2. What is a company?
As per Sec 3(1)(i):
“Company means:
-A company formed and registered under this Act, or
-An existing company, formed and registered under any
previous company law.”
“A company means 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.
-who share the profits or lose arising there from.”
-Lord Justice Lindlay

3. Features of a company
Separate Legal Entity
Limited Liability ( either by share or guarantee)
Perpetual Succession
Artificial person
Common seal
Transferability of shares
Separate Property
Capacity to sue
Termination of existence
Separate management

4. Types of Companies
Classification on the basis of incorporation
Statutory companies
Registered companies
Classification on the basis of liability
Limited Company ( Limited by share or by guarantee)
Unlimited company
Classification on the basis of ownership
Government Company
Foreign Company
Classification on the basis of number of members
Private Company
Public Company
• Classification on the basis of control
Holding company
Subsidiary company

5. Types of Companies
Statutory Companies:
Formed under Special Statutory Act of Parliament or
State Legislature. For e.g., RBI, SBI, IFCI, etc.
Registered Companies:
Are registered under the Companies Act. These
companies have MoA and AoA for internal & external
regulations.

6. Types of Companies
Limited Company
Limited by Shares
Limited by Guarantee not having share capital
Limited by guarantee having share capital
Unlimited Company
no limit on the liability of the members.
Members cannot be directly sued by the creditors.
When the company is wound up, members to discharge the
liability.

7. Types of Companies
Government Company
 51% of the paid up share capital by government.
The share can be held by the central government or state
government. Partly by central and partly by two or more
governments.
Foreign Company
A company incorporated outside India, but having a
place of business in India.

8. Private Company
 minimum of two persons
minimum paid up capital of 1 lakh or more
The maximum number of members to be fifty
Rights to transfer the shares are restricted
Prohibits any invitation to the public to subscribe
It prohibits acceptance of deposits from persons
other than its members, directors or their relatives.
Two or more are holding one or more shares in a
company jointly, to be treated as a single member.

9. Public Company
A Public company means a company-
> Which is not a private company
> Which has a minimum paid-up capital of Rs 5 lakh or
such higher paid-up capital, as may be prescribed
> Which is a private company and is a not a subsidiary of a
company, which is private company.
>It includes- any company which is a public company
with a paid up capital of less than 5 lakh, then it has to
enhance its paid up capital as per the statutory
requirement

10. Conversion of Company
The Act provides for conversion of public company into a
private company and vice versa
A private company is converted into a public company
either by default or by choice in compliance with the
statutory requirements.
Once the action for conversion takes place then, a
petition can be filed with the central government with the
necessary documents for its decision on the matter of
conversion

11. Registration and Incorporation
Association of persons or partnership or more than 20
members ( 10 in case of banking) can register to form a
company under the Companies Act, 1956
The contract entered into by this illegal association is void
and cannot be validated. Its illegality will not affect its tax
liability or its chargeability
The certification of incorporation is the conclusive evidence,
that all the requirements for the registration have been
complied with in respect of registration.

12. Procedure for incorporation of
Company.
Application for availability of name
Preparation of MOA and AOA
Selection and finalization of MOA and AOA- Its printing,
stamping and signing
Preparation of other necessary documents
Filling of the required documents for Registration to
obtain certificate of incorporation and Certificate of
commencement of business

13. Memorandum of Association
It is the charter of the company
It contains the fundamental conditions upon which the
company can be incorporated
It contains the objects of the company’s formation
The company has to act within objects specified in the MOA
It defines as well as confines the powers of the company
Any thing done beyond the objects specified in the MOA
will be ultra vires. Their transactions will be null and void
The outsider have to transact looking into the MOA

14. Conditions of the MOA
It should be printed
Divided into paragraph and numbers consecutively
Signed by at least seven persons or two in case of
public and private company respectively.
The signature should be in the presence of a
witness, who will have to attest the signature
Members have to take shares and write the number
of shares taken with full address

15. The Compulsory Clauses in MOA
The Name Clause
The Registered Office Clause
The Object Clause
The Liability Clause
The Capital Clause
The Association or Subscription Clause

16. “Doctrine of Ultra Vires”
 The powers exercisable by the company are to be confined
to the objects specified in the MOA.
 If the company acts beyond the powers or the objects of
the company that is specified in the MOA, the acts are
considered to be of ultra vires. Even if it is ratified by the
all the members, the action is considered to be ineffective.
 Even the charitable contributions have to be based on the
object clause. ( A Lakshmanaswami Mudaliar V. LIC of
India)

17. The consequences of the ultra vires transactions are
as follows:
a) Injunction
b)Directors’ personal liability.
c) If a property has been purchased and it is an ultra vires
act, the company can have a right over that property.
d)The doctrine to be used exclusively for the companies’
interest.
e) But the others cannot use this doctrine as a tool to attack
the company

18. Articles of Association
It is the companies bye- laws or rules to govern the
management of the company for its internal affairs and the
conduct of its business.
AOA defines the powers of its officers and also establishes a
contract between the company and the members and
between the members inter se
It can be originally framed and altered by the company under
previous or existing provisions of law.

