Description
The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.
Joint stock Company
1.
2. 3. 4. 5. 6. 7. 8. 9.
-A form of business organization. -Voluntary association of min. 07 persons. -Formed for certain Common Goal. -Registered under Common Seal - Having Separate Legal Entity -With Capital by shares from the public - With Limited liabilities - Creation by Law as an Artificial Person - Having Perpetual Existence
Definitions of company
? Definitions : ? As per clause ii, Sec 03 (I) (i) of Company Act 1956, & as per
Lord Justice Haney the company means : ? “A company is an incorporated association, which is an artificial person, created by law, having separate legal entity , with legal perpetual existence and registered under common seal”. - -- Company, formed under the rules and regulations of company act 1956 is known as “ a Company “. - Lord Lindley has described “the company as an voluntary association of many persons who contribute money or money’s worth to a common stock and employ it in some trade or business, and who shares the profit and loss (as the case may be) arising there from”
- Members required as per company Act : - Sec-12-Private Co Mini – 02 Members, Max-50, Dir -02 - Public limited - Mini -07 Members, No limit, Dir-03
- Sec-11 Banking Co- Mini- 10 Members,
-
-
Dir -03 In other Co case - Mini 20 Max No limit, Dir-03 If members are 10 or more and Not registered – then the company will be treated as “Illegal company” But to the above rule following exceptions are there. a) Stock Exchange - Ref : VV Ruia Vs Dalmia. Held that it is not formed for carrying out any business. b) Non profit org – Charitable , Religious, scientific, Literary, social associations and clubs. (No intention to gain the profit) C) Hindu Undivided family or Joint Hindu family-without registered they earn the money for the family.
Main characteristic of company
? ? ? ? ?
? ? ? ? ?
1. A voluntary association of a persons 2. An incorporate (Integrated ) association. 3. Formed for certain common purpose / common goal. 4. Capital is created by selling the shares to public, who becomes a owner of the company for that much amount, 5. Limited Liability (remains up the amount of shares only) Sec 45 says, If less then requisite member 07 or 02 in case of Pvt. Co, and run the business for 06 months, then the remaining members are held responsible for the debts 6. Separate Legal Entity . (Can sue as a natural person) Ref :Salomon Vs Salomon & Co Ltd- AIR 1877. Lee Vs Lee Air Farming Co Limited 1960 Air 420PC. Macaure Vs Northen Assurance Co Ltd 7. Separate Property- The Guzdar Vs Commissioner of Income tax Bombay (Share holder are not the owner of property of the co.)
Cont…….
? 8. Artificial person created by Law, but not as a citizen of India and can not claim any fundamental right as like a natural person. Ref : Tata E & L Co Ltd Vs State of Bihar 1965 SCJ-605. ? 9. Minimum 07 members mandatory & no restriction on maximum no . ? 10. Registered under common seal. ( Sec 48 -50) ? 11. Transferability of shares,- Sec -82 ? 12. Perpetual legal existence ? 13. Statutory requirement (Registration, goal, seal, product, audit, meeting, and appointment as Memorandum of association and articles of association ? 12.Separation of ownership and management ? 13. Shareholders are the real owner. ? 14. Company may sue /to be sued, in its own name. ? Ref : Rajendra Nath Datta Vs Shaibendra Nath Mukherjee 1982 293 Calcutta. _ As director given on lease with out company’s seal- held as a personal deed and company is not responsible.
Process of Formation of Company
? The whole process of formation of a company may be roughly
divided in to three parts named as : ? A)Promotion by promoters - ( Sec 62 (6), 69, 78 478 & 519) ? -The Members to prepare a prospectus, from the group of persons having professional capacity and legal knowledge, who works as per the instructions of board of directors, which is legally formed. ? Promoters – One who undertakes to form a company with reference to a given project, and to set it going and who takes the necessary steps to accomplish that purpose. Or in other words number of business operations familiar to the commercial world by which company is brought into existence. The relation of trust and confidence requires the promoter to make a full disclosure of all material facts relating to the formation of the company .
