2. Submitted to: Mr. Varun Dhingra
Our Team- Group no 10.
Name Roll Call
Ankita Brahmbhatt
Rakesh Dhimmar
Soyeb Jindani
Rinku Kasundra
Shivangi Khambhati
Submitted to: Mr. Varun Dhingra

3. Topics to be covered Chapter 1. Nature of Company Chapter 2.
Types of Companies
Chapter 3.
Formation & Incorporation of Company

4. Chapter 1.
Nature of Company

5. A voluntary association of persons:
DEFINITION OF COMPANY
A voluntary association of persons:
A company in broad sense, may mean an association of individuals formed for some purpose. But it is a voluntary association of persons.
An artificial person- has no body or soul:
A company has no body, no soul and no conscience. It is not visible, save to the eye of the law.

6. Lindley’s definition:
Lindley gives a definition of company as follows:
“ An association of many persons who contribute money or money’s worth to a common stock, and employ it in some common trade or business and who share the profit or loss arising there from. The common stock so contributed is denoted in money and is the capital of the company. The person who contribute it, or to whom it belongs, are members. The proportion of capital to which each member is entitled is his share. Shares are always transferable.

7. CHARACTERISTICS OF A COMPANY
Separate Legal Entity:
A company is in law regarded as an entity separate from its members. It has an independent corporate existence.
Limited Liability:
A company may be a company limited by shares or a company limited by guarantee. In a company limited by shares, the liability of members is limited to the unpaid value of the shares. In a company limited by guarantee, the liability of members is limited to such amount as members may undertake to contribute to the assets of the company.

8. Perpetual Succession:
Perpetual succession means that a company’s existence persists irrespective of the change in the composition of its membership. Thus its continued existence is not affected by a constant change in its membership.
Common Seal:
The company must act through its agents and all such contracts entered into by its agents must be under the seal of the company.
Transferability Of Shares:
The capital of the company is divided into shares. These shares are freely transferable, so no shareholder is permanently wedded to company.

9. Separate Property:
As a company is legal person distinct from its members, it is capable of owning, enjoying and disposing of property in its own name. The company is the real person in which all its property is controlled and managed.
Capacity To Sue:
A company can sue and be sued in its corporate name. It may also inflict or suffer wrongs.

10. STATUTORY EXCEPTIONS
Number of members below statutory minimum (Sec. 45)
If a company carries on business for more than 6 months after the number of its members has been reduced to 7 in case of private company or 2 in case of public company, every person who knows this fact and is a member during the time that the company so carries on business after six months, is severally liable for the whole of debts of company contracted during that time.
In such case continued members
(i) can be sued and not those who have withdrawn.
(ii) shall be liable only if they are aware of the fact of the number falling below the statutory minimum.

11. Contd… Failure to refund application money [Sec. 69(5)]:
The directors of a company are jointly liable to repay the application money with interest if company fails to refund the money.
Misdescription of company’s name [Sec. 147(4)]:
Where an officer or an agent of a company does any act or enters into a contract without fully or properly mentioning the company’s name and the address of its registered office, he shall be personally liable.
Fraudulent trading:
In the case of fraudulent trading, court may declare that any persons who were knowingly parties to the carrying on of his business in this way are personally liable without any limitation of liability.
Holding and subsidiary companies:
Holding and subsidiary companies are separate legal entities.

12. Difference Between Company & Partnership
Basis
Company
Partnership
Regulating Act
Regulated by Companies Act, 1956
Regulated by Indian Partnership Act, 1932
Mode Of Creation
Came into existence after registration
Registration is not compulsory
Legal Status
Members are not liable
Members are liable
Change in membership, never necessary to transfer its assets
Change in membership, must necessary to transfer assets to new partners.

