directors is 3. Minimum number of directors is 2.
20. Director‟sAppointment
Directors are elected by the
shareholders through an election.
There is no exact rule to choose the
directors.
21. Remuneration
of directors
Here the directors get the
remuneration at a fixed rate.
Here the directors get the
remuneration as they wish.
22. Director‟s
retirement
Here the directors have to take
compulsory retirement for 1/3portion of a year.
Here there is no regulation like this.
23. Statutory
meeting &reporting
Here it is compulsory to call a
meeting and reporting to theregistrar within the determined
time.
Here it is not mandatory to call
meeting and reporting.
24. Audit &
submission of
Account
It has to audit the annual accounts
and submit one copy to the
registrar and shareholders.
No need to do these.
25. Changeability Public Ltd. Co. can‟t be changed tothe other forms.
But this type of company can bechanged to Public Ltd. Co.
By above discussion we have discussed about the differences between Public ltd. Co. and Private
ltd. Co.
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Memorandum of Association – Meaning
The Memorandum of Association is a document which contains the fundamental rules regarding
the constitution and activities of a company. It is the basic document which lays down how thecompany is to be constituted and what work it shall undertake. The purpose of the memorandum
is to enable the members of the company, its creditors, and the public to know what its powersare and what is the range of its activities.
“The Memorandum of Association of the company is its charter and defines the limitation of
the power of the company established under Act.” - Lord Cairns.
“Memorandum of Association is a document which contains the fundamental rules regarding
the constitution and activities of a company.” - J.K. Mitra.
Its objective is to inform the shareholders, creditors and customers about the scope of authorizedfield of operation of company.
Memorandum of Association – Contents
The Memorandum of Association is a document which contains the fundamental rules regarding
the constitution and activities of a company. It is prepared by following the Company Act. The
contents of the Memorandum of Association are discussed in the Company Act, 1994(SECTION-6, 7, 8). They are discussed below:
1. Name Clause: The name of the company with the word „Limited‟ at the end of the name
of a public company and the words “Pvt. Ltd.” at the end of the name of a privatecompany. But it is not necessary to add the word „ltd.‟ with the name of the company
which is made for charity. (Sec-28)
There are some rules to determine the name of a company at SECTION-11:
It is not allowed to keep the name of an existing company.
It is banned to keep the name which is banned in the Govt. gazette (Sec-11;4) .
2. Situation Clause: The name of the State in which the registered office of the company is
to be situated.
3. Objects Clause: The objects of the company. The companies (Amendment) Act,1956,
provides that in the case of a company formed after the same amending Act, the Memomust state separately
The main objects and objects incidental and ancillary to the main objects.
Other objects not included in the previous condition.
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4. Area of operation clause: Except in the case of trading corporations, the State or states to
whose territories the objects extend.
5. Liability clause: The nature of the liability of the members, i.e. whether limited by shares
or by guarantee or unlimited.
6. Capital clause: In the case of a company having share capital – unless the company is an
unlimited company, the memorandum shall state the amount of share capital and the
division thereof into shares of a fixed amount.
7. Consent Clause: This is the last clause of Memorandum of Association. Here the
directors in case of Public ltd. Co. minimum 7 and Private ltd. co. minimum 2 put theirsigns to give their consent to state that-
Everybody has collected the minimum subscription
They have mentioned their share numbers They sign with their addresses and ID in front of two witnesses.
By above discussion, it is discussed about the contents of Memorandum of Association.
Articles of Association- Definition
The Articles of Association contain rules, regulations and bye-laws regarding the internal
management of companies.
“ Articles are the internal laws of a company. Articles devise ways for the internal managementof the company.”
- Lord Brobene.
“The document containing the rules and regulations for the internal management of the
company‟s called „Articles of Association‟.” - Yogendra Prasad Verma.
A public company may or may not file articles. If it does not, the regulations contained in Table
A will apply to it.
The Articles shall: Be printed;
Be divided into paragraphs numbered consecutively;
Be signed by each subscriber of the memorandum of association.
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Articles of Association- Contents
Articles usually contain provisions in respect of the following matters:
Name and address of the company.
Rules of daily activities of the company. Rules about shares:
Number of shares.
Process of issuing shares.
Collection process of share value. Issuing process of share certificate and share warrant.
Procedure of share transfer
Process of transferring stocks from shares.
