1. COMPANIES ACT BY CA. SAYANTAN BASU

2. 15/10/2012CA SAYANTAN BASU2 Back Ground Growth of business and rapid industrialization in early 19 th century witnessed considerable changes in types of business organizations. Business continued to expand and capital to an unlimited extent was required. First law regulating companies took birth in 1850, as Joint Stock Companies Act. It was followed by the English Companies Act, 1856. First law regulating companies took birth in 1850, as Joint Stock Companies Act. It was followed by the English Companies Act, 1856.

3. 15/10/2012CA SAYANTAN BASU3 The working of the Act revealed several loopholes. Following English Companies Act of 1908,Indian Companies Act,1913 was passed. Even the Act of 1913 proved inadequate and therefore, it was amended several times. World war II witnessed many changes in the organisation and management of joint stock companies. Government of India, therefore, appointed a committee under the Chairmanship of Mr.H.L.Bhabha on 25 th oct 1950 of 12 members representing various interests.

4. 15/10/2012CA SAYANTAN BASU4 Committee submitted its report in April 1952. Based on this report, present companies Act, 1956 was enacted in the lines of English Companies Act 1948. Companies Act,1956 regulates entire organisation and management of the companies in India. It came into force in and from 1 st April 1956.

5. 15/10/2012CA SAYANTAN BASU5 COMPANY (Sec3) A company is a form of business organisation in which the funds of a large number of investors are managed by few person for the purpose of earning profits which are shared by all the investors. Section 3 (1) (i) of the companies Act, 1956 Section 3 (1) (i) of the companies Act, 1956 “ A Company means a company formed and registered under this Act”.

6. 15/10/2012CA SAYANTAN BASU6 Company is defined as “ a voluntary incorporated association which is an artificial person, created by law with limited liability having a common seal and perpetual succession” Characteristics /features of a company  Registration : A Company is to be compulsorily registered under the Companies Act  Distinct person /Separate legal entity : A company is a distinct person possessing its own identity.

7. 15/10/2012CA SAYANTAN BASU7  Perpetual succession : A company incorporated never dies. It has a perpetual succession.  Artificial person : The company is an artificial person. It functions through its Board of Directors.  Transferable shares : A Company has the greatest advantage of its shares being easily transferable. SEC 82 CA provides that the shares or debentures, shall be movable property, transferable in the manner provided for in the articles of the company.

8. 15/10/2012CA SAYANTAN BASU8  Common seal : The company has a separate legal existence under its own common seal. The common seal of the company gives it an independent existence.  Separate property : The company being a distinct and legal personality can own, enjoy and dispose off property in its own name.  Capacity to sue and be sued : A company can sue and be sued in its corporate name.

9. 15/10/2012CA SAYANTAN BASU9 Classification of Companies Company/Corporation Royal Charter or Chartered companies Statutory CompaniesRegistered Companies

10. 15/10/2012CA SAYANTAN BASU10 Classification of Companies Registered Companies Companies Limited By Shares Companies Limited By Guarantee Unlimited Companies

11. 15/10/2012CA SAYANTAN BASU11 Classification of Companies Company Limited by Shares Public Companies Private Companies

12. 15/10/2012CA SAYANTAN BASU12Typology Chartered Companies : These Companies are incorporated under a special Royal charter issued by the King or Queen. The charter governs them. Chartered Companies : These Companies are incorporated under a special Royal charter issued by the King or Queen. The charter governs them. Ex: - East India Company, Bank of England. Ex: - East India Company, Bank of England. Statutory Companies : These Companies are formed under the special Statutory Act of the parliament of State Legislature. These companies are governed by the Act of Parliament or by State of Legislature. Statutory Companies : These Companies are formed under the special Statutory Act of the parliament of State Legislature. These companies are governed by the Act of Parliament or by State of Legislature. RBI, SBI, IFCI, LIC etc., RBI, SBI, IFCI, LIC etc.,

13. 15/10/2012CA SAYANTAN BASU13 Registered Companies : Companies registered under the Companies Act, 1956 or under any pervious Companies Act. All Companies are now regulated by the provision of the Companies Act,1956. These companies have Memorandum of Association and Articles of Association for their external and internal regulation. Companies registered under this Act are Registered Companies : Companies registered under the Companies Act, 1956 or under any pervious Companies Act. All Companies are now regulated by the provision of the Companies Act,1956. These companies have Memorandum of Association and Articles of Association for their external and internal regulation. Companies registered under this Act are Companies limited by shares Companies limited by shares Companies limited by Guarantee Companies limited by Guarantee Unlimited Companies Unlimited Companies