13. Contd… Liability Of Members Management Transferability Of Interest
Limited
Without limit
Management
Managed by directors or a managing director or manager
Managed by members if the agreement provides
Transferability Of Interest
Freely transferable unless its Articles provide
Cannot transfer without consent of other partners
Authority Of Members
Shareholder is not an agent and has no power to bind the company
Partner is an agent to make contract and incur liabilities

14. Contd… Powers Restriction In Powers Insolvency Debts Dissolution
Limited which allowed by the objects clause in its Memorandum Of Association
No limit
Restriction In Powers
Effective against public
Effective against a particular partner
Insolvency
Members are not insolvent
Insolvency of partners
Debts
To any member then can claim
Cannot prove against firm
Dissolution
Only according to the provisions of Companies Act, 1956
At any time by any partner and at death or in solvency of partner

15. Contd… Number of members Maintenance Of Books
Minimum in private company 2 and in public company 7
Minimum in partnership is 2
Maximum in private company 50 and in public no limit
Maximum in banking business 10 and in any other 20
Maintenance Of Books
Bound by law to maintain books of account and audited annually
No such statutory provision

16. COMPANY LAW IN INDIA
The first legislative enactment for “Registration of Joint Stock Companies” was passed in the year 1950 which was based on English Companies act, 1844.
The English Companies Act, 1856 replaced both the acts 1844 and In this a company legislation assumed for the first time a form.
In this, any 7 or more persons could form themselves into an incorporated company with or without limited liability, by signing a Memorandum of Association and complying with requirements of the Act.
Then came Companies Act 1866 for consolidating and amending the law relating to the incorporation, regulation and winding up of trading companies and associations.
The Companies Act 1866 was recast in 1882 and this stood the test of time till 1913.

17. Act of 1913:
Following the English Companies Act 1908, the Indian Companies Act of 1913 was passed. But it was highly unsatisfactory in course of operation. As such, some amendments were made in the act in the years 1914, 1915, 1920, 1926, 1930 and 1932 and then in 1936.
From 1937 to 1951, further amendments were made almost every year in 1913 Act.

18. THE COMPANIES ACT, 1956
After the end of World War II, there is the need of further revision of company law. The Government of India appointed, on 25th October, 1950, a committee of 12 members representing various interest under chairmanship of Mr. H. C. Bhabha.
The committee has submitted all reports in April The recommendations of committee culminated in the most comprehensive law on the subject in the Companies Act, 1956.
The act has been amended several times since it was codified. Major amendments were in 2002.

19. Chapter 2.
Types of Companies

20. 1. CLASSIFICATION ON THE BASIS OF INCORPORATION
(1) Statutory companies:-
These are the companies which are created by a special Act of the Legislature.
(2) Registered companies:-
These are the companies which formed and registered under the Companies Act 1956, or were registered under any of the earlier Companies Acts. These are by far the most commonly found companies.

21. 2. CLASSIFICATION ON THE BASIS OF LIABILITY
On the basis of the liability companies may be classified into:
1. Companies with limited liability, these may be-
(A) Companies limited by shares, or
(B) Companies limited by guarantee, or
2. Companies with unlimited liability [Sec. 12 (2)].

22. 1. Companies with limited liability:
(A) Companies limited by shares: - where the liability of the members of a company is limited to the amount unpaid on the shares, such a company is known as a company limited by shares.
(B) Companies limited by guarantee: - where the liability of the members of a company is limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wound up, the company is called a Companies limited by guarantee.

23. 2. Unlimited companies:-
Sec. 12 specifically provides that any 7 or more persons (2 or more in case of a private company) may form an incorporated company, with or without limited liability. A company without limited liability is known as an unlimited company. In case of such a company, every member is liable foe debts of the company.