Re-issuing process of share certificate etc.
Rules about shareholders:
Shareholders‟ rights and liabilities. Voting power of shareholders etc.
Rules about capital: Changing process of capital increase and decrease.
Changing process of share value.
Distributing process of new shares.
Amount of minimum subscription.
Rules about meeting: Process of calling meeting.
Process of election. Process of conducting meeting etc.
Rules about Directors: Number of directors.
Power, duties and rights of directors.
Conditions about the remuneration of directors.
Number of qualification shares of directors.
Disqualification of directors.
Retirement and replacement process of directors.
Rules about profit and reserve: Process of profit declaration.
Process of profit determination.
Process of profit distribution.
Process of reserving and investing profit etc.
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Rules about Accounts: Maintaining accounts book.
Inspecting accounts.
Auditing accounts.
Appointing auditor.
Process of company‟s profit-loss etc.
Other rules: Appointing managing directors, secretary, underwriter and auditors and
determining their remuneration.
Use of the seal of the company.
Process of notice of company‟s members. Dissolution process of company etc.
By above discussion the contents of Articles of Association are described.
The Doctrine of Indoor Management
When the Articles of association of a company prescribed a particular procedure for doing a
thing, the duty of carrying out the provisions lies on the person in charge of the management of the company. Outsiders are entitled to assume that the rules have been complied with. This is
known as the doctrine of Indoor Management.
Example: The articles of a company provided that the directors can give a bond if authorized by
a resolution of the company. The directors gave a bond to T although no resolution was passed.
Held, T was entitled to assume that the resolution was passed (because it was a matter of
internal procedure) and the company was bound by the bond.
The Doctrine of indoor management does not apply in certain cases:
a) Void Acts: Where the act is void ab initio, the company is not bound, e.g. forgery.
Example: An act ultra vires the memo or articles can‟t bind a company.
b) Knowledge of irregularity: Where the person dealing with the company has notice,
actual or constructive, that the prescribed procedure has not been complied with the
company is not bound.
Example: X Company lends money to Y Company on a mortgage of its asset. The
procedure laid down in the articles for such transaction was not complied with. The
directors of the two companies were the same. Here it may be presumed that the lender
had notice of the irregularity. Hence the mortgage is not binding.
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c) Lack of authority: If an agent of a company makes a contract with a third party and if the
act of the agent falls outside the ordinary authority of the agent, the company is notbound.
Example: A branch manager of a company drew bills of exchange and also endorsed
bills on behalf of the company, although they had no authority for these acts from thecompany. Held, the company was not bound.
Directors-Number
The number of directors to be appointed to the Board of directors of a Company is determined by
the articles.
Tha Act provides that there must be at least 3 directors in a Public Company (Other than a publiccompany which has become such by virtue of sec. 43A) and at least 2 directors in other
Companies. – Sec.252.
Subject to the minimum stated above and the maximum fixed by the articles the Company can,
by ordinary resolution, increase or decrease the number of directors. It can also appoint
additional directors for one year. – Sec. 258.
The Company can increase the number of directors beyond the maximum fixed by the articles
provided previous sanction of the Central Government is obtained. Where the maximum fixedby
articles is 12 or less, the number can be increased to 12 without Government approval. – Sec. 259
Directors – Qualification
A director is an important role for a company. He needs not have any academic qualification: he
need not have any degree from the university; he need not have been to school. From the
Contract Act and the Companies Act, it can be said that the director must have the followingqualifications:
1. A director must be capable of entering into a contract, i.e.
He must have attained the age of majority.
He must have sound mind.
He must not be disqualified from contracting by any law to which he issubject – Sec. 11.
2. A director must be a natural person, i.e. not an artificial person.
3. A director must have the requisite qualification shares. The qualification shares are notrequired in nomination by the Central Government or in certain Statutory Corporations.
4. A director must not be disqualified under the circumstances enumerated in Sec. 274, e.g.
if he is an undischarged insolvent or a person convicted by the Court.
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Directors – Disqualification
A person shall not be capable of being appointed director of a company, if –
1. He has been found to be of unsound mind by a Court of component
jurisdiction and the finding is in force;
2. He is an undischarged insolvent;
3. He has applied to be adjudicated as an insolvent and his application is
pending;
4. He has been convicted by a Court of any offense involving moral turpitudeand sentenced in respect thereof to imprisonment for not less than six months
and a period of five years has not elapsed from the last date of expiry of thesentence;
5. He has not paid any call in respect of shares of the Company held by him,
whether alone or jointly with others, and six months have elapsed from the
last day fixed for the payment of the call;
6. An order disqualifying him for appointment as director has been passed by aCourt in pursuance of Section 203 and is in force, unless the leave of the
Court has been obtained for his appointment in pursuance of that Section.