14. 15/10/2012CA SAYANTAN BASU14 Private and Public Companies Section 3 (1) (iii) of A defines a Private Limited Company means a company which has a minimum paid up capital of one lakh Rupees or such higher paid up capital as be prescribed and by its articles. Section 3 (1) (iii) of A defines a Private Limited Company means a company which has a minimum paid up capital of one lakh Rupees or such higher paid up capital as be prescribed and by its articles. Section 3 (1) (iv) states that all companies other than private companies are called public companies Section 3 (1) (iv) states that all companies other than private companies are called public companies

15. 15/10/2012CA SAYANTAN BASU15 Private vs. Public Companies Difference Private Company Public Company Members Minimum 2 Maximum 50 Minimum 7 Maximum Unlimited Transfer of shares Strict and regulated by its articles Freely transferable Invitation Cannot invite public to subscribe to its share capital Can invite Name It has to use words “Private Limited” “Limited” Number of directors 2 3 Legal control Less legal controls Regulations are more Strict Minimum paid up capital 1 lakh rupees Five lakhs rupees Five lakhs rupees

16. 15/10/2012CA SAYANTAN BASU16 Registration & Certificate of incorporation A Company obtains separate legal existence only after it is registered under the companies Act and is issued a certificate of incorporation by the Registrar of Companies of the State where registered office of the Company is situated. A Company obtains separate legal existence only after it is registered under the companies Act and is issued a certificate of incorporation by the Registrar of Companies of the State where registered office of the Company is situated. Certificate of Incorporation is a document which certifies that the company has been registered with the Registrar of Companies under the Companies Act on a particular date. Certificate of Incorporation is a document which certifies that the company has been registered with the Registrar of Companies under the Companies Act on a particular date.

17. 15/10/2012CA SAYANTAN BASU17 Incorporation of a Company or Procedure for Registration The following formalities shall be complied with to enable the Registrar of Companies to issue a certificate of Incorporation.  Application for availability of name under which the company proposes to be incorporated is to be made to the Registrar of Companies in the prescribed form in the state where the registered office of the company is to be situated.

18. 15/10/2012CA SAYANTAN BASU18  After the name is made available, Memorandum and Articles of Association is to be filed with Registrar of Companies with necessary stamp duty and filing fees according to the authorised capital of the company (with in 30 days of obtaining the certificate of incorporation).  Statement of nominal capital : If the nominal capital exceeds 50 lakhs, a certified copy of the permission of the “controller of capital issues” should be filed

19. 15/10/2012CA SAYANTAN BASU19  List of Directors : It consists the name, addresses & occupation of the persons who have agreed to act as the first directors of the company.  Consent of the Directors : If the directors are appointed by the articles or named in the prospectus their written consent to act as directors should be filled.  Undertaking : A written undertaking to take up &pay for the qualification shares by directors should be filed

20. 15/10/2012CA SAYANTAN BASU20  Statutory declaration : The registrar will examine the documents if they found to be correct and in order he will issue a certificate known as “ Certificate of incorporation” which contains name of the company, the date of its issue and signature of the registrar with his seal  Certificate of commencement of business: A Pvt Ltd company can start it business as soon after receiving the certificate.

21. 15/10/2012CA SAYANTAN BASU21 Certificate of commencement of Business A Public Company cannot do any business and cannot exercise any borrowing powers Filing of prospectus Filing of prospectus Receipt of minimum subscription Receipt of minimum subscription Payment of directors Payment of directors Filing of declarations Filing of declarations

22. 15/10/2012CA SAYANTAN BASU22 Memorandum of Association (Sec 2 (28)) According to Sec of C.A Memorandum of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act. According to Sec of C.A Memorandum of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act. MOA is the document which contains the rules regarding constitution and activities or objects of the company. MOA is the document which contains the rules regarding constitution and activities or objects of the company. It is a fundamental charter of the company It is a fundamental charter of the company Its relations towards the members and outsiders are determined by this important document. Its relations towards the members and outsiders are determined by this important document.