19. AOA
AOA plays a subsidiary part to the MOA
Any thing done beyond the AOA will be
considered to be irregular and may be ratified by
the shareholders.
The content of the AOA may differ from company
to company as the Act has not specified any
specific provisions
Flexibility is allowed to the persons who form the
company to adopt the AOA within the
requirements of the company law
Any ambiguity and uncertainty in one of them
may be removed by reference to the other.

20. Share Capital
Share: Share is defined as “an interest having a
money value and made up of diverse rights
specified under the articles of association”.
Share capital: Share capital means the capital
raised by the company by issue of shares.
A share is a share in the share capital of the
company including the stock.
Share gives a right to participate in the profits of
the company, or a share in the assets when the
company is going to be wound up.

21. Other features of a share
A share is not a negotiable instrument, but it is a
movable property.
It is also considered to be goods under the Sale of
Goods Act, 1930.
The company has to issue the share certificate.
It is subject to stamp duty.
The ‘Call’ on Shares is a demand made for payment
of price of the shares allotted to the members by
the Board of Directors in accordance with the
Articles of Association.
The call may be for full amount or part of it.

22. Share Certificate and Share
Warrant
Share Certificate: The Share Certificate is a document issued by
the company and is prima facie evidence to show that the person
named therein is the holder ( title) of the specified number of shares
stated therein.
 Share certificate is issued by the company to the ( share holder)
allottee of shares.
 The company has to issue within 3 months from the date of
allotment. In case of default the allottee may approach the central
government
Share Warrant: The share warrant is a bearer document issued by
the company under its common seal. As share warrant is a negotiable
instrument, it is transferred by endorsement and by mere delivery like
any other negotiable instrument.

23. Types of Capital
 1.Nominal, authorized or registered capital means the sum
mentioned in the capital clause of Memorandum of Association
 2.Issued capital means that part of the authorized capital which has
been offered for subscription to members and includes shares allotted
to members for consideration in kind also.
 3.Subscribed capital means that part of the issued capital at nominal
or face value which has been subscribed or taken up by purchaser of
shares in the company and which has been allotted
 Called-up capital means the total amount of called up capital on the
shares issued and subscribed by the shareholders
 Paid-up capital means the total amount of called up share capital
which is actually paid to the company by the members.

24. Kinds of shares
>Preference shares- It can be further
classified as
Participating preferential shares.
Cumulative preferential shares
Non Cumulative preferential shares
>Equity or ordinary shares
Shares at premium
Shares at discount
Bonus shares
Right shares
SWEAT shares (ESOPS)

25. Rights of shareholders
Voting Power on Major Issues
Ownership in a Portion of the Company
The Right to Transfer Ownership
Entitlement to Dividends
Opportunity to Inspect Corporate Books and Records
The Right to Sue for Wrongful Acts: In the form of a shareholder
class-action lawsuit.

26. Transfer and Transmission of
shares
AOA provides for the procedure of transfer of shares. It is
a voluntary action of the shareholder.
It can be made even by a blank transfer –In such cases the
transferor only signs the transfer form without making any
other entries.
In case it is a forged transfer, the transferor’s signature is
forged on the share transfer instrument.
Transmission of shares is by operation of law, e.g. by
death, insolvency of the shareholder etc.

27. Debentures
Negotiability Security Permanence Convertibility
Bearer Secured Redeemable Convertible
Registered Unsecured Unredeemable Non convertible
Partly convertible
Optional convertible

28. Dividends
The sharing of profits in the going concerns and
the distribution of the assets after the winding up
can be called as dividends
It will be distributed among the shares holders
The dividends can be declared and paid out of:
• Current profits
• Reserves
• Monies provided by the government
• It can be paid after presenting the balance sheet
and profit and loss account in the AGM

29. Dividends
Other than the equity shareholders, even the
preferential shareholders can get the dividends.
Rather they are the first ones to get the dividends.
Dividends are to be only in cash, if otherwise
specified in the AOA.
Dividends to be paid by Cheque only.
Unclaimed dividend after 30 days of declaration to
be transferred to unclaimed dividend account with
any scheduled bank.

30. Directors
The Legal Status of the director
The director occupies the position of a:
 As a Trustee- In relation to the company
 As Agents- When they act o n behalf of the
company
 As Managing Partner-As they are entrusted with
the responsibility of the company
Qualification Shares
In case there is requirement as per the AOA for
the director is bound to buy qualification shares
If acts are done by the director prior to he or she
being disqualified, the acts are considered to be
valid.