The Central Government may, by notification in the Official Gazette, remove the
disqualifications under Clauses (d) and (e) above, as regards any individual.
A private company, which is not a subsidiary of a public company, may provide by its articles
that a person shall be disqualified from being appointed to those specified in 1 to 6 above.
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Company VS Partnership
Company and Partnership both are the form of business organization. Though both are businessorganization but there are some differences in their formation process and activities. The
differences between them are shown below:
No. Topic Company Partnership
01. Formation
Procedure
The formation procedure is
complex due to the excessive legalactivities.
Comparatively its formation
procedure is easy.
02. Number of
members
Minimum 7 and maximum is
limited by shares for Public ltd.Co. and Minimum 2 and maximum
50 for Private ltd. Co.
More than 2 may conduct
partnership business.
03. Scope &nature of
ownership
The owners live in a vast area anddifferent kind of people may be its
member.
Owners may be limited betweenfamily and friends.
04. Size Normally it is a large sized
business.
It is a small or middle-sized
business.
05. Secrecy Here maintaining secrecy isn‟tpossible.
Maintaining secrecy of businessinformation is possible here.
06. Expansionfacility
Because of low risk, there is agood opportunity of expansion.
Though risk is high so that there isless scope of expansion.
07. Decisionmaking
For bureaucratic problem thedecision making process is time-
costing.
Here it is possible to take decisionand implement it fast.
08. Legal
restriction
Here it is need to be followed more
legal restriction.
Here the legal restriction is less.
09. Safety of
members
For lawful control the safety of
members are more here.
Here the safety of members is less.
10. Use of the
word
„Limited‟
The word „Limited‟ is only writtenafter Public ltd. Co. and The word
„Pvt. Ltd.‟ is written after Privateltd. Co.
No need to write this kind of
words.
11. Preparation
of Articles
Public company can use „Table A‟instead of Articles of Association
and It is compulsory for privatecompany to prepare Articles of Association.
No need to prepare this.
12. IssuingProspectus
Issuing prospectus is compulsoryfor public company.
No need to issue prospectus.
13. Minimumsubscription
Public ltd. co. needs to collectminimum subscription beforedistributing shares.
Private ltd. co. can distribute shareswithout minimum subscription.
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No. Topic Company Partnership
14. Capital
collection
It can collect shares by addressing
people for purchasing shares orfrom the members.
It can collect shares only from the
members.
15. Share transfer Its shares are transferable. There is no procedure of shares.
16. Share warrant It can issue share warrant with thefull value.
There is no procedure of sharewarrant.
17. Issuingdebenture
It can issue debentures to thepublic.
There is no procedure of issuingdebenture.
18. Member‟s list It is compulsory to make list if thenumber of members exceed over
50.
There is no need of keeping the
member‟s list.
19. Number of
Directors
Minimum number of directors is 3
for public company and minimum
number of directors is 2 for private
company.
It is fixed by the partners.
20. Director‟sAppointment
Directors are elected by theshareholders through an election
for public company.
There is no exact rule to choose thedirectors.
21. Remunerationof directors
Here the directors get theremuneration at a fixed rate.
Here the directors get theremuneration as they wish.
22. Director‟sretirement
Here the directors have to take
compulsory retirement for 1/3
portion of a year.
Here there is no regulation like this.
23. Statutory
meeting &
reporting
Here it is compulsory to call a
meeting and reporting to the
registrar within the determinedtime.
Here it is not mandatory to call
meeting and reporting.
24. Audit &
submission of
Account
It has to audit the annual accounts
and submit one copy to the
registrar and shareholders.
No need to do these.
25. Changeability Public Ltd. Co. can‟t be changed to
the other forms but privatecompany can be changed to Public
Ltd. Co.
It may not be transferred to another
form of organization.
By above discussion we have discussed about the differences between Company and partnership.