24. 3. CLASSIFICATION ON THE BASIS OF NUMBER OF MEMBERS
From the point view of the general public and on the basis of number of members, a company may be:-
(1) A private company, or
(2) A public company

25. (1) Private company: - A private company is normally what the American call a ‘close corporation’. According to Sec 3 (1) (iii), a ‘private company’ means a company which has a minimum paid – up capital of Rs. 1,00,000 or such higher paid – up capital as may be prescribed, and by its Articles-
Restricts the right to transfer its shares, if any.
Limits the number of its members to 50 not including its employees – members (present or past).
Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company.
Prohibits any invitation or acceptance to deposits from persons other than its members, directors or their relatives

26. (2) Public company: -–
(A) A public company means a company which has a minimum paid – up capital of Rs. 5 lakh or such higher Paid – up capital, as may be prescribed;
(B) A public company means a company which is a private company which is a subsidiary of a company which is not private company

27. Difference between a public co. and a private co.
Minimum capital
Public ltd. co. must have paid up capital Rs. 5,00,000.
Private ltd. co. Must have paid a minimum paid up capital of Rs.1,00,000.
Minimum number
In case of public ltd. co. Minimum number of person required is 7.
In case of private ltd. co. Minimum number of person required is 17.
Maximum number
In case of public ltd. co. there is no restriction of maximum number of person.
In case of private ltd. co. maximum number can not exceed 50.
Number of directors
In case of public ltd. co. must have At least 3 directors.
In case of private ltd. co. must have at least 2 directors.

28. Public co. Private co. Restriction on appointment of directors
The directors must file with the registrar a consent to act as directors or sign an undertaking for their qualification shares.
Director of private co. did not do so.
Restriction on invitation to subscribe for shares
It invite the general public to subscribe for the shares in or the debentures of the co.
A private co by its articles prohibits any such invitation to the co.
Transferability of shares/debentures
The shares and debentures are freely transferable. (sec 82)
The right to transfer shares and debentures is restricted by the articles.
Special privileges
Enjoy no such privileges
Enjoy some privileges

29. Public co. Private co. Quorum
If Article of company do not provide for a larger quorum, 5 members for a meeting of company
If Article of company do not provide for a larger quorum, 2 members for a meeting of company
Managerial remuneration
Total mgmt remuneration can not exceed 11 % of the net profits. (sec 198)
No such restriction applies to a private co.

30. Special privileges of a private co.
1) number of members
2) allotment before minimum subscription
3) prospectus or statement in lieu of prospectus
4) issue of new shares
5) kinds of shares
6) commencement of business
7) index of members
8) statutory meeting and statutory report
9) demand for pool
10) managerial remuneration
11) number of directors
12) rules regarding directors

31. Legal position of a private co.
The legal position of a private co. is in most respects similar to that of a public co. and even if one member holds practically all the shares the co. is a distinct person.

32. When does a private company become a public company?
A private company may become a public company by-
(1) Conversion by default (Sec. 43):- where a default is made by a private company in complying with the essential requirements of a private company. The company ceases to enjoy the privileges and exemption conferred on a private company. In such a case, the provision of the Companies Law board may relieve the company from the consequences as aforesaid, if it is opinion that non – compliance was accidental or due to inadvertence or other sufficient cause. It may also grant relief if on some grounds it is just and equitable. It may, however, impose such terms and conditions as seem to it just and expedient.

33. (2) Conversion by choice or volition (Sec. 44):
If a private company so alter its Articles that they do not contain the provisions which make it a private company, it shall cease to be a private company as on the date of the alteration. It shall then file with the Registrar, within 30 days, either a prospectus or a statement in lieu of prospectus. When this done, the company becomes a public company. 
A private company which becomes a public company shall also-
(a) File a copy of the resolution altering the Articles, within 30 days of passing thereof, with the registrar;
(b) Take steps to raise its membership to at least 7 if it is below that number on the date of conversion, and also increase the number of its directors to more than 2 it is below that number;
(c) Alter the regulations contained in the Articles which are inconsistent with those of a public company.

34. Conversion of a public company into a private company
A public company may be converted into a private company by passing a special resolution. The special resolution should be to change the Articles of the company so as to include the conditions as prescribed in Sec. 3 (1) (iii) which make a company a private company. An alteration made in the Articles which has the effect of converting a public company into a private company, shall have effect only when such alteration has been approves by the Central Government. Where the alteration has been approved by Central Government a printed copy of the Articles as altered shall be filed by the company with the Registration within 1 month of the date of receipt of approval.