31. Disqualifications
As per the company law, the following
persons are disqualified from been appointed
as a director:
Unsound mind
An undischarged insolvent
A person who is convicted by the court
Who has applied for being adjudged insolvent
Not paid for the call on shares
Persons who are already directors in maximum
number of companies as per the provisions of the
Act or
Any other person who has been disqualified by
the court for any other reason

32. Appointment of Directors
The appointment can sometimes be by based on
the proportional representation like minority
shareholders.
There can be alternate directors, additional
directors, casual directors.
The third parties can appoint the directors
Other than the shareholders and the first
directors ,the central government and
NCLT may also appoint directors.

33. Duties and Liabilities of the Directors
Fiduciary Duties
To act honestly and with good faith
Not to use confidential information of the company for their
own purpose
Duty of Care and to act reasonably while acting for the
company
Statutory Duties
Not to contract with company, where he/she or his relative
has an interest in the contract
where he/she has a interest, they need to inform the board
or seek prior approval while entering into contract,
otherwise the contract is voidable
Duty to attend and convene meetings
Duty not to delegate

34. The directors liabilities
The liability of the directors can be either civil or
criminal.
If provided in the MOA, the liability may be
unlimited, for a limited company, otherwise it may
be altered.
Liability may be for breach of fiduciary duties
The directors are personally liable for the
following:
a) Ultra vires acts
b) malafide acts
c) negligent acts
d) liability for the acts of third parties

35. Criminal Liability
Liability of the director for any untrue statement
in the prospectus
Inviting any deposits in contravention of the law
Liability for false advertisement
Failure to repay the application money, which was
excess
Concealing the names of the creditors
Failure to lay the balance sheet.
Failure to provide information to the auditor etc

37. Auditor Powers and Duties
Powers of Auditors:
 To access books of accounts of the company.[227(1)]
 To seek information and explanation from the officers of
the company
 To visit branches where he is not satisfied with the details
given by the branch auditor [228]
 To receive notice of AGM [231]
To take advice from experts.
To receive Branch Audit Report.
To sign the audit report based on his opinion.
To attend AGM.
Right of lien.

38. Auditor Powers and Duties
Report to the shareholders on:-
• Whether proper Books of Accounts were kept and proper returns
received from the Branches not visited by him.
• Whether necessary information was received during the course
of audit .
• Whether BS & P& L A/c are in agreement with the Books of
Accounts.
• Whether BS & P& L A/c are as per Co.’s Act.
• Whether the BS & P& L A/c complied with Accounting
Standards referred in Sec 211(3C)
• Whether Accounts show True & Fair View.
• Report on CARO (if applicable)
• Qualifications in report.
• Directors disqualifications if any.

39. Auditor Powers and Duties
Duty to inquire into Certain Matters Sec 227(IA)
• Loan and advances made by the company.
• Book entries.
• Sale of investment below cost.
• Loan and Advances shown as deposit
• Personal expenses.
• Shares issued during the year.
Sign & submit the Audit Report.
Certify Statutory report regarding :
• Numbers of shares allotted
• Cash received on such allotment
• Receipt and Payment Account

40. Corporate governance
Disclosures on Remuneration of Directors:
• Section 299 of the Act requires every director of a company to make
disclosure, at the Board meeting, of the nature of his concern or
interest in a contract or arrangement (present or proposed) entered
by or on behalf of the company.
• The company is also required to record such transactions in the
Register of Contract under section 301 of the Act.
Requirements of the Audit Committee:
• section 292A of the Act requires every public having paid up capital
of Rs 5 crores or more shall constitute a committee of the board to be
known as Audit Committee.
• The Annual Report of the company shall disclose the composition of
the Audit Committee.

41. Corporate governance
 Periodic discussions with the auditors about the Internal Control
Systems and the scope of audit including the observations of the
auditors.
 If the default is made in complying with the said provision of the Act,
then the company and every officer in default shall be punishable with
imprisonment for a term extending to a year or with fine up to Rs
50000 or both.
Corporate Democracy:
• Wider participation by the shareholders in the decision making
process
• Introduction of section 192A of the Act and the Companies (Passing
of Resolution by Postal Ballot), Rules provides for certain
resolutions to be approved and passed by the shareholders through
postal ballots.

