Types of Companies

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TYPES OF COMPANIES

COMPANIES

Other Classification

Government Co. Foreign Co.

Producer Co.

Association not for Profit

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PRODUCER COMPANIES

New type of co. (to convert cooperative to convert in corporate).

Only certain categories of persons can

incorporate such producer cos.

Members have necessarily to be `primary

producers.'

Primary Producers means those engaged in agriculture including

animal husbandry, horticulture, floriculture, pisciculture,

viticulture, forestry, forest products, re-vegetation, bee raising and

farming plantation products; handloom, handicraft and other

cottage industries.

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TYPES OF COMPANIES

COMPANIES

On the basis of control

Holding Co. Subsidiary Co. Associate Co.

Wholly Owned Subsidiary Partly Owned Subsidiary

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HOLDING AND SUBSIDIARY COMPANIES

A Co. shall be treated as a Subsidiary of another Co., if

and only if –

a) That other controls the composition of BODs;

b) That other controls more than half of the total

voting power / equity shares of such Co.;

c) The first mentioned Co. is a subsidiary of any Co.

which is the other’s subsidiary

Tata Group Structure.pdf

GVK - Annual Report.pdf5

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WHOLLY OWNED SUBSIDIARY COMPANIES

A company (subsidiary company) in which another

company (holding company) holds all of its voting

shares (100%).

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PARTLY OWNED SUBSIDIARY COMPANIES

A company (subsidiary company) in which another

company (holding company) holds majority of its

voting shares (more than 50%) but less than

100%.

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ASSOCIATE COMPANIES

A co. over which another co. exercises dominant

power, even though it does not hold a majority of the

voting rights in that co.

As per AS 18, it is more than 20%.

PTC Ltd.pdf

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IMPORTANT NOTE

In respect of Insurance cos. (HDFC Ergo Insurance, ICICI

Lombard), Banking Cos. (ICICI Bank, HDFC Bank), &

Electricity Supply cos. (Tata Power, Reliance Power)

incorporated and registered under the Cos. Act -

The provisions of Insurance Act, Banking

Regulations Act & Electricity Supply Act will

prevail when they are inconsistent with the

provisions of the Companies Act, applicable

generally.9

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INCORPORATION OR

FORMATION OF A COMPANY10

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PROMOTERS OF A COMPANY

Before a Co. is formed, there must be some

persons who have an intention to form a Co. &

who take the necessary steps to carry that

intention into operation.

Such persons are called “Promoters”.

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PROMOTERS OF A COMPANY

It is they who :

Conceive the idea of forming the Co.;

Take the necessary steps to incorporate it;

Provide it with Share & Loan Capital;

Acquire the business or property;

Negotiates the preliminary agreement;

Prepare, execute & register the MOA & AOA;

Finds the bankers, brokers, legal advisers,

underwriters, first Directors;

Prepares, advertises & Circulates the

Prospectus for placement of capital12

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POSITION & DUTIES OF PROMOTERS

Refer Study Material

Infosys Shareholding Pattern - Sept, 2013.pdf

IOC_Shareholding Pattern Dec 2013.pdf

L&T - Shareholding_Pattern-Dec 2013.pdf

Wipro - shareholding-pattern-Sept-2013.pdf13

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PROMOTION OF A COMPANY

Incorporation of a Co.

means a process by which a Co. is

incorporated or brought into being as a

Corporate body.

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REGISTRAR OF COMPANIES (ROC)

Ministry of Corporate Affairs (MCA)

Registrar of Companies (ROC)

http://www.mca.gov.in/

http://www.mca.gov.in/MCA21/ 15

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FORMATION OF COMPANIES

STEP I :

Decide the type of the Co. to be registered.

A.

1. Private Co.

2. Public Co.

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FORMATION OF COMPANIES

STEP II:

Application for availability of name:

1. Application for name availability to be made to

the ROC.

1030-Form1A.PDF

2. Promoters should decide upon at least 6

suitable names, apart from one main name, in

order of preference to ROC. 17

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FORMATION OF COMPANIES

STEP II:

Application for availability of name:

3. ROC shall confirm the availability of the name

within 7 days.

4. Where the Promoters are informed by the ROC

of the availability, such name shall be available for

adoption by the promoters for a period of 3

months. 18

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FORMATION OF COMPANIES

RULE:

A Co. will not be allowed to use a name which is

prohibited under the Emblems and Names

(Prevention of Improper Use) Act, 1950.

Proposed name will be disallowed, if :

1. It is not in consonance with objects of the Co.;

2. Name is offensive to any section of the people; 19

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FORMATION OF COMPANIES

STEP III:

Preparation of the MOA / AOA

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FORMATION OF COMPANIES

STEP IV:

Printing, Stamping & Signing of MOA / AOA

1. MOA / AOA have to be stamped as per the

State Stamp laws.

2. MOA / AOA should be signed by the each

subscriber.

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FORMATION OF COMPANIES

STEP IV:

Printing, Stamping & Signing of MOA / AOA

3. Each subscriber shall take at least one share.

4. After the MOA / AOA has been Stamped, Signed,

Dated, one original Copy shall be submitted to the

ROC.

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FORMATION OF COMPANIES

STEP V:

Payment of Registration Fees : To be paid to

the ROC

Quantum of Registration fees depends on the

nominal capital of the Company.

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FORMATION OF COMPANIES

STEP VI:

Certificate of Incorporation

If all the documents mentioned above are complete

and ROC is satisfied that all the requirements

have been complied with, he will register the

MOA/AOA and issue the COI.

Bharti Airtel.pdf

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FORMATION OF COMPANIES

STEP VII:

Certificate of Commencement of Business

A Public Co. must obtain a COB from the ROC

before it commences business or exercises

borrowing powers.