35. 4. Classification on the basis of CONTROL
1. Holding Company: [Sec.4(4)] a company is “deemed to be the holding company of another if, but only if, that other is its subsidiary.”
2. Subsidiary Company:[Sec.4(1)] a company is deemed to be a subsidiary of another company in the following 3 cases.
Company controlling composition of Board of Directors.
Holding of Majority of Shares.
Subsidiary of another subsidiary.

36. 5.Classification on the basis of OWNERSHIP
Government Company:A government company means any company in which not less than 51% of the paid-up share capital is held by—
The Central Government, or
Any State Government or Governments, or
Partly by the Central government and partly by one or more State Governments.

37. Rules Applicable to Government companies
Appointment of auditor and audit reports (Sec.619)
Audit reports to be submitted to Comptroller and Auditor- General of India.
2. Annual report to be placed before Parliament (Sec.619-A)
Provisions of Sec.619 to apply certain companies (619-B)
4. Certain provisions of the Companies Act not to apply (Sec.620)

38. Foreign Company
It means any company incorporated outside India which has an established place of business in India [Sec. (1)]
Where a minimum of 50% of the paid-up share capital of a foreign company is held by one or more citizens of India or/and by one or more bodies corporate incorporated in India, whether singly or jointly, such company shall comply with such provisions as may be prescribed as if it were an India company [Sec. 591(2)]

39. Rules applicable to foreign companies
Secs. 592 to 603 apply to foreign companies.
Documents (Sec.592)
Accounts(Sec.594)
Obligation(Sec.595)
Service of documents on foreign company (Sec. 596)
Office where documents to be delivered (Sec.597)
Penalty (Sec.598)
Registration of charges (Sec.600)
Requirements as to prospectus (Sec.603)
Winding up of foreign companies (Sec. 584)

40. Association not for Profit (sec.25)
According to sec. 13, the name of a limited company must end with the word ‘limited’ in the case of public company and with the words ‘ Private limited’ in the case of private company. Sec. 25 of the Act, however, permits the registration , under a license granted by the Central government, of an association not for profit with limited liability without using the word “limited” or the words “Private limited” to its name.
There are certain conditions and revocation of license.

41. One- man Company
Example: A private company is registered with a share capital of Rs. 5,00,000 divided into 5,000 shares of Rs. 100 each. Of these shares 4,999 are held by a A and one share is held by A’s wife, B. this is a one- man company.

42. Prohibition of Large Partnership(sec.11)
Illegal association: if the number of members in an association or partnership exceeds this statutory limit and it is not registered under the companies Act, it is an illegal association and has no legal existence.
Consequences of illegal association:
1. personal liability.
2. Contracts.
3. Winding up.
Penalties for improper use of words “Limited” and “Private Limited” (sec.631)

43. Penalties for improper use of words ‘limited’ and ‘Private Limited’ (Sec.631)
If any company wrongly using both words or word to be punishable with fine which may extend to Rs.500 for every day upon which that name has been used.

44. Formation and Incorporation of Company
Chapter 3.
Formation and Incorporation of Company

45. MCA 21 –ELECTRONIC FILING OF FORMS
ministry of corporate affairs (MCA) has launched a program for managing the work relating to filing of documents and getting approvals from ministry of corporate affairs .the physical filling of all forms has been discontinued and converted into electronic filling. it is almost a paper less working of MCA except few cases where paper work is unavoidable due to legal and statutory requirements .
This project is termed as ‘MCA-21’. the project become fully operational on 15 th September most of physical filling of papers has been discontinued at the offices of registration of companies.
mca-21 project is designed to fully automate all processes related to enforcement and compliance of legal requirement under companies act, 1956.