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Meeting – Classification
The corporate system of business organization is essentially democratic in structure. Thebusiness of the Company is carried on by officials acting under the orders of the Board of
Directors, which is the executive head of the Company. But the directors are elected to the Board
by the shareholders of the company and must abide by the wishes of the shareholders asexpressed in resolutions passed in meetings convened for the purpose.
The Companies Act provides for the following types of meetings:
A. Meetings of the shareholders:
1. Statutory Meeting: Every public company ltd by shares capital, must within a period
of not less than one month and not more than six months from the date at which the
company is entitled to commence business, hold a general meeting of members which
is to be called, the statutory meeting. In this meeting the members are to discuss a
report by directors, known as the Statutory Report, which contains particulars
relating to the formation of the Company. – Sec. 165(1).
Meetings
Meetings of the
shareholders
Statutory Meeting
Meetings Of
directors
Other meetings
General meeting
Extra-ordinary
general meeting
Class meetings
Meetings of the
creditors
Meetings of the
debenture holders
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2. Annual General Meeting: General meeting of a company means a meeting of its
members for specified purposes. There are two kinds of General Meetings.
The Annual General Meeting.
Other general meetings.
The statutory provisions regarding the Annual General Meeting are:
Section 166, 167, 168, 171.
The court has no power to direct the calling of the annual general meeting.
3. Extra ordinary General Meeting: The Board of Directors can be compelled to hold a
General Meeting upon request or requisition made for it, under the following
conditions. – Sec. 169.
B. Other General Meetings:
1. Meetings of Directors: The Board of directors can call a general meeting of the
members any time by giving not less than 21 days‟ notice. A general meeting may be
called with a shorter notice under certain circumstances.
2. Meeting of Company Law Board: The Company Law Board can call such a meeting
of its own motion or on the application of any director of the company or any member
of the company who would be entitled to vote in the meeting.
Resolutions of A Company – Classification
The Act of 1956 classifies resolutions into the following types:
Resolution
Special
resolution
Ordinary
resolution
Resolution
requiring
special notice
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A. Special resolution: A special resolution is necessary for deciding important matters. The
Act specifies what these matters are. (Example: Reduction of Capital; Winding up etc.).
Procedure for passing a special resolution
A special resolution may be passed in a general meeting of members called in the usual way withthe usual notice. But the following conditions must be satisfied. – Sec. 189.
1. The notice calling the general meeting must specify that a special resolution will be
moved.
2. The number of votes cast in favor of the resolution whether by show of hands or by poll,
must be at least three times the number cast against it.
Special resolution is required for the following issues:
Alteration of Memorandum for changing the place of registered office from one
state to another or alteration of objects with the leave of the Company Law Board.
Change of name of the company with the consent of the Central Government.
Alteration of the Articles of the company.
Conversion of any portion of the uncalled capital into reserve capital.
Reduction of share capital.
Variation of shareholders‟ rights.
Payment of interest out of capital.
B. Ordinary resolution: All matters not required to be decided by a special resolution, may
be decided by a ordinary resolution. An ordinary resolution is passed, when the number
of votes cast in its favor exceeds those cast against it.
C. Resolution By Special Notice: Where by any provision contained in the Act or in the
Articles, special notice is required of any resolution, the intention to move the resolution
shall be given to the Company not less than 14 days before the date of meeting where the
resolution is to be moved, exclusive of the day on which the notice is served or deemed to
be served and the day of the meeting. – Sec. 190(1).
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Shares Definition:
A „share‟ may be defined as an interest in the company entitling the owner thereof to receive
proportionate part of the profits, if any, and of a proportionate part of the company upon
liquidation.
“A Company‟s „owned capital‟ is split up into a large number of equal parts, each such part
being called a share.”
- Y.k. Bhushan.
“A share is not a sum of money, but is an interest measured in the sum of money and made up
of various rights contained in the contract.”
- Justice Forwell.
Classification
Redeemable
Non-cumulative
Cumulative
Non Par value sha
Bonus share
Right share
Deferred sharesPreference shares Equity shares
Shares
Other shares
Participating
Irredeemable
Non-participating
Convertible
Non-convertible
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Winding Up
The winding up or liquidation of a company means the termination of the legal existence of a
Company by stopping its business, collecting its assets and distributing the assets among
creditors and shareholders.
There are three methods of winding up of a company:
Winding up of a company
Voluntary winding up
Compulsory winding up
Voluntary winding up under the supervision of court
By members
By creditors