Presented By: Group 1 Aarti Singh, Azhar Hussain, Jyoti Nawlani, Nemchand Meena, Renuka Sharma

Companies Act The Companies Act is a successor to the Indian Companies Act of 1913 and is a consolidation of many successive Amendment Acts, statutory rules and principles laid down in decisions of the courts in India and England.

Object ives of Comp anies Act Provide a minimum standard of good behaviour & business honesty Safegua rd the interest of stakehol ders To facilitate control A fair disclosur e of company in their annual published accounts High standar d of account ing and auditing Provide a ceiling on the share of profits to manageme nt as remunerati on Check transact ion where there is a possibili ty of conflict of interest Protecti on of Minority Rights

Sec.3 of Companies Act, 1956 defines company as- A company formed and registered under the Act or an existing company formed and registered under any of the previous company laws.

Features of a Company:

In the Companies Act, companies are classified as follows: Types of Companies Compani es limited by shares Public Compani es Deemed public Compani es Private Compani es Compani es limited by guarante e Companies with unlimited liability

The Companies Act also maintains three special types of companies namely: Holding and Subsidiary companies Government Companies Investment Companies

Eg; INDIAN OIL CORPORATION LIMITED

Privat e comp any minimu m of two membe rs. Maxim um 50 membe rs minimu m paid capital of `1,00,00 0 or more shares cannot be transfer red freely Cannot invite public to subscribe to its shares or debenture s. Eg; Jet Airways

3) Deemed public company: a private company incorporated in India, which is a subsidiary of a public company, can be called as deemed public company in india

Unlimited companies A company not having any limit on the liability of its members is termed as unlimited company. The members of an unlimited company are liable, like the partners of a firm, for all its trade debts without any limit. An unlimited company must have Articles of Association, stating the number of members with which it is registered and the amount of registered share capital if it has any.

The liability of the members of a guarantee company is limited by a fixed sum which is specified in the memorandum and beyond which they cannot be called upon to contribute.

Government Companies

Holding and Subsidiary Companies 1. Holding Companies:- The Company which holds more than half of the nominal value of share capital of another company or controls the composition of board of directors of another company is known as Holding company. 2. Subsidiary Companies:- A company whose more than half of the nominal value of share capital is held by another company or another company controls the composition of board of directors of such company is known as Subsidiary Company.

Foreign companies:- A company incorporated outside the region of a nation but has a place of business in the nation is known as Foreign Company. Investment Companies:- A company whose principal business is acquisition of shares, debentures or other securities.

Formation of Company Company comes existence when a number of persons come together with an intention to do some business. These persons are called promoters

Process of Formation of Company. Name for the company Location of registered of the company Drawing up of Memorandum of Association Drawing up of Articles of Association Submitting documents to the Registrar Getting the company registered

Memorandum of Association A Memorandum of Association is a fundamental document of a company which is also known as the Charter of the company. It lays down objects, scope of activities, limitations,power of a company beyond which a company cannot go.

Essential to prepare MOA for registration. It should be originally framed.I t cannot be adopted. It lays objects, limitations of the company. serves as a basis of contract between the company and the outsiders. It is usually unalterable. It enable those who deal with the company to know about the permitted range of activities. Characteristics Of Memorandum of Association

Contents of MOA THE NAME CLAUSE: Name which is confirmed by the Registrar should be stated in this clause. The name with “Limited” as the last word of the name in case of public limited company and with “Private Limited” as the last word of the name in case of private limited company. REGISTERED OFFICE CLAUSE: This clause states the name of the state in which the Registered office of the company is to be situated.

THE OBJECT CLAUSE: Main objects to be pursued by the company on its incorporation and Objects incidental or ancillary to the attainment of main objects. THE LIABILITY CLAUSE: the nature and extent of liability of its members. THE CAPITAL CLAUSE: The amount of share capital with which the company is to be registered. It shall also give the number and face value of the shares. THE ASSOCIATION OR SUBSCRIPTION CLAUSE:, the subscribers express their desire and agreement to form a company, agree to sign the memorandum and take specified number of shares

Articles of Association The Articles of Association is a document of a company which contains the rules, regulations or bye –laws for regulating the internal affairs of a company. It defines the mode and form in which the business of the company is to be carried on. They are framed with the object of carrying out the aims and objects as set out in Memorandum of Association.