46. The following nine matters are covered under MCA -21 project since 16-9-2006
1.Registration and incorporation of new companies.
2.Fillings of annual returns and balance sheets.
3.Filling of forms for change of name /address /directors detail.
4.Registration , modification and verification of charges.
5.Inspection of documents.
6.Issued of certified copies .
7.Application for permission required under various provision of company law.
8.Approvals from central government, regional director and ROC. [it will be sent physically by post.]
9.Investore grievance redressal.

47. Amendments to companies Act.
New sections 61OB to 61OE have been inserted in companies Act.
Section 61OB:provision relating to filling of applications, documents , inspection etc through electronic form.
Section 61OC: power to modify act in relation to electronic records (including the manner and form in which electronic records shall be filed)
Section 61OD:providng of value-added services through electronic form
Section 61OE:application of provisions of information technology act,2000

48. Salient features of the schemes are as follow
A] Existing forms meant for physical filling have been converted into e-forms. the new e forms have already been notified on
B] some old forms have been eliminated and combined with new forms (e.g., form 29 with form 32)
C] fillings of form and application will be through internet.
D] form can be filled online. Alternatively these can be downloaded, filled offline and then filled.
E] pre-scrutiny is done in the portal before the form is accepted for submission.
F] E form digitally signed by managing director, director, manager or secretary. they will have to obtain DSC, that is digital signature corticated.
G] documented to be attached must be in ‘portable document format’, that is PDF format. facility is available on portal to convert document into PDF format.
H] paper document which are to be submitted will have to be scanned and attached to the e forms.

49. I] in case where payment of stamp duty is required, original document bearing stamp duty will have to be filled in office of ROC , after e filling is done.
J] payment of fees can be through internet through credit card / internet banking.
K] many forms require certification by CA/CWA/CS in practice.
L] if a company has sufficient equipment and facilities , the document can be filed by company form its office itself .
M] Those who do no have adequate facilities can file document through facilitation centers established in various cities which are presently manned by TCS.
N] ‘certified filing centre ‘ will facilitate e-filing documents.
O] every director have to obtain DIN that is director identification number .
P] physical filing pf documents is discontented and e filings is compulsory from that date.
Q] office of ROC , regional director and DELHI HQ will process the document and application submitted electronically by companies .
R] Issuance of certificates and approvals will continued to remain on paper .this will be dispatched by post or courier to applicant.

50. Incorporation of Company

51. INTRODUCTION
Before a company is formed, certain preliminary steps are necessary.
Eg. Whether it should be a private company or a public company, what its capital should be, and whether it is worthwhile forming a new company or taking over by certain persons known as “PROMOTERS. They do all the necessary preliminary work incidental to the formation of a company.

52. INCORPORATION OF COMPANY
MODE OF FORMING INCORPORATEDCOMPANY ( SEC. 12)
Any 7 or more persons (2 or more in case of a
private company) associated for any lawful purpose may form an incorporated company, with or without limited liability. They shall subscribe their names to a memorandum of association and also comply with other formalities in respect of registration.

53. A company so formed may be :
(1) a company limited by shares or
(2) a company limited by guarantee, or
(3) an unlimited company.

54. DOCUMENTS TO BE FILED WITH THE REGISTAR
THE MEMORANDUM OF ASSOCIATION
THE ARTICLES OF ASSOCIATION
AGREEMENT
LIST OF DIRECTORS
DECLARATION

55. CERTIFICATE OF INCORPORATION
When the requisite documents are filed with the register, the register shall satisfy himself that the statutory requirements regarding registration have been duly complied with. In exercising this duly, the register is not required to carry out any investigation. If the register is satisfied as to the compliance of statutory requirements, he retains and registers the memorandum, the articles and other documents filed with him and issues a “ certificate of incorporation” i.e. of the formation of the company {sec.33(3)}
By issuing certificate of incorporation the register certifies under his hand that the company is incorporated and in the case or a limited company, that the company is limited (Sec.34)

56. CONCLUSIVENESS OF CERTIFICATE OF INCORPORATION
That requirements of the act in respect of registration of matters precedent and incidental thereto have been complied with.
That the association is a company authorized to be registered under the act, and has been duly registered.
That the date borne by the certificate of incorporation is the date of birth of the company, i.e. the date on which the company comes into existence.

