Companies act 1956
By Akash Saxena
Companies Act 1956 INTRODUCTION:: INTRODUCTION
This la This law w w will wil illl rep il repre resen sentt the the ba basi sic c le lega legal leg gal all pro provis provisions vision ions s govern gov governing erning ing a co comp company. mpan any y. Ev Ever Every ery y corpor corporate ate execu executive tive needs need ne eds s to have knowledge of of basic provisions of of company law law.. NING NIN NG MEANI
OF OF COMPANY; NY;
The w The word wo orrd d co comp com ompa mpan pany any ny y ha has has n no o st str strict ric ictl ictly tly ly y te tech techni tec chni hnical nica call or or llegal egal mean me meaning anin ing. g..
It
implies association of of perso persons ns for for some object object..
This
act runs into 658 sections and 15 schedules schedules..
DEFINITION OF
COMP ANY
1.
Section 3 Section 3(((1 1 1)) of of the Companies Companie Com panies s Act Act 1956 Act 1956 195 6 merely states states that that th at ³ a company means a company forms and registered under under this act act.
2
As As def define define def ined ined dd in Sec Sectio tion n 3 3(((1 1 1)(ii) )(ii) lays lays dow down down n ³ an exis existin existing ting g comp company any means a com means compan company pany y formed forme for med d and regis registere tered d under under the compa companies nies act.. act
3
A Acc Accor ccoordin rdding ingg to to Pr Prof Prof Pro of f Haney: Haney Han ey: ³ A A co compa compa co mpany mpany ny ny is an art artific artificial artif ificial icial ial pers person on created by law, having separate entity, with perpetual perpetual succession and common seal´ seal´..
By Akash Saxena
Characteristics of company 1.
Incorporated Association. Association.
2.
Artificial Artificial Legal Person Person..
3.
Separate Legal Entity Entity..
4.
Perpetual Succession Succession.. It does not die & life is not dependant dependant on its members members..
5.
Limited Liability Liability..
6.
Common Seal Seal..
7.
Separate Property Property..
8.
Capacity to sue and being sued sued..
By Akash Saxena
Incorporation
of Company
Stages of Incorporation: The complete compl co mplete ete pro proces process cess s of of formation of of a company may be divided into four four stage stages stages: s: 1.
Promotion.. Promotion
2.
Registration/Incorporation.. Registration/Incorporation
3.
Floatation/ Raising of of Capital Capital..
4.
Commencement of of Busines Business Business. s.
By Akash Saxena
Promotion 1.
It means preliminary steps taken for for the purpose purpose of of registration registration..
2.
Gerstenberg has defined the term promotion as ³ the discovery of business opportunities and the organization of of fund, property and managerial ability for for the purpose of of making profit profits profits. s.
3
P Person erson who perform the task of of promot promotion ion are called promoters promoters..
4
P Promotion romotion means a number number of of business operations familiar familiar to the commerc comme commercial rcial ial wor world ld by which a company is broug brought ht into exixtence exixtence..
By Akash Saxena
Registration The promoter promoter of of the company will submit submit the following following documents with th with the e re regist registr reg gistra istrar rar arr of of tthe he Com Compan panies ies for for tthe he reg regist istrat ration ion of of tthe he company:: company
of associa association tion Memorandum of Articles Articles of of Association Association Associa tion List o List off pe pers person per rson sons ons s who who ha have hav ve e cons consen conse con sente ented nted ted d to to act a as s dir direct ectors ors of of tthe he company.. company
A A statutory declaration of of complian compliance compliance. ce.
Any Any agreement with the relevant persons of of the proposed company company..
By Akash Saxena
Cond.
The registrar registrar of of companies companies is to allot a Corporate Corporate Identity Number (CIN) to each company registered on or or after after Nov 1 1,, 2000 2000..
After After scrutiny of of all th these thes ese e docum documents ents and if if they they are in order, order, the registrar of registrar of compani companies es shall issue a ³ certifi certificate cate of of incorporation´ incorporation´..
This ce certi rtific ficate ate of of inc incorp incorpora incor orpora poration oratio tion n given giv gi ven by by tthe he re regis gistra trar trarr r sha shall shal sh alllll be conclusive evidence evidence that all the requirements of of the Act Act have been compiled with with..
By Akash Saxena
Floatation
A A private company is prohibited prohibited from inviting public to subscribe to its share capital capital..
