INDIAN COMPANIES ACT, 1956

Submitted By: Sonal Agarwal Monalisa Nayak Harsh Srivastava Surbhi Dhaneshwary Swati Pandit

What is a company?

An association of many persons who, contribute money or moneys worth to a common stock and employ it in some trade or business, and who share the profit and loss arising therefrom.

Companys aCt of 1956

a group of persons associated together for the purpose of carrying on a business, with a view to earn profits. The word Company is an amalgamation of the Latin word Com meaning with or together and Pains meaning bread. a group of persons who have come together or who have contributed money for some common person and who have incorporated themselves into a distinct legal entity in the form of a company for that purpose.

Features of a Company
1. 2. 3. 4. 5. 6. Incorporated Association Separate legal Association Limited Liability Transferability of Shares The company can sue & be sued The company can purchase property & sell property in its own name

Types of Companies Public Ltd. v/s Private Ltd. Listed v/s Unlisted Company Holding v/s Subsidiary Company

Formation of a Company
Promotion Stage Pre-Incorporation Contracts Incorporation Commencement

Promotion Stage

Promotion may be defined as the discovery of business opportunities and the subsequent organization of funds, property and managerial ability into business concerns for the purpose of making profits therefrom

Pre-incorporation Contracts

Pre incorporation contracts are those contracts entered into between different parties on behalf of or for the benefit of the company prior to its incorporation.

Incorporation (Documentation Process)

Type of Company & Availability of Name. Memorandum of Association & Articles of Association Appointment letter of Director & Manager A statement from subscribers A statement from CA or Advocate Issuance of Certificate of Incorporation

Commencement Private Companies can commence the business after third stage
Public companies need certificate of commencement

Certificate of Incorporation
Once all the above documents have been filed and they are found to be in order, the Registrar of Companies will issue Certificate of Incorporation of the Company. This document is the birth certificate of the company and is proof of the existence of the company. Once, this certificate is issued, the company cannot cease its existence unless it is dissolved by order of the Court.

Members
Public Company 7-Unlimited members Minimum number of directors is 3

Private Company 2-50 Members Restricts the right of members to transfer its shares Limits the number of its members to fifty Prohibits an invitation to the public to subscribe to any shares in or the debentures of the company Minimum number of directors is 2

Memorandum of Association

Memorandum of Association of a company is its charter & defines the limitations of the powers of a company. It contains the fundamental condition upon which alone the company is allowed to be incorporated - Lord Cairns

Contents Of Memorandum Of Association Six Clauses

Name Objects Registered office

Liability

Capital

Association or subscription

Articles of Association
. The articles proceed to define the duties, the right and the powers of the governing body as between themselves and the company at large and the mode and form in which the business of the company is to be carried on and the mode and form in which changes in the internal regulations of the company may from time to time be made. - Lord Cairns

Content Of Article of Association

1. The extent to which Table A is applicable 2. Different classes of shares and their rights 3. Procedure of making an issue of share capital and allotment thereof 4. Procedure of issuing share certificates and share warrants 5. Forfeiture of shares and the procedure of their re-issue 6. Procedure for transfer and transmission of shares

Cont.
7. The time lag in between calls on shares conversion of shares into stock 8. Directors, their appointment, remuneration, qualifications, etc. 9. Account and audit 10. Lien of shares 11. Payment of commission on shares and debentures to underwriters 12. Rules for adoption for preliminary contracts if any

..Cont.
13. Re-organization and consolidation of shares capital 14. Alteration of share capital & Buyback of shares 15. Borrowing power of directors 16. General meeting, proxies and polls 17. Voting rights of members 18. Winding up

Prospectus
After the receipt of certificate of incorporation, if the promoters of a public limited company wishes to issue shares to the public, he will issue a document called prospectus. It is an invitation to the public to subscribe to the share capital of the company.

Cont
The companies Act, 1956 defines prospectus as any document described or issued as a prospectus and include any notice, circular, advertisement or other documents inviting deposits from the public or inviting offer from the public for the subscription of shares. It is circulated among the public in printed pamphlets. It gives all necessary information about the company so that the prospective shareholders may fully understand the objectives and the plans of the company.

Objectives
Prospectus is issued with the following broad objectives: It informs the company about the formation of a new company. It serves as a written evidence about the terms and conditions of issue of shares or debentures of a company. It induces the investors to invest in the shares and debentures of the company. It describes the nature, extent and future prospectus of the company. It maintains all authentic records on the issue and make the directors liable for the misstatement in the prospectus.

Content of Prospectus
1. Contents of the Memorandum with the names, addresses and occupations of the signatories of the memorandum and the number and value of shares subscribed by them and their interest in the property and profits of the company. This content is not required if the prospectus is published in newspaper or issued after 2 years from the commencement of business. 2. Description of the business and length of time during which the business of the company has been carried on.

3. Names, addresses and occupation of proposed or existing Chief Executive, directors, secretary and any other Company in which they hold office.
4. Remuneration to Chief Executive and directors.

Cont
5. Minimum subscription (only in the case of first allotment). For allotment of shares minimum subscription must have been received in cash. 6. Date and time of opening and closing of subscription list and the amount payable on application on each share.

7. The amount offered and allotted on each previous allotment, if any, within two preceding years.
8. Substance and particulars of any contract or arrangement in respect of any preferential rights or options given to any person (e.g. option of conversion from debentures to ordinary shares or preferential right in allotment to NIT, non-residents or employees).

Cont..
9. Share or debentures issued within two preceding years otherwise than in cash.
10. Premium on shares within two preceding years.

11. Names of underwriters and the opinion of the directors that the resources of underwriters are sufficient to discharge their obligation 12. Commission on shares or debentures within two preceding years (including underwriting commission) with names, nature, rate etc. 13. Preliminary expenses (not applicable if prospectus is issued after two years of commencement of business).
14. Amount or benefits within two preceding years or intended to be given to any promoter or officer.

Cont..
15. Name and addresses of auditors and legal advisors.
16. Interest of every director of promoter in: the promotion of the company any property acquired within two years or proposed to be acquired.

17. Pending legal proceedings.

THANK YOU