32293757 indian compny law

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The Companies Act, 1956 The Companies Act, 1956

Why study company law ?

Most popular form of business organisation.

Why«««.? It provides an organisational framework

it is a means to an end

A company is a person in Income-tax.More than 60% of income-tax revenue

comes from corporate assessees

Non-corporate form of business enterprises-

Sole proprietorship Joint Hindu Family (HUF)

Partnership

Corporate Form of business enterprises ±

Co-operative organisation ± Can be

converted into a Producer company. Company

Limited Liability Partnership (LLP)

MEANING OF A COMPANY

Separate

Legal Entity

Transferable

Shares

Limited

Liability

Separate

Property

Perpetual

Succession

Common

REGISTERED OR INCORPORATED UNDER

THE COMPANIES ACT WHERE BY IT AQUIRES

CERTAIN ATTRIBUTES

FOR SOME COMMON PURPOSE VIZ.

BUSINESS, CHARITY, RESEARCH ETC.

A COMPANYI

S ANASSOCIATION OF PERSONS

By a company is meant an association of many

personswho contribute money or money¶s worth to acommon stock and

employ it in some trade or business, and

who share the profit and loss (as the case maybe) arising there from.

The common stock so contributed is denoted inmoney and is the capital of the company.

The persons who contribute it, or to whom it

belongs, are members. The proportion of capital to which each

member is entitled is his share.

The shares are always transferable althoughthe right to transfer is often more or less

restricted. (Lord Justice Lindley)

On the basis of itscharacteristics, acompany can bedefined as

³ an incorporated association, which isan artificial personcreated by law, having a separate entity , with

a perpetual successionand a common seal ´.(Haney)

Characteristic Features

of a Company

S eparate Legal entity

S olomon v S olomon &Co.Ltd.

Limited liability of members

Perpetual S uccession

S eparation of ownership frommanagement

Transferable shares

S eparate Property

Common S eal

Capacity to sue and being sued

Lifting the corporate veil

Fictional veil between the company and its members.

Lifting the veil means disregarding the corporate

entity and paying regard to the realities behind the

legal form When entity relies on its corporate personality as

a shield to cover its wrongdoings

S tatutory recognition of lifting of

corporate veil

Under Statutory Provisions

1. R eduction of membership below the statutory

minimum (sec. 45)

Misrepresentations in prospectus (sec.6

3. Failure to return application money (sec. 69)

4. Misdescription of name (sec. 147)5. Piercing the veil in holding and subsidiary

company relationships

6. Company under investigation

7. Fraud during winding up

8. For ultra vires Act

9. For violations of the provisions of other

statues

UNDER J UDI C I AL DE C ISIONS

1. Lifting corporate veil in tax matters.

2. Lifting corporate veil where company

is used for evasion of personal and

statutory obligation.

3. Lifting corporate veil for

determination of the enemy character

of the company.

4. Lifting corporate veil in associated

companies.

5. Lifting corporate veil where company

is used to avoid welfare legislation.

6. Lifting corporate veil where body

corporate is used to commit fraud or

improper conduct.

7. Lifting corporate veil for determining

technical competence of the company.

DIFFERENCE BETWEEN

COMPANY & BODY CORPORATE

Is Company a Citizen?

Is a Company a property of the

shareholders?

Body Corporate is wider than the term

company

It has three distinct attributes:

Separate legal personality

Perpetual succession

Common seal

Includes foreign company, PFI, N.Bank, AOP

declared as a BC by CG. e.g ONGC

Distinction between Company and

Corporation Generally speaking, an association of persons

incorporated and clothed with legal personality separate from the persons

constituting it is known as corporation.

As per Section 2 (7) of the Companies Act theword corporation is synonymous with bodycorporate.Every company is a body corporate but every body corporate is not a company.

Disadvantages of Corporate form

1. Formalities and expenses ± to form a company

with the authorized capital of ten lakhs registration fees

is Rs. 27,200.2. Corporate Disclosures

3. Separation of control from ownership.

4. Greater social responsibility.5. Greater tax burden; MAT, DDT etc.

6. Detailed winding up procedure

K INDS O F C O MPANIES

A. The Companies not covered by the

Companies Act, 1956.