Formation process Contd……
? B) Registration of company-( Sec 12, 33)- Application along with requisite documents like – 1. Memorandum of association, (Mini 07 Person to sign) As per the format of ? Regulation of Management- Table A of Schedule 1. as per company act 1956. ? 2. Articles of association, (Mini 07 Person to sign) ) As per the format of Regulation ? of Management- Table A of Schedule 1. as per company act 1956. ? 3. Statutory Declaration of compliance- Must be prepared & certified by the any ? one of the following, saying that the all requisite statutory requirement have legally ? and successfully completed and are correct in best of my knowledge. ? 1. An advocate of HC or SC. ? 2. Attorney General, or Company secretary ? 3. Chartered Accountant full time practicing in India ? 4. Full / whole time Director , MD, Managers who working in the formation ? of the company . ? 4. List of Full / whole time Director , MD, Managers. ( Written undertaking by all for confirmation) ? 5. Appointment of Auditor and his consent of acceptance etc.
Formation process Contd……
? C)Floating and raising of share capital.- Sec 82-
Invitation to public in general for share capital to obtain the sufficient share capital to commence and carry out the business. ? Commencement of Business- Private company need not to. But Public ltd co, is required to obtain the necessary certificate from registrar of the company.
Procedure of Registration of the company.
? A) Mode of forming the Incorporated company. ? Mini 07 persons, & Prospects. Sec -2 (36), 55 – 68, ? B) Registration Memorandum and Articles ? Memorandum of association-(Name, RO, Object, ? Share Capital, Liability, Association clauses . Sec 12 – 54. ? Articles of association.(All internal rules regulation and ? bylaw. Sec 2 (2)
? ? ? ?
Approval Letter by the Registrar. Declaration- All Requisite documents completed Sec-33 List of the directors with their consents. Sec 266 Sanction by Controller of the Share Capital. Sec 82. Challan –Registration amount to be paid. Sec 146 (2) c) Certificate of Incorporation.- Proof of legal Existence,
Classification of companies
? A) On the basis of Liability : ? Company limited by shares ? Company limited by guarantee ? Unlimited Company ? B) On the basis of Mode of Incorporation ? Chartered company(East India co Royal Chartered) ? Statutory company (Created by Central or state ? legislature RBI, LIC, SBI, FCI) ? Registered company. ? C) On the basis of ownership? Private Company ? Public limited company, ? Government company (more then 51% share by Govt) ?
Cont…..
? D) On the basis of Jurisdiction of functioning? National company ? Multinational company (Other then their own ? country ) ? Foreign Company (Amway) ? E) On the basis of Control and Share Holding ? Holding company ? Subsidiary Company ? F) Other types of the company ? One man company ? Association for non-profit /charitable org ? Existing (Before of 1956) company ?
Prospectus
? After obtaining the certificate of incorporation, The
appointment of the directors takes place as per Law. The Various director will elect a person as Chairman of the Board of director, ? A Prospectus, as per 2 (36) means any document described or issued as prospectus and includes notice, circular, advertisement or other documents inviting deposits for the Public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate.
Contents of a Prospectus
? As per sec 56 of Company Act lays down that the matter and reports stated in schedule II. Scheduled II has been revised by Govt. vide its notification dated 03.10.1990. As per that the Schedule II is divided in three Parts : ? FIRST PART : ? A)General Information. ? 1) Name and address of Registered office ? 2) Name of stock exchange(where listed) ? 3) Declaration about refund f the issue if min 90% is not received within 120 day from the date of prospects, ? 4) Declaration about the issue of allotment letters / refund within a period of 10 weeks and interest in case of delay in refund as per the prescribed rate under sec 73. ? 5) Date opening of Issues. ? 6) Date of Closing of Issues. ? 7) Name of the auditors and lead managers. ? 8) Name of the underwriter/ CRISIL/ for debenture & Preference share. B) Capital Structure of the company ? 1) Authorized / Subscribed / paid up
Directors
? Directors: Sec 2(13)
? A) Legal Provision of the Director : ? 1) Minimum three directors. ? 2) Addition to this 03, can be made with by passing of Ordinary General Meeting. In certain cases only Central Govt permission is to be taken. (Sec 259)
? ? ? ?
3) Only Individual can become a director and not any corporate body or group of persons. Sec 258. 4) As per provision of the Memorandum of Association Sec 254. 5) Company General meeting Sec 255, 257, 263, 265. 6) Board of Director Sec 260, 262, 313. 7) Central Govt Sec 408.