57. EFFECTS IF REGISTRATION ( SEC. 34)
When a company is registered and a certificate of incorporation is issued by the registrar, three important consequences follow
(1) the company becomes a distinct legal entity. Its life commences from the date mentioned in the certificate of incorporation
(2) the company acquires a perpetual succession. The members may come and go, but it goes on for ever, unless it is would up.
(3) the company’s property is not property of the shareholders. The shareholders have a right to share in the profits of the company when realized and divided. likewise any liability of the company is not liability of the individual shareholders.

58. PROMOTER
A PROMOTER is a person who does the necessary preliminary work incidental to the formation of company. It is a compendious tern used for a person who undertakes, does and goes through all the necessary and incidental preliminaries, keeping in vied the object, to bring into existence an incorporated company.

59. Functions of promoter
The promoter of a company decides its name and ascertains that it will be accepted by the registrar of companies. He settles the details of the company’s memorandum and articles the nomination of directors, solicitors, bankers, auditors and secretary and the registered office of the company. He arranges for the printing of the memorandum and articles, the registration of the company the issue of prospectus, where a public issue is necessary, he is in fact responsible for bringing the company into existence for the object which he has in view.

60. Fiduciary position of promoter
A promoter stands in a fiduciary ( relation requiring confidence or trust ) to the company which he promotes.
(1) not to make any profit at the expense of the company
(2) to give benefit of negotiations to the company.
(3) to make a full disclosure of interest or profit
(4) not to make unfair use of position.

61. Duty of promoter as regards prospectus
The promoter must see, in connection with the prospectus, if any is issued (or the statement in lieu of prospectus) that the prospectus:
(1) contains the necessary particulars.
(2) does not contain any untrue or misleading statements or does not omit any material fact.

62. Remuneration of promoters
He may sell his own properly at a profit to the company for cash or fully paid shares provided he makes a disclosure to this effect.
He may be given an option to buy a certain number of shares in the company at par.
He may take a commission on the shares sold.
He may be paid a lump sum by the company.

63. PRE – INCORPORATION OR PRELIMINARY CONTRACTS
The promoters of a company usually enter into contracts to acquire some properly or right for the company which is yet to be incorporated. Such contracts are called pre-incorporation or preliminary contracts. The promoters generally enter into such contracts as agents for the company about to be formed. The legal position is that two consenting parties are necessary to a contract whereas the company, before incorporation, is a non-entity. The promoters cannot, therefore act as agent for a company which has not yet come into existence. As such the company is not liable for the acts of the promoters done before it incorporation.

64. POSITION OF PROMOTERS AS REGARDS PRE-INCORPORATION CONTRACTS
(1) Company not bound by pre incorporation contract
(2) company cannot enforce pre incorporation contract
(3) promoters personally liable.

65. RETIFICATION OF A PRE INCORPORATION CONTRACT
A company cannot ratify a contact entered into by the promoters on its behalf before its incorporation. Therefore, it cannot by adoption or ratification obtain the benefit of the contract purported to have been made on its behalf before it came into existence as ratification by the company when formed is legally impossible. The doctrine of ratification applies only if an agent contracts for a principal who is in existence and who is competent to contract at the time 0pf contract by the agent.

66. SPECIFIC PERFORMANCE OF PER INCORPORATION CONTRACT
Sec. 15 and 16 if the specific relief act, 1963 deal with this point. When the promoters of a company have before its incorporation entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation, specific performance may be obtained by the terms of the incorporation, specific a performance may be obtained by of enforced against the company provided that the company has accepted the contract and has communicated such acceptance to the other party of the contract/

67. Any Queries ???
Thank You