B. The Companies covered by the

Companies Act, 1956.

Companies not covered by the

Companies Act

i) S tatutory companies

ii) Chartered Companies

Companies covered by the Companies Act

a) Private Company - S ec 3 (1) (iii)

b) Public Company - S ec 3(1)(iv)

These companies may be:

i) Companies with liability limited by shares.

ii) Companies with liability limited by guarantee.

iii) Companies with unlimited liabilities

(Unlimited Companies).

COMPANIES

PUBLIC PRIVATE

COVERED BY THE

COMP ANIES ACT

STATUTORY CHARTERED

NOT COVERED BY

THE COMP ANIES ACT

OTHER COMP ANIES

1. Companies not for profit2. Government Companies, 3. Foreign Companies

4. Holding and Subsidiary Companies

THESE COMP ANIES MAY BE

1. Companies Limited by Shares2. Companies Limited by Guarantee

3. Unlimited Companies

From the point of view of liability, public and

private companies may be organized as

I. Companies not for profitii. Government. companies

iii. Foreign companies

iv. Holding and subsidiary companies

Advantages and Privileges of Private

Companies

i) Formationii) Business

iii) Meetings

iv) Board of Directors

Not allowed from

persons other than

its members, directors

or their relatives

FEATURES OF PRIVATE COMPANIES

Minimum2

Maximum 50

1. Number of

Members

Restricted

2. Transfer of

Shares

No public Offer

for Shares or

Debentures

3. Invitation

for Public

Subscription

4. Invitation or

Acceptance of

Deposits

A PRIVATE COMPANY

Means a Company which has a minimum paid-up

Capital of Rs. 1.00 lac

FEATURES OF PUBLIC COMPANIES

which is not aa private

company

which has apaid-up

capital ofRs. 5 lac

which is apvt company

& subsidiary ofa public company

Is formed by at least

Seven Persons

A PUBLIC COMPANYmeans a company which

Distinction of a Private Company and a Public

Limited Company Number of Members

Number of Directors

Transfer of Shares

Public Subscription

Commencement of business

Allotment of Shares

Statutory Meeting

Managerial Remuneration

Index of members

Other Companies

a. Government company [Sec 617]

b. Foreign Companies [Sec 591]

c. Holding and subsidiary Companies [Sec. 4]

d. Companies not for profit (or Association

not for profit) [Sec25]

e. Public financial institutions

f. Investment company

ILLEGAL ASSOCIATION [SEC 11] An association or partnership is an illegal association if all

the following conditions are satisfied :

(a)The number of persons carrying on business exceeds

20 (10 persons in case of banking business).

(b) It is formed for the purpose of earning profits.

(c)It is not registered under the Companies Act or formed

under any other Indian law (e.g. Cooperative Societies Act

,Trust Act).

(d)It is not a Joint Hindu Family (i.e., an HUF is not an

illegal association even if he number of members exceed

20 or 10, as the case may be).

ILLEGAL ASSOCIATION [SEC 11]

EXCEPTIONS

Associations µnot for profit-making¶

Joint Hindu Family

Effects of an illegal association ±Members personally liable and punishable with fine upto

Rs. 10,000.

An illegal association is liable to be taxed.

( KS Chattiar vs ITO 1957, ITR 457)

Meaning of O fficer who is in default S ec 5

Conversion of private company into a Public

company

1. Conversion by default [ S ec. 43]

2. Conversion by operation of law

3. Conversion by choice [ S ec. 44 ]

Conversion of a public company into a Privatecompany

Defunct Company

ADMINISTRATION OF COMPANIES

ACT - I

REGISTR AR OF COMP ANIES

REGIONAL DIRECTOR

CENTR AL GOVERNMENT

(Ministry of Company Affairs)

National Company Law Tribunal

National Company Law

Appellate Tribunal

Supreme Court

JURISDICTION OF COURTS

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