?
Directors Contd…
? Appointments of the directors :
? -Appointment of First Director are always use to be as per the Articles of
?
? ?
?
? ?
association list. - Appointment of the Subsequent Directors are always appointed in the every Annual General Meeting, Because all director retires at every Annual General meeting. - At least 2/3 of the total directors are to be retired compulsory in AGM. (Sec 255). - Directors are also appointed by Board of Directors in following cases : a) Appointment of Additional Director- Sec 260 b) Filling of Casual Vacancy of the Director -Sec -262 C) Alternate Director –Sec 313.
Directors Contd...
? C)Powers of the Directors : ? -The power to make call to shareholder for their unpaid calls. ? - The power to Buy back its shares under sec 77A ? - Power to issue the debentures. ? -Power to borrow the money other then the debentures. ? -To invest the funds of the company for the interest of Company. ? -Power to make a Loan. ? - To full fil the causal Vacancies. ? -Sanction the contract on behalf of the company. ? -Recommend a rate of dividend to shareholder.
Directors Contd…
? Duties & Responsibilities of the Directors :
? A) Statutory Duties :
? 1) To file return of Share allotment to register – Sec 75- Within 30 days
? ? ? ? ? ?
after allotment letter, Failure to do so- Rs 500/- fine per day need to be leveled to concerned director 2)Not to issue any irredeemable preference share after 10 years. 3. Disclosure of interest –(Sec 299-300) 4. To disclose the receipt of transfer of property.- Sec 319. 5.To disclose the receipt of compensation from transfer of share. 6. To attend the Board meetings 7.To Convene and hold the General Meeting
Directors Contd…
? B) General Duties : ? 1. Duty of good faith and always in the interest of the company. ? 2. Duties of Care, other will be held responsible for any negligence act,
default misfeasance or breach of trust. ? 3.Duty to attend the Board Meetings. ? Duty not to delegate – must perform all duties personally.
? C) Conduct and convene the SM, AGM, EGM in time as per 1956 act. ? D) To prepare the Profit & Loss, Balance Sheet and Annual Report
in time.
Directors Contd…
? Liabilities of Directors:
? A) Liability to the company: ? - Breach of Fiduciary Duty- for his dishonesty act. ? -Ultra vires act –to work out of limit and authority. ? -Negligence
? - Breach of trust and misconducts
? B) Liability to Third Party : ? ?
?
? ?
- Liability under company act : Regards to -Prospectus, allotment, fraudulent trading, Unlimited liability. -Liability for Breach of Warranty : Within the limit of their power alloted. C) Liability of Breach of statutory duties. D)Liability of Act of Co – Directors. E) Criminal Liability : Filing prospectus-(Sec 44(4), Fail to reply against deposits 58A (5), Mislead or mispresents ( Sec 68), Fraudulent or duplicate false share certificate Sec 84 ©, Fail to produce record Sec 240 ©
Auditors
? Appointment of Auditors:
? - First auditor is appointed with the 30 days of
incorporation by the First board of directors till first AGM. ? - Can be replaced in the first AGM by Special Resolution and subsequently in every AGM. ? - BOD is also authorized to fill the causal vacancies of the auditor of AGM. The post is up to next AGM only. ? (Sec 224). At every time the Register must be updated for such appointment within 30 days in writing.
Auditors Contd…
? Powers of the auditors :
? - Right to free and complete access at all times to the
books of accounts and vouchers of the company ? - Right to require from the officers of the company such information and explanations as may be necessary for the performance of his duties as auditors. ? -He is entitled to receive notice of the and attend the AGM, and any query concerned to audit.
Auditors Contd…
? Duties & Obligation (responsibility) of auditor–Sec 227. ? - To confirm that the accounts are being prepared as per the ?
?
?
?
requirement of company act. -Whether the Balance sheet gives a true and fair view of the company at the end of the year as per his best of knowledge or not ? -Whether the all requisite information have been received by him from the company staff or not ? -Whether the all requisite books of accounts are being kept as per the requirement of law or not ? -Whether the Balance sheet and Profit and loss are in agreement with the given annual report. “ Qualified report”
doc_580160125.ppt
The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.
