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The articles of association are the rules and regulation of a company framed for the purpose of internal management .the article regulates the manner in which the companys affairs will be managed. While the memorandum lays down the objective and purposes for which the company is formed, the article lay down rules and regulation for the attainment of those objects.

1. 2. 3. 4. 5. 6. The exclusion share capital preliminary agreements allotment of shares lien of shares calls of shares


A companys memorandam of association is of supreme importance. The first steps in the formation of a company are to prepare a memorandam of association because no company can be formed or registered under the companies act without it. it is the charter of the company. it contain fundamental condition upon which along the company is allowed to be incorporated. they are condition introduce for the benefit of the creditors and the outside public as well of the shareholder.

1. name clause 2. registered office clause 3.


Every company shall in each year of the Gregorian calendar hold in addition to any other meeting a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it not more then fifteen month shall claps between the date of one annual general meeting of a company and that of the next.

Every public company and a private company which is a subsidiary of a public company shall have at least their director. 1. Every private company shall have at least two directors. 2. Only a mutual person may be appointed director. 3. Every director should selected by all members.


Any written contract which if made between individual would be by law required to be in writing signed by the parties to be charged therewith may be made on behalf of the company in writing signed by any person acting under its authority ,express or implied.

A prospectus issued by on behalf of a company on in relation to an intended company shall be dated and that date shall be publication of the prospectus. In prospectus include every kind of information about the organization. Companys share establishing profit all include in this prospectus. By prospectus company spared their shares.


On the basis of number of Members Company cab be divided in two (a) private company (b) public company. A private company is accompany which, by its article(a)restrict the right to transfer its share if any, (b)limits the number of its member to fifty, excluding members who are or where in the employment of the company and (c)prohibits any invitation to the public to subscribe for any share in, or debentures of the company. Where two or more person hold one or more shares jointly in the company, they shall be treated as a single member for the purpose of this definition. In a private company without share capital, the article need not contain the provisions for restricting the right of member to transfer shares. The minimum number required to form a private company is to. a private company shall add the word private limited at the end of its name, and it may commence its business immediately after obtaining a certificate of incorporation. but it should be noted here that a public company, after obtaining the certificate of incorporation, has to company with to certain

formalities to obtain a certificate of commencement of business, after which only it is entitled to do so. Private companies are usually family concern, since share is generally held by member of the family. A public company is that which is not a private company .this means that it may invite the general public to subscribed for any share in, or debenture of, the company .however this is not binding on the company . similarly, the limit of a maximum of fifty members as applicable to a private company does not apply to a public company. However, the minimum number of members required to form a public company Is seven at the same time the article need not contain a clause for restricting the right of members to transfer the share .these are freely transferable. it should be noted that a public company must add the word limited at the end of its name.


Nature of capital In simple words the term capital denotes a particular amount of money with which a business started. In case of company, the term share capital refers to the amount of money raised by the issue of shares. Under the companies Act, the capital of a company refers to the followings: 01.Nominal or registered capital-Thus is the maximum amount which a company is authorized to raise by issue of shares and upon which it pays the stamp duty and registration fee. 02.Issued Capital-Such part of the registered capital that is offered to the public for subscription is called the issued capital of the company. 03.Called up capital-Companies do not generally call the full amount of shares at once, only such amount as they need being called called up capital therefore refers to that part of issued capital whish has been called up. 04.Subscribed capital-This refers to that part of the companys issued capital which has been take up or subscribed by the public. 05.Paid up capital-This is amount that has actually been paid up by shareholders or which is credited as paid up on the shares. 06.Reserve capital-Under section 99m a limited company may ,by a special resolution, determine that any portion of its share capital which has not been already called up shall not be capable of being called up except in the event and for the purpose of the company being wound up. Such uncalled capital is known as reserve capital. Definition of share-

The capital of a company is divided into small and each part is known as a share. Share means share in capital of the company and includes stock, except when a distinction between stock and share is expressed or implied. The shares of any members in a company are movable property and they can be transferred in the manner provider in the articles of the company. The term goods as define under section 2(7) of the sale of goods Act includes shares also. But it is important to note that shares are not ordinary but a peculiar kind of movable property or goods.

Members and Shareholders The term shareholder refers to a person who holds share in a company, while the member refers to a person whose name appears on the register of members. Members without being shareholders 1.In the case of companies limited by guarantee or unlimited companies, a member may not be shareholders because such companies may not have share capital 2.A deceased member continues to be member so long as his name is one the register of members, but he cant be termed a shareholder of the company. Shareholders without being members 1.A person who holds warrant is a shareholders but not a members because his name does not appear on the register of members after issue of a share warrant. 2.Similarly , a transferee or legal representative of a deceased or insolvent members is not a member until he applies for registration as one and his name is entered in the register of the members although he is shareholder even without being placed on the registered of members. Model of acquiring membershipA person becomes a member of a company in the following ways: 01. By subscribing to the memorandum. 02. By agreeing to purchase qualification shares.

03. By application and allotment. 04. By transfer. 05. By transmission of shares. 06. By estoppel.

Who can be members? The ACT does not lay down any qualification for persons who can become members of a company. But since membership involves an agreement between the member and the company. The membership rights of some special categories of persons are discussed below: 01. Minor 02. Partnership firms 03. Foreigners 04. Insolvents 05. Companies 06. Hindu undivided families 07. Married women 08. Trustees 09. Registered societies 10. Persons taking shares in fictitious name 11. Joint holders Termination of membership A person may cease to be a member of a company in one of the following ways: 01. By transfer of his shares and the registration of the transferee on the companys register of members. 02. By a valid surrender of shares to the company. 03. By all the shares being allotted to others by the company , if he is a subscriber of the memorandum. 04. By redemption of redeemable preference shares. 05. By sale of shares in execution of a decree of court and the purchaser being registered as a members.

06.By death of the shareholder when his shares are registered in the name of his legal representative. 07.On the winding up of the company. In to shares certificates into share warrants in case of fully paid shares.

Rights of members The members of a company enjoy various rights in relation to the company. Some of the more important rights are stated below: 01.He has a right to have the certificate of shares held by him within three months of the allotment. 02. Has a right to apply to the company law board for rectification of the register of members. 03.He has the right to apply the court to have any variation or abrogation to his rights set aside by the court. 04.He is entitled to receive a copy of the statutory report. 05. He is entitled to receive a copies of the annual report of directors annual accounts and authors report. 06.He has a right to demand poll. 07.He is entitled to inspect and obtain copies of minutes of proceeding of general meetings. 08.He has right to apply to the company law board for investigation of the affairs of the company. 09.He has the right to remove a director before the expiry of the term of his office. 10.He has right to participate in the surplus assts of the company if any, on its winding up.