42. Company Secretary
A company having a paid up share capital of two crore
rupees or more but less than five crore rupees may appoint
any individual who is a member of the Institute of
Company Secretaries of India as a whole-time secretary to
perform the duties of a secretary under the Companies
Act, 1956.
Advises Board of Directors on the kind of practices to be
adopted in corporate governance.
She/he is the one who represents the company for internal
and external stakeholders
The secretary appointment is generally governed by the
company’s articles of association

44. CS roles and duties
make sure that the procedure for appointment of directors
is followed properly.
should ensure that all statutory and regulatory
requirements are properly complied with.
They should advise the company and its board of
Directors on business ethics and corporate governance.
should also ensure that the interest of the stakeholders are
safeguarded.
is responsible for organizing board meetings

45. CS roles and duties
has to ensure that Annual General Meetings (AGM) are
held as per the Companies Act and the companies’
Article of Association.
responsible for issuing notices of meetings, distribution of
proxy forms.
Has to ensure that the Memorandum and Articles of
Association is properly complied with.
has to make sure that company complies with the
requirements of SEBI if company is listed on any of the
Stock exchanges of India.

46. CS roles and duties
responsible for maintaining the statutory registers
regarding the members, company charges, directors and
secretary, directors’ interests in shares and debentures,
interests in voting shares and debenture holders.
Ensure the payment of dividends and interest. They have
to keep an eye on register of members in case any
stakeholder is aiming at taking over the company.
Has to play a key role in implementing acquisitions,
disposals and mergers. They have to make sure that
proper documentation is in place and proper commercial
evaluation is done.

48. Classification of Meetings
General meetings
a) Statutory meetings ( which happens only once in the
lifetime of the company)
b) EGM- Convened to transact some special or important
decision to be taken
c) AGM-it can be conducted based on the provisions given
in the Articles or by passing a resolution in one AGM
Class meetings- This is the meeting of the shareholders-
which is convened by the class of shareholders based on the
kind of shares they hold.
Board Meetings- This is conducted for the smooth running
of the company

49. A meeting may be convened by the director, requisitionist,
or the NCLT
Notice to be given by the secretary after the time and place
have been fixed by the directors
Even the shareholders can call a meeting as an
extraordinary general meeting (EGM)
The NCLT can call an Annual General Meeting (AGM)

51. Oppression of minority
shareholders
Shareholders elect the board of directors in a
corporation. Once elected, the directors set the
corporation's bylaws, elect officers and act as
supervisors for the corporation.
This means that the people who run the business are
often elected by majority shareholders. Meanwhile,
minority shareholders may not even be able to elect
themselves to the board of directors.

52. By controlling the board of directors, and, thus, the
officers of a corporation, majority shareholders often
have outright decision-making power.
Some majority shareholders use this power to oppress
minority shareholders by:
- Squeezing-out / freezing-out minority shareholders
- Refusing to declare dividends
- Reducing profits and dividends (by increasing spending, etc.)
- Denying minority shareholders the right to inspect corporate records
- Diluting minority shareholders' interest by issuing more stock
- Moving business assets out of the business
- Terminating the minority shareholder's employment with the
corporation

53. Winding up
It is the process whereby the life of the company is ended
and its property is administered for the benefit of its
creditors and members.
During this process a liquidator is appointed to take control
of the company. The liquidator will be responsible for the
assets, debts and final distribution of the surplus to the
members.
It is the process for discharge of liabilities and returning
the surplus to those who are entitled for it.
But even a company which is making profit can be wound
up is the special feature of winding up , which is different
from that of the process of insolvency.

54. How can be company be
wound up?
By passing a special resolution[sec:433(a)]
If there is a default in holding the statutory
meeting[sec:433(b)]
Failure to commence the business [sec:433(c)]
If there is reduction in the membership of the minimum
number of members as per the statutory
requirement[sec:433(d)]
If it not able to pay its debts[sec:433(e)]

55. Modes of winding up
Compulsory winding up/winding up by the
tribunal(secs.433 to 483)
• under the supervision of the court
Compulsory winding up may happen for ‘just and
equitable’ reasons also.
The just and equitable grounds can be like loss of
substratum , where there is dead lock in the management,
etc
Voluntary winding up:(secs.484 to 483)
( Members voluntary winding up and creditors
voluntary winding up)
• Voluntary winding up subject to the supervision of the
court.

56. Winding up procedure
A petition for winding up has to be filed by the concerned
person to the prescribed authority
Liquidator to be appointed to safeguard the property of
the company
Then the court will hear the matter and pass necessary
orders. It can dismiss the petition or pass an order of
winding up

57. Dissolution of the company
When the company ceases to exist as a corporate entity for
all practical purposes it is said to have been dissolved.
Dissolution has to be declared by the court.
It will not be extinct and will be kept under suspension for
2 Years.
The order has to be forwarded by the liquidator to the
Registrar of the Companies within 30 days from the date of
the order of dissolution.

58. Balaji
Bharath
BiBy
Chetan
Praveen
ramya