Joint stock Company
1.
2. 3. 4. 5. 6. 7. 8. 9.
-A form of business organization. -Voluntary association of min. 07 persons. -Formed for certain Common Goal. -Registered under Common Seal - Having Separate Legal Entity -With Capital by shares from the public - With Limited liabilities - Creation by Law as an Artificial Person - Having Perpetual Existence
Definitions of company
? Definitions : ? As per clause ii, Sec 03 (I) (i) of Company Act 1956, & as per
Lord Justice Haney the company means : ? “A company is an incorporated association, which is an artificial person, created by law, having separate legal entity , with legal perpetual existence and registered under common seal”. - -- Company, formed under the rules and regulations of company act 1956 is known as “ a Company “. - Lord Lindley has described “the company as an voluntary association of many persons who contribute money or money’s worth to a common stock and employ it in some trade or business, and who shares the profit and loss (as the case may be) arising there from”
- Members required as per company Act : - Sec-12-Private Co Mini – 02 Members, Max-50, Dir -02 - Public limited - Mini -07 Members, No limit, Dir-03
- Sec-11 Banking Co- Mini- 10 Members,
-
-
Dir -03 In other Co case - Mini 20 Max No limit, Dir-03 If members are 10 or more and Not registered – then the company will be treated as “Illegal company” But to the above rule following exceptions are there. a) Stock Exchange - Ref : VV Ruia Vs Dalmia. Held that it is not formed for carrying out any business. b) Non profit org – Charitable , Religious, scientific, Literary, social associations and clubs. (No intention to gain the profit) C) Hindu Undivided family or Joint Hindu family-without registered they earn the money for the family.
Main characteristic of company
? ? ? ? ?
? ? ? ? ?
1. A voluntary association of a persons 2. An incorporate (Integrated ) association. 3. Formed for certain common purpose / common goal. 4. Capital is created by selling the shares to public, who becomes a owner of the company for that much amount, 5. Limited Liability (remains up the amount of shares only) Sec 45 says, If less then requisite member 07 or 02 in case of Pvt. Co, and run the business for 06 months, then the remaining members are held responsible for the debts 6. Separate Legal Entity . (Can sue as a natural person) Ref :Salomon Vs Salomon & Co Ltd- AIR 1877. Lee Vs Lee Air Farming Co Limited 1960 Air 420PC. Macaure Vs Northen Assurance Co Ltd 7. Separate Property- The Guzdar Vs Commissioner of Income tax Bombay (Share holder are not the owner of property of the co.)
Cont…….
? 8. Artificial person created by Law, but not as a citizen of India and can not claim any fundamental right as like a natural person. Ref : Tata E & L Co Ltd Vs State of Bihar 1965 SCJ-605. ? 9. Minimum 07 members mandatory & no restriction on maximum no . ? 10. Registered under common seal. ( Sec 48 -50) ? 11. Transferability of shares,- Sec -82 ? 12. Perpetual legal existence ? 13. Statutory requirement (Registration, goal, seal, product, audit, meeting, and appointment as Memorandum of association and articles of association ? 12.Separation of ownership and management ? 13. Shareholders are the real owner. ? 14. Company may sue /to be sued, in its own name. ? Ref : Rajendra Nath Datta Vs Shaibendra Nath Mukherjee 1982 293 Calcutta. _ As director given on lease with out company’s seal- held as a personal deed and company is not responsible.
Process of Formation of Company
? The whole process of formation of a company may be roughly
divided in to three parts named as : ? A)Promotion by promoters - ( Sec 62 (6), 69, 78 478 & 519) ? -The Members to prepare a prospectus, from the group of persons having professional capacity and legal knowledge, who works as per the instructions of board of directors, which is legally formed. ? Promoters – One who undertakes to form a company with reference to a given project, and to set it going and who takes the necessary steps to accomplish that purpose. Or in other words number of business operations familiar to the commercial world by which company is brought into existence. The relation of trust and confidence requires the promoter to make a full disclosure of all material facts relating to the formation of the company .
