Basic Idea for the companies Act 1956

1. Submitted To :- Prof. Priya kini
Prepared By - Vinay Golchha
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2.  A company can be defined as an "artificial person", invisible, intangible, created
by or under law, with a discrete legal entity, perpetual succession and
a common seal. It is not affected by the death, insanity or insolvency of an
individual member.
 According to Section 3(1)(i) of the Companies Act, a company means, “ A
company formed and registered under this Act or an existing company.”
 A voluntary association formed and organized to carry on a business.
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3.  A company is an artificial person created by law.
 It is a voluntary association of individuals for profits.
 A company means a group of persons associated together for the attainment of
a common end, social or economic.
 „Existing Company‟ means a company formed and registered under any of the
earlier Company Laws.
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4.  Separate legal entity
 Limited liability
 Perpetual succession
 Common seal
 Transferability of shares
 Separate property
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5. Types Of
Company
Companies
Incorporated
Chartered
Companies
Statutory
Companies
Registered
Companies
Companies
limited by
shares
Public
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Private
Unincorporated
Companies
Limited By
Guarantee
Public
Private
Unlimited
Companies
Public
Private
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6. Types Of Company
Limited Liability
Liability
Unlimited
Liability
Number Of
Member
Public
Company
Private
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7. Types Of Company
Company
Control
Holding
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Ownership
Subsidiary
Govt.
Non Govt.
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8.  Incorporated Companies: These are the association of persons who contribute money to a
common stock known as capital of the company. They have existence independent of its members.
 Unincorporated Companies: These are the mere collection of persons who have agreed to join in
partnership to run a business and share the profits.
 Chartered Companies: The „Crown‟ in the exercise of the royal prerogative has power to create a
corporation by the grant of a charter to persons assenting to be incorporated. Such companies or
corporations are known as chartered companies.
 Statutory Companies: A company may be incorporated by means of a special Act of the
Parliament or any State Legislature. Such Companies are called statutory companies. Such
companies are generally formed to carry out some special public
undertakings, e.g., railways, waterways, gas, electric generation etc. They are governed by the Acts
creating them.
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9. Registered Companies: Companies registered under the Companies Act,1956, or the earlier
Companies Acts are called registered companies. Such companies come into existence when they are
registered under the Companies Act and a Certificate of Incorporation is granted to them by the
Registrar.
A company registered under the Act may be:
I.
Companies limited by shares: In a company limited by shares the liability of the members is limited
by the memorandum to the amount, if any, unpaid on the shares respectively held by them.
II. Companies limited by guarantee: It is a registered company public or private, in which the liability
of members is limited to such amounts as they may respectively undertake by the memorandum to
contribute to the assets of the company in the events of its being wound up.
III. Unlimited Companies: A company not having any limit on the liability of its members is termed as
unlimited company.
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10.  According to Section 3(1)(iii) of the Companies (Amendment)Act,2000, a private
company means a company which:
 (a) has a minimum paid up capital of one lakh rupees or such higher amount as may
be prescribed by the Government;
 (b) has a minimum of 2 and maximum of members excluding employees;
(c) restricts the right of members to transfer its shares , if any;
 (d) prohibits any invitation to the general public to subscribe for its shares or
debentures;
 (e) does not invite the public to subscribe to its deposits.
 E.g.:- Ambika Industries Pvt. Ltd., Paras Pharmaceutical Pvt. Ltd. etc.
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11.  According to Section 3(1)(iv) of the Companies (Amendment)Act,2000, a public
company means a company which:
 (a) is not a private company; and
 (b) has a minimum paid up capital of five lakh rupees or such higher amount as may
be prescribed by the Government.
 E.g.:-Reliance Industries Ltd., Tata Iron & Steel Co. Ltd., D.C.M. Ltd., etc.
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12.  Government Companies: It is a company of which 51% or more equity share capital
is held by the Government. Rest of the shares can be held by private individuals or
businessmen.
 Foreign Companies: It is incorporated outside India but has a place of business in
India. Some of the popular MNCs operating in India are Coca Cola(USA), Pepsi
Cola(USA), Sony(Japan),etc.
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13.  A Company comes into existence when a group of
people come together with a view of forming an
association to exploit the business opportunities by
bringing together; men, material, money and
management.
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14.  Promotion Stage.
 Selection of Name.
 Incorporation (Registration Stage).
 Raising the Share Capital Stage.
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15.  Discovery of Business opportunities.
 Detailed Investigation.
 Assembling necessary requirements.
 Financing of proposition.
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16.  To be identified for legal and business purpose (i.e. “Ltd” or
“Pvt Ltd” ). The name should not be similar to the existing.
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17.  A company is said to be incorporated when it fulfill the
formalities of registration and obtain “CERTIFICATE OF
INCORPORATION” by submitting the MoA, AoA and written
consent of all the directors.
 A public to commence business, should raise the required
capital and obtain the “CERTIFICATE OF
COMMENCEMENT OF BUSINESS”.
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18.  Entering onto an agreement with underwriters.
 Applying to the stock exchange for listing of shares.
 Issue of prospectus inviting public to subscribe.
 Allotting shares
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19.  Contains fundamental conditions.
 Charter of company.
 Lays down area of operation of the company.
 Regulates external affairs.
 Defines the object and scope.
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20.  Name.
 Object.
 Registered office clause.
 Liability Clause.
 Capital clause.
 Association or subscription.
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21.  In corporate governance, a company's articles of
association is a document which, along with
the memorandum of association form the
company's constitution, defines the responsibilities of the
directors, the kind of business to be undertaken, and the
means by which the shareholders exert control over
the board of directors.
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22.  The important
 Powers, duties, rights and liabilities of Directors
 Powers, duties, rights and liabilities of members
 Rules for Meetings of the Company
 Dividends
 Borrowing powers of the company
 Calls on shares
 Transfer & transmission of shares
 Forfeiture of shares
 Voting powers of members
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23.  A prospectus, is a disclosure document that describes a
financial security for potential buyers. It commonly provides
investors with material information about mutual
funds, stocks etc., any litigation that is taking place, a list of
material properties and any other material information. In the
context of an individual securities offering, such as an initial
public offering ,a prospectus is distributed
by underwriters or brokerage to potential investors.
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24.  Prospectus issued generally i.e. issued to persons who are
not existing members or debentures holders.
 Prospectus issued generally uniform with shares or
debentures already quoted on stock exchange.
 Prospectus not issued generally i.e. only to the existing share
holders and debenture holder.
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25. Prepared By - Vinay Golchha
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