23. 15/10/2012CA SAYANTAN BASU23 Contents of MOA (sec 13) Name of the Company. (Ltd, Pvt Ltd) Name of the Company. (Ltd, Pvt Ltd) Registered office of the Company Registered office of the Company Objects of the company Objects of the company Capital clause Capital clause Liability of the members Liability of the members Details of share capital of the company Details of share capital of the company Subscription or Association clause Subscription or Association clause

24. 15/10/2012CA SAYANTAN BASU24 Forms of MOA ( Sec 14 & 15) The MOA of a company shall be in any onr of the forms in Table B,C,D and E in Schedule I as maybe applicable to the company The MOA of a company shall be in any onr of the forms in Table B,C,D and E in Schedule I as maybe applicable to the company Table B : Contains MOA of a company Limited by shares. Table C : Contains MOA of a company limited by Guarantee and not having a share capital. Table D : Contains MOA of a company limited by Guarantee and not having a share capital. Table E : Contains MOA of an un limited company

25. 15/10/2012CA SAYANTAN BASU25 Articles of Associations Sec 2(2) & 26 to 29 Articles of Association is another contract document which provides the detail of working of the company. Articles of Association is another contract document which provides the detail of working of the company. AOA are the rules and regulations of a company framed for the purpose of internal management of its affairs. AOA are the rules and regulations of a company framed for the purpose of internal management of its affairs. AOA deals with the rights of the members of the company AOA deals with the rights of the members of the company The articles are framed for carrying out the aims and objects of the MOA The articles are framed for carrying out the aims and objects of the MOA

26. 15/10/2012CA SAYANTAN BASU26 Contents of AOA Articles usually contain provisions relating to the following amongst other matters Articles usually contain provisions relating to the following amongst other matters Share capital and alteration thereof Share capital and alteration thereof Payment, call, transfer, forfeiture of shares Payment, call, transfer, forfeiture of shares Share certificate and warrants Share certificate and warrants Rights of shareholders Rights of shareholders Meetings of the company Meetings of the company Appointment, remuneration, qualification, power, etc of BOD Appointment, remuneration, qualification, power, etc of BOD

27. 15/10/2012CA SAYANTAN BASU27 Accounts and audit Accounts and audit Dividends Dividends Indemnity Indemnity Winding up Winding up The AOA & MOA shall be Printed Printed Divided into paragraphs numbered consecutively Divided into paragraphs numbered consecutively Signed by each subscriber of the MOA in the presence of at least one witness. Signed by each subscriber of the MOA in the presence of at least one witness.

28. 15/10/2012CA SAYANTAN BASU28 MOA VS AOA S.No Memorandum of Association Articles of Association Articles of Association 1 It is a charter of a company or it is “life giving” document It contains rules and regulations regarding internal management 2 It is a fundamental charter It is subsidiary to memorandum 3 Every company must Public Company limited by shares may or may not have 4 Alteration of Memorandum is much difficult and strictly regulated Articles can be easily altered by a special resolution

29. 15/10/2012CA SAYANTAN BASU29 Prospectus - sec 2 (36) Prospectus mans any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits form the public for the subscription or purchase of any shares in, or debentures of a body corporate Prospectus mans any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits form the public for the subscription or purchase of any shares in, or debentures of a body corporate Merely Prospectus is a document by which an invitation is issued to the public to take shares or debentures of the company. Merely Prospectus is a document by which an invitation is issued to the public to take shares or debentures of the company.

30. 15/10/2012CA SAYANTAN BASU30 Contents of the Prospectus - Sec 44(2)(a)&56 Every prospectus issued by or on behalf of a company who is or has been engaged or interested in the function of a company shall state the matters. Every prospectus issued by or on behalf of a company who is or has been engaged or interested in the function of a company shall state the matters. Dating of prospectus (sec.55) : Prospectus shall be dated and that date shall be taken as the date of publication of the prospectus. Dating of prospectus (sec.55) : Prospectus shall be dated and that date shall be taken as the date of publication of the prospectus. Registration of Prospectus (sec 60) : No prospectus shall be issued unless on or before Registration of Prospectus (sec 60) : No prospectus shall be issued unless on or before

31. 15/10/2012CA SAYANTAN BASU31 the date of its publication. A copy of the prospectus has been delivered to the Registrar for registration duly signed by every person who is named therein as a director or proposed director of the company. With every prospectus shall be attached the following documents when filed with the Registrar the date of its publication. A copy of the prospectus has been delivered to the Registrar for registration duly signed by every person who is named therein as a director or proposed director of the company. With every prospectus shall be attached the following documents when filed with the Registrar Expert’s consent Expert’s consent Delivery of registration Delivery of registration Newspaper advertisement of prospectus Newspaper advertisement of prospectus

32. 15/10/2012CA SAYANTAN BASU32 SHARE CAPITAL Share capital mans that amount which the company raises by issue of shares. It is classified as Share capital mans that amount which the company raises by issue of shares. It is classified as Authorised or Nominal Capital : This is the capital with which the company is registered Authorised or Nominal Capital : This is the capital with which the company is registered Issued capital : The entire authorised capital may not be required to be raised by the company initially. It is less than the Authorised or Nominal Capital. Issued capital : The entire authorised capital may not be required to be raised by the company initially. It is less than the Authorised or Nominal Capital.