Therefore, when a private company company is formed, the requisite capital is obtained from friends and relatives by making its own arrangement arrangement..
The company can take any of of the followi following ng steps steps::
Issue a prospectus in case public is to be invited to subscribe to its capita capital capital. l.
Deliver a statement in lieu of Deliver of prospectus where the company has either either not issued a prospectus prospectus..
By Akash Saxena
Commencement of Business
Every pri Every privat private priva vate te e comp company compan com pany any y can co comme commence com mmence mence nce busin business ess immed immediate immedi imm ediat iately ately ely ly on receipt of of certi certificate ficate of of incorporation incorporation..
Wher Wh Where ere e a com compa pany ny has iss issued issu is sued ued ed a pro prospe prospectu pros spectu pectus ctus s it has has tto o sat satisfy isfy the following conditions cond co ndit itio ions ns::
The minimum subscription in cash has been received received..
Every direct director director or or of of th the e co compa mpany ny has has pa paid id in ca cash sh hi his s quali qualificati qualification fication on shares, a proportion proportion payable on application and allotment of of shares offered for for public subscription subscription..
No mo mone ney y is lia liabl ble e to be rep repaid repa re paid aid id to app applic applicants appli licant cants ants s for forr any fo any sha shares shar sh ares res es or debenture debe debentures ntures s which which hav have e bee been n off offere ered d for for pub public lic by rea reason son of of any failure to apply apply..
By Akash Saxena
Memorandum
of Association
For the formation of For of company the first step is to prepare a document called Memorandum of of Association. Association Associa tion.
According Accordin Accor ding g tto o tth the he ac actt me memora memorandu memor morandu andum ndum m mean means means s th the e me memor morand andum um of association of of a company as originally framed or or altered from time to time.. time
It defines the limitati limitation on and powers of of company company..
It conta contains contai con tains ins ns the funda fundamenta mentall cond condition condiition tion upon upon whi which ch the compa company company ny is allowed to be incorporated incorporated..
It has to be printed, printed, divided into paragraphs, numbered numbered and signed by at least 7 persons in the presence of of at least one witness, who will attest the signature signature..
By Akash Saxena
Contents of MO A Contents of MOA: 1.
Name of of the company company..
2.
Registered office. office.
3.
Objects of of company company..
4.
Liability.. Liability
5.
Capital.. Capital
6.
Association Association
By Akash Saxena
Articles of Association Meaning:
It go gove vern rns s th the e ru rule rul ules les es s an and d reg regula ulatio tions ns an and d man manage agemen mentt of of tthe he company.. company
It defines the power powers s of of its officers officers..
They establish a contract between the company and the members members..
By Akash Saxena
Contents of AO A 1.
Differen Diffe Different rentt classes classe cla sses s of of shares and their their rights rights..
2.
Procedure of of making an issue of of share capital capital and allotmen allotment allotment. t.
3.
Procedures of of issuing share certificates and share warrants warrants..
4.
Directors, their their appointment, remuneration, remuneration, qualific qualifications qualifications. ations.
5.
Accounts Accounts and audits audits..
6.
Powers of of direct directors directors. ors.
7.
General meetings meetings..
8.
Voting rights of of members members..
9.
Winding up up..
10.
Dividend and reserves reserves..
By Akash Saxena
Prospectus Definition: n:
Acco According Accord rdin ing g tto o the act ³ pr pros prospe pro ospe spectu pect ctus us s mea means mean me ans ns s an any y do docu document cume ment nt descri des described cribed bed or or is issu sued ed as a pro prospe spectu ctus s and inc includ ludes es any not notice notice, ice,, circulars, advertisement or or other other document document inviting deposits from public or or inviting offers from public for for subscription or or purchase of any shares, debentures, ..´´ Essentials
n: of of definition:
1.
Document
2.
Subscription
3.
Invitation to public
4.
Offer to public 50 or Offer or more persons By Akash Saxena
Necessary Pre
requisites of Prospectus
a)
It must be dated dated..
b)
It must be signed signed.. By direct directors ors
c)
It must be registered registered.. It is issued within 90 days from registration registration..
Contents of of prospectus: 1.
Matters
specified specifie d in Part I of of schedul schedule schedule e II II::
a.
Name and address of of company company,,
b.
Its objects,
c.
Particulars of of directors and auditors,
d.
Details regarding securities being issued issued..
By Akash Saxena
By Akash Saxena