Bharti Airtel.pdf

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FORMATION OF COMPANIES

Wipro.pdf

RIL.pdf

Bharti Airtel.pdf

Certificate.pdf

Infosys MOA.pdf 26

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MEMORANDUM OF ASSOCIATION

“MOA is a document which sets out the

constitution of the Co. and as such is the

foundation on which the structure of the Co.

stands.”

It defines the scope of the Co. and its relation to

the outside world.

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MEMORANDUM OF ASSOCIATION

The Co. cannot depart from the provisions of

the MOA however great the necessity may be.

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MEMORANDUM OF ASSOCIATION

Contents of Memorandum of Association:

1st Clause

Name Clause:

Name of the Company.

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CONTENT OF MEMORANDUM OF ASSOCIATION

2nd Clause

Registered Office Clause:

Name of the State in which the Regd. Office will be situated.

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CONTENT OF MEMORANDUM OF ASSOCIATION

3rd Clause

Object Clause

A. Main Objects of the Co. to be pursued upon incorporation of the

co.;

B. Objects “incidental and ancillary” to the attainment to the

main objects;

C. Other Objects (which may be pursued by the company at any

time in future);

Bharti Airtel.pdf

Infosys MOA.pdf

Wipro.pdf 31

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CONTENT OF MEMORANDUM OF ASSOCIATION

4th Clause

Liability Clause:

A statement that the liability of its members are limited.

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CONTENT OF MEMORANDUM OF ASSOCIATION

5th Clause

Capital Clause:

It must state the amount of share capital with which the

company is registered.

It is described as “Nominal Capital”, “Authorized

Capital” or “Registered Capital”

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CONTENT OF MEMORANDUM OF ASSOCIATION

6th Clause:

Association Clause:

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MEMORANDUM OF ASSOCIATION

Alteration of Memorandum of Association:

Name :

1. Shareholder Approval through Special Resolution;

2. Central Govt. approval

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ALTERATION OF MEMORANDUM OF ASSOCIATION

Registered Office:

One Premises to another in the same city / town / village

1. Board Approval only

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ALTERATION OF MEMORANDUM OF ASSOCIATION

Registered Office:

One City to another in the same State

1. Shareholder Approval through Special Resolution;

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ALTERATION OF MEMORANDUM OF ASSOCIATION

Registered Office:

One State to another State

1. Shareholder Approval through Special Resolution;

2. Central Govt. Approval

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ALTERATION OF MEMORANDUM OF ASSOCIATION

Objects:

1. Shareholder Approval through Special Resolution;

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ALTERATION OF MEMORANDUM OF ASSOCIATION

Capital:

1. Shareholder Approval through Ordinary Resolution;

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MEMORANDUM OF ASSOCIATION

Doctrine of Ultra Vires:

1. Whatever is not stated in the MOA as the objects

or powers is prohibited by the doctrine of Ultra

Vires.

2. An act which is ultra vires is void, and does not

bind the company.

4. The Co. cannot make it valid, even if every

member assents to it.41

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MEMORANDUM OF ASSOCIATION

Consequences of an Ultra Vires Act:

1. Neither the Co. nor the other contracting

party can sue on it.

2. The Directors of the company may be held

personally liable to outsiders for an ultra

vires act.

Ashbury Railway Carriage.xlsx42

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ARTICLE OF ASSOCIATION (AOA)

The AOA of a Co. are its by-laws or rules or

regulations that govern the management of its

internal affairs and the conduct of its

business.

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ARTICLE OF ASSOCIATION (AOA)

\

They are subordinate to and are controlled by MOA.

Companies Act, 2013

Memorandum of Association

Article of Association44

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CONTENT OF ARTICLE OF ASSOCIATION (AOA)

It contains generally:

1. Issue of Preference Shares;

2. Allotment of Shares;

3. Calls on Shares;

4. Lien on Shares;

5. Transfer and Transmission of Shares;

6. Nomination;

7. Forfeiture of Shares;

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CONTENT OF ARTICLE OF ASSOCIATION (AOA)

8. Alteration of Capital;

9. Buy Back;

10. Borrowing Power

11. Share Certificates;

12. Dematerialization;

13. Rematerialization

14. Voting Rights and Proxies;

15. Shareholders, Director & Committee Meeting;

16. Directors, their appt. and delegation of power;

17. Nominee Director, Additional Director;

18. Common Seal. 46

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ALTERATION OF ARTICLE OF ASSOCIATION

Shareholders approval through Special

Resolution

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MOA / AOA

Doctrine of Constructive Notice :

MOA & AOA are public documents and can be

inspected by anyone on payment of nominal fees.

Hence, every person who enters into a contract with a Co.

is “presumed to know”, not only the exact powers of

the Co. but also the extent to which these powers

have been delegated to the directors.

Every person dealing with the Co. is deemed to have a

constructive notice of the contents of its MOA/AOA.48

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MOA / AOA

Constructive Notice of MOA & AOA :

Consequently, if a person enters into a contract

which is beyond the powers of the Co., as defined in

the MOA, or outside the limits set on the authority

of the Directors,

he cannot acquire any rights under the

contract against the Co.

Kotla Venkataswamy V. Rammurthy.xlsx49

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MOA / AOA

Doctrine of Indoor Management :

While persons contracting with the Co. are

presumed to know the provisions of the contents of

the MOA/AOA, they are entitled to assume that

the provisions of the AOA have been duly

observed by the officers of the Co.

It is not their duty to see that the Co. carries out

its own internal regulations.

Royal British Bank V. Turquand.xlsx 50

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THANK YOU

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