33. 15/10/2012CA SAYANTAN BASU33 Subscribed capital : That part of the issued capital which is agreed to be taken up by the public. Subscribed capital : That part of the issued capital which is agreed to be taken up by the public. Paid-up capital : The amount actually paid up by the subscribers towards the capital accepted by them. Paid-up capital : The amount actually paid up by the subscribers towards the capital accepted by them. Un-called capital : The company may not require the full amount of the subscribed capital. It may call up only a part of the capital subscribed and that part which has not been called up (the remainder of the subscribed capital is un called capital) Un-called capital : The company may not require the full amount of the subscribed capital. It may call up only a part of the capital subscribed and that part which has not been called up (the remainder of the subscribed capital is un called capital)

34. 15/10/2012CA SAYANTAN BASU34 KINDS OF MEETINGS Meetings MEMBERS Statutory Meetings Annual General Meeting Extra Ordinary Meeting Class Meeting MEMBERS Board Committee Creditors Debenture holders Creditors &Contributors

35. 15/10/2012CA SAYANTAN BASU35  Statutory Meeting (Sec165): Every Company limited by shares &every company limited by guarantee &having a share capital, shall within a period of not less than one month nor than 6 months.  Annual General Meeting (Sec 166,167,&172): A Company may holds its first annual general meeting within 18 months from the date of its incorporation. A company cannot hold more than one annual general meeting in any year.

36. 15/10/2012CA SAYANTAN BASU36  Extra Ordinary Meeting (Sec 169): Any Meeting other than Statutory Meeting & annual general meeting is called an Extra Ordinary Meeting. The Extra Ordinary Meeting is convinced to transact any urgent or special business.  By the board of directors.  By the board of directors on the requisition of not less than 1/10 th of members holding paid – up capital of the company the right of voting.  By the board of directors in case of the company not having share capital on the requisition of the members holding 1/10 th of the total voting power.

37. 15/10/2012CA SAYANTAN BASU37 Class Meeting: A company has often 2 class of share –equity and preference shares. The company may vary the rights of any class. Such rights can be varied by convening separate meeting of holders of different classes of shares. Class Meeting: A company has often 2 class of share –equity and preference shares. The company may vary the rights of any class. Such rights can be varied by convening separate meeting of holders of different classes of shares. Board Meeting (Sec 285 -286): It must held at least once in 3months & atleast 4 such meetings shall be held in every year. Notice of every meeting of the board of directors of a company shall be given in writing, usual address in India Board Meeting (Sec 285 -286): It must held at least once in 3months & atleast 4 such meetings shall be held in every year. Notice of every meeting of the board of directors of a company shall be given in writing, usual address in India

38. 15/10/2012CA SAYANTAN BASU38 Quorum for meeting (Sec 287&288) : Quorum for meeting (Sec 287&288) : It shall be 1/3 rd of its total strength. Quorum means a minimum numbers present who are competent to transact and vote on any business. It shall be 1/3 rd of its total strength. Quorum means a minimum numbers present who are competent to transact and vote on any business. Meetings of Creditors and Debenture holders Meetings of Creditors and Debenture holders are generally held in case of winding up of the company or in case of proposed scheme of arrangement.

39. 15/10/2012CA SAYANTAN BASU39 Company Management Board of Directors [ Sec 2(13) ] The company being an artificial person carries on its activities and business through individuals called Directors. The company being an artificial person carries on its activities and business through individuals called Directors. Director includes any person occupying the position of a director by whatever name called Director includes any person occupying the position of a director by whatever name called The directors of a company collectively are referred to as “Board of Directors” or “Board” The directors of a company collectively are referred to as “Board of Directors” or “Board”

40. 15/10/2012CA SAYANTAN BASU40 Every public company, other than a public company which has become such by virtue of section 43A shall have at least 3 directors. Every other company shall have at least 2 directors [Sec 252]. Every public company, other than a public company which has become such by virtue of section 43A shall have at least 3 directors. Every other company shall have at least 2 directors [Sec 252]. Section 253 is amended by insertion of a provision and section 266A to 266G are inserted, which provide for DIN to every individual director. Section 253 is amended by insertion of a provision and section 266A to 266G are inserted, which provide for DIN to every individual director. DIN means a Director Identification Number which the Central Govt. may allot to any individual to be appointed as director. DIN means a Director Identification Number which the Central Govt. may allot to any individual to be appointed as director.