Formation process Contd……
? B) Registration of company-( Sec 12, 33)- Application along with requisite documents like – 1. Memorandum of association, (Mini 07 Person to sign) As per the format of ? Regulation of Management- Table A of Schedule 1. as per company act 1956. ? 2. Articles of association, (Mini 07 Person to sign) ) As per the format of Regulation ? of Management- Table A of Schedule 1. as per company act 1956. ? 3. Statutory Declaration of compliance- Must be prepared & certified by the any ? one of the following, saying that the all requisite statutory requirement have legally ? and successfully completed and are correct in best of my knowledge. ? 1. An advocate of HC or SC. ? 2. Attorney General, or Company secretary ? 3. Chartered Accountant full time practicing in India ? 4. Full / whole time Director , MD, Managers who working in the formation ? of the company . ? 4. List of Full / whole time Director , MD, Managers. ( Written undertaking by all for confirmation) ? 5. Appointment of Auditor and his consent of acceptance etc.
Formation process Contd……
? C)Floating and raising of share capital.- Sec 82-
Invitation to public in general for share capital to obtain the sufficient share capital to commence and carry out the business. ? Commencement of Business- Private company need not to. But Public ltd co, is required to obtain the necessary certificate from registrar of the company.
Procedure of Registration of the company.
? A) Mode of forming the Incorporated company. ? Mini 07 persons, & Prospects. Sec -2 (36), 55 – 68, ? B) Registration Memorandum and Articles ? Memorandum of association-(Name, RO, Object, ? Share Capital, Liability, Association clauses . Sec 12 – 54. ? Articles of association.(All internal rules regulation and ? bylaw. Sec 2 (2)
? ? ? ?
Approval Letter by the Registrar. Declaration- All Requisite documents completed Sec-33 List of the directors with their consents. Sec 266 Sanction by Controller of the Share Capital. Sec 82. Challan –Registration amount to be paid. Sec 146 (2) c) Certificate of Incorporation.- Proof of legal Existence,
Classification of companies
? A) On the basis of Liability : ? Company limited by shares ? Company limited by guarantee ? Unlimited Company ? B) On the basis of Mode of Incorporation ? Chartered company(East India co Royal Chartered) ? Statutory company (Created by Central or state ? legislature RBI, LIC, SBI, FCI) ? Registered company. ? C) On the basis of ownership? Private Company ? Public limited company, ? Government company (more then 51% share by Govt) ?
Cont…..
? D) On the basis of Jurisdiction of functioning? National company ? Multinational company (Other then their own ? country ) ? Foreign Company (Amway) ? E) On the basis of Control and Share Holding ? Holding company ? Subsidiary Company ? F) Other types of the company ? One man company ? Association for non-profit /charitable org ? Existing (Before of 1956) company ?
Prospectus
? After obtaining the certificate of incorporation, The
appointment of the directors takes place as per Law. The Various director will elect a person as Chairman of the Board of director, ? A Prospectus, as per 2 (36) means any document described or issued as prospectus and includes notice, circular, advertisement or other documents inviting deposits for the Public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate.
Contents of a Prospectus
? As per sec 56 of Company Act lays down that the matter and reports stated in schedule II. Scheduled II has been revised by Govt. vide its notification dated 03.10.1990. As per that the Schedule II is divided in three Parts : ? FIRST PART : ? A)General Information. ? 1) Name and address of Registered office ? 2) Name of stock exchange(where listed) ? 3) Declaration about refund f the issue if min 90% is not received within 120 day from the date of prospects, ? 4) Declaration about the issue of allotment letters / refund within a period of 10 weeks and interest in case of delay in refund as per the prescribed rate under sec 73. ? 5) Date opening of Issues. ? 6) Date of Closing of Issues. ? 7) Name of the auditors and lead managers. ? 8) Name of the underwriter/ CRISIL/ for debenture & Preference share. B) Capital Structure of the company ? 1) Authorized / Subscribed / paid up
Directors
? Directors: Sec 2(13)
? A) Legal Provision of the Director : ? 1) Minimum three directors. ? 2) Addition to this 03, can be made with by passing of Ordinary General Meeting. In certain cases only Central Govt permission is to be taken. (Sec 259)
? ? ? ?
3) Only Individual can become a director and not any corporate body or group of persons. Sec 258. 4) As per provision of the Memorandum of Association Sec 254. 5) Company General meeting Sec 255, 257, 263, 265. 6) Board of Director Sec 260, 262, 313. 7) Central Govt Sec 408.