Contents of Articles The articles of a company usually contain regulations relating to the following maters: »Share Capital and rights attached to different classes of shares. »Calls on shares. »Forfeiture of shares. »Transfer and Transmission of shares. »Redemption of Preference shares. »Rights of members. »General Meetings. »Rights of members in General meetings. »Constitution of Board of Directors.

Prospectus According to Companies Act, “prospectus" means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate. If No Public Issue, then a company shall issue a “Statement in lieu of Prospectus” A private company does not issues prospectus because is prohibited from making any invitation to the public

Certificate of Commencement of Business A certificate of commencement of business is issued by registrar after filing of a declaration by a director or secretary stating that the company has collected the minimum subscription stated in the prospectus and that the directors have taken the qualification shares

Registration of Company The MOA and AOA, if any, have to be submitted to the Registrar of Companies of the state in which it is proposed to locate the registered office of the company. Following documents should also be submitted: –Form1 declaration of compliance with the requirements of Companies Act 1956 –Form 10- notice of situation/ change of situation –Form 32- Appointment of Directors –Form 29- Consent to act as Director

Board of Directors The company being an artificial person, its activities have to be carried out by persons authorised for that purpose. The executive authority is usually exercised by Board of Directors, most of whom are normally elected by the shareholders. The Board of a public company should consist of minimum 3 members and 2 in case of a private company

A person shall not be capable of being appointed director of a company, Of unsound mind Undischarged insolvent Applied to be adjudicated as an insolvent and his application is pending. Convicted by a court of any offence involving moral turpitude and sentenced thereof to imprisonment for not less than six months and not less than five years has elapsed from the date of expiry of the sentence. Not paid call moneyznd six months have elapsed from the date of payment An order has been passed from court in pursuance of section 203

Meeting of Directors Number of Meetings: In the case of every company a meeting of its board of directors shall be held at least once in every 3 months and at least 4 such meetings shall be held in every year. Notice of Meetings: Notice of every meeting of the board of directors of a company shall be given in writing to every director for the time being in India and at his usual address in India. Quorum of Meetings: The quorum of the board shall be 1/3 of its strength or two directors which ever is higher. The companies Act contains the following provisions relating to board meeting.

Powers of the Board of Directors GENERAL POWERS The BODs may exercise all powers of the Company and can do all such acts and things that the Company can do. But these powers must be according to provisions of Companies Act., MOA, AOA and the resolutions of the Company.

POWERS Power to- Make calls on shareholders in respect of money unpaid To buy-back its shares To issue debentures To borrow other than debentures To invest funds of the Co., and To make loans. Powers only at the meetings: To fill casual vacancies in the Board, additional directors or alternate directors. To sanction a contract in which a director is interested To recommend the rate of dividend to be declared.

Restrictions on Powers of Directors The BODs of a public Co. cannot exercise the following powers without the consent of the shareholders in general meeting: »Sell or lease the undertaking of the Co. »Remit or give time for the re- payment of any debt »Invest otherwise than in trust securities. »Borrow money exceeding the aggregate of the paid-up capital and free reserves. »Contribute to any charitable not directly related to the business of the Co.

Inter-Corporate Investments According to section 372 of the Companies Act, the BOD of a company is entitled to invest in any shares of any other body corporate upto 10% of the subscribed capital of such other body corporate subject to following: –The aggregate of investments made in all other companies shall not exceed 30% of the subscribed capital of investing company –The aggregate of investments made in all other companies in same group(under same management) shall not exceed 20% of the subscribed capital of investing company

Winding Up of Companies A company registered under Companies Act can cease to exist by any one of the following legal methods: »If a company transfers its undertaking(s) to any other company under a scheme of reconstruction or amalgamation. »The name of a defunct company may be removed from the register of companies of registrar »A company may be wound up under Part VII of the Companies Act.

There are two principal modes of winding up of a company: –Voluntary wind up –Compulsory wind up Voluntary wind up: A declaration of insolvency by the Board at its meeting is necessary for Voluntary wind up of a company by its members. Voluntary wind up may be: o At the instance of members or creditors or o Under the provision of court

Compulsory wind up A company may be wound up by court, if the company: »By special provision resolved that it be wound by court »Made default in delivering the statutory report to the registrar or in holding the statutory meeting »Does not commence its business within a year from date of its incorporation »Number of members is reduced; less than 2 in case of private company and less than 7 in case of public company »Unable to pay debts