41. 15/10/2012CA SAYANTAN BASU41 Position of Directors It is very difficult to define the position of directors in a company as the Companies Act,1956 is silent on this issue. Generally It is very difficult to define the position of directors in a company as the Companies Act,1956 is silent on this issue. Generally Director acts as Director acts as  Agents of the company  Officers in certain matters  Trustees  Managing partners

42. 15/10/2012CA SAYANTAN BASU42 Appointment of Directors  By the articles as regard first directors [Sec 254] [Sec 254]  By the Company in general meetings [Sec 255,257,263,264] [Sec 255,257,263,264]  By the directors Sec 260,262,313  By the third party [sec 255]  By the central Government [Sec 408].

43. 15/10/2012CA SAYANTAN BASU43 Qualification of Directors The directors must obtain qualification shares with in 2 months after their appointment The directors must obtain qualification shares with in 2 months after their appointment The nominal value of qualification share must not exceed Rs. 5000 The nominal value of qualification share must not exceed Rs. 5000 The director should not obtain shares by way of gift from a promoter. The director should not obtain shares by way of gift from a promoter. The director should make the payment for his qualification of shares. The director should make the payment for his qualification of shares. The director is required to hold Q.S in his own right. The director is required to hold Q.S in his own right.

44. 15/10/2012CA SAYANTAN BASU44 Rights or Power of Director Statutory Powers Statutory Powers The power to make on shares The power to make on shares To invest fund To invest fund To issue debentures To issue debentures To borrow money otherwise than on debentures To borrow money otherwise than on debentures To make loans To make loans

45. 15/10/2012CA SAYANTAN BASU45 Managerial Powers Managerial Powers Power to contract with the third party on behalf of the company Power to contract with the third party on behalf of the company To recommend dividend To recommend dividend To allot forfeit & transfer shares of the company. To allot forfeit & transfer shares of the company.Rights  To attend meetings of the company  To participate in the management of the company’s affairs  To receive remuneration, if any, fixed

46. 15/10/2012CA SAYANTAN BASU46 Duties of Directors  Act honestly  Employ reasonable degree of skill and diligence in the interest of the company  Must not make secret profits  Attend Board Meetings  Send his consent of his appointment as a director to the Registrar where applicable.  Obtain Q.S  Pay Call amount

47. 15/10/2012CA SAYANTAN BASU47  Disclose his interest in the contract etc.,  Disclose his name, occupation, nationality  Not to delegate his functions except to the extent authorised by the Act or Articles of the company.  It should be noted that the duties of a director vary according to the nature and size of the company.

48. 15/10/2012CA SAYANTAN BASU48 Managing Director Sec 2(26) A director who is entrusted with substantial powers of management which would not otherwise or exercisable by him, and includes a director occupying the position of a Managing Director by whatever name called. A director who is entrusted with substantial powers of management which would not otherwise or exercisable by him, and includes a director occupying the position of a Managing Director by whatever name called. He is an agent of the company with capacity to bind the company within the sphere of management authorised to him. He is an agent of the company with capacity to bind the company within the sphere of management authorised to him.

49. 15/10/2012CA SAYANTAN BASU49 Appointment of MD A Managing Director may be appointed in any of the following ways: A Managing Director may be appointed in any of the following ways: By agreement with the company By agreement with the company By a resolution passed by the company in general meeting By a resolution passed by the company in general meeting By a resolution passed by the BOD By a resolution passed by the BOD By memorandum of association By memorandum of association By articles of association By articles of association

50. 15/10/2012CA SAYANTAN BASU50 Powers of MD A MD of a company shall exercise his powers subject to the superintendence, control and direction of its BOD. A MD of a company shall exercise his powers subject to the superintendence, control and direction of its BOD. He is entrusted with substantial powers of management and administration of the affairs of the company He is entrusted with substantial powers of management and administration of the affairs of the company

51. 15/10/2012CA SAYANTAN BASU51 The following powers to do administrative acts of a routine nature shall not be deemed to be included within substantial powers of management The following powers to do administrative acts of a routine nature shall not be deemed to be included within substantial powers of management Power to affix the common seal of the company to any document Power to affix the common seal of the company to any document to draw and endorse any cheque on the account of the company in any bank to draw and endorse any cheque on the account of the company in any bank To draw and endorse any negotiable instrument To draw and endorse any negotiable instrument To sign any certificate of shares To sign any certificate of shares To direct registration of transfer of any share To direct registration of transfer of any share

52. 15/10/2012CA SAYANTAN BASU52 THANK YOU ……………….. THANK YOU ………………..