?
Directors Contd…
? Appointments of the directors :
? -Appointment of First Director are always use to be as per the Articles of
?
? ?
?
? ?
association list. - Appointment of the Subsequent Directors are always appointed in the every Annual General Meeting, Because all director retires at every Annual General meeting. - At least 2/3 of the total directors are to be retired compulsory in AGM. (Sec 255). - Directors are also appointed by Board of Directors in following cases : a) Appointment of Additional Director- Sec 260 b) Filling of Casual Vacancy of the Director -Sec -262 C) Alternate Director –Sec 313.
Directors Contd...
? C)Powers of the Directors : ? -The power to make call to shareholder for their unpaid calls. ? - The power to Buy back its shares under sec 77A ? - Power to issue the debentures. ? -Power to borrow the money other then the debentures. ? -To invest the funds of the company for the interest of Company. ? -Power to make a Loan. ? - To full fil the causal Vacancies. ? -Sanction the contract on behalf of the company. ? -Recommend a rate of dividend to shareholder.
Directors Contd…
? Duties & Responsibilities of the Directors :
? A) Statutory Duties :
? 1) To file return of Share allotment to register – Sec 75- Within 30 days
? ? ? ? ? ?
after allotment letter, Failure to do so- Rs 500/- fine per day need to be leveled to concerned director 2)Not to issue any irredeemable preference share after 10 years. 3. Disclosure of interest –(Sec 299-300) 4. To disclose the receipt of transfer of property.- Sec 319. 5.To disclose the receipt of compensation from transfer of share. 6. To attend the Board meetings 7.To Convene and hold the General Meeting
Directors Contd…
? B) General Duties : ? 1. Duty of good faith and always in the interest of the company. ? 2. Duties of Care, other will be held responsible for any negligence act,
default misfeasance or breach of trust. ? 3.Duty to attend the Board Meetings. ? Duty not to delegate – must perform all duties personally.
? C) Conduct and convene the SM, AGM, EGM in time as per 1956 act. ? D) To prepare the Profit & Loss, Balance Sheet and Annual Report
in time.
Directors Contd…
? Liabilities of Directors:
? A) Liability to the company: ? - Breach of Fiduciary Duty- for his dishonesty act. ? -Ultra vires act –to work out of limit and authority. ? -Negligence
? - Breach of trust and misconducts
? B) Liability to Third Party : ? ?
?
? ?
- Liability under company act : Regards to -Prospectus, allotment, fraudulent trading, Unlimited liability. -Liability for Breach of Warranty : Within the limit of their power alloted. C) Liability of Breach of statutory duties. D)Liability of Act of Co – Directors. E) Criminal Liability : Filing prospectus-(Sec 44(4), Fail to reply against deposits 58A (5), Mislead or mispresents ( Sec 68), Fraudulent or duplicate false share certificate Sec 84 ©, Fail to produce record Sec 240 ©
Auditors
? Appointment of Auditors:
? - First auditor is appointed with the 30 days of
incorporation by the First board of directors till first AGM. ? - Can be replaced in the first AGM by Special Resolution and subsequently in every AGM. ? - BOD is also authorized to fill the causal vacancies of the auditor of AGM. The post is up to next AGM only. ? (Sec 224). At every time the Register must be updated for such appointment within 30 days in writing.
Auditors Contd…
? Powers of the auditors :
? - Right to free and complete access at all times to the
books of accounts and vouchers of the company ? - Right to require from the officers of the company such information and explanations as may be necessary for the performance of his duties as auditors. ? -He is entitled to receive notice of the and attend the AGM, and any query concerned to audit.
Auditors Contd…
? Duties & Obligation (responsibility) of auditor–Sec 227. ? - To confirm that the accounts are being prepared as per the ?
?
?
?
requirement of company act. -Whether the Balance sheet gives a true and fair view of the company at the end of the year as per his best of knowledge or not ? -Whether the all requisite information have been received by him from the company staff or not ? -Whether the all requisite books of accounts are being kept as per the requirement of law or not ? -Whether the Balance sheet and Profit and loss are in agreement with the given annual report. “ Qualified report”
doc_580160125.ppt