The Companies Act 1956

By Group D

Members of Group D

Jay

Shefali

Shivam

poonam

Jaskaran

Himanshu

Pranav

Imran

Ravi

Roy

Vignesh

Simarpal

Umair

Introduction

• The Indian companies act, like most of our laws has been farmed on the lines of the common law. In the year 1850, the joint company act was passed. This was first Indian legislation. Following this the Indian companies act,1913 was passed. The act aimed at improvising the earlier law to meet the requirement of the then prevailing world. This act was replaced by the act of 1956

• The major committees set up from time to time for the purpose of revision of theCompanies Act, 1956 were:

• Sachar Committee

• Eradi Committee

• Naresh Chander Committee &

• Dr.j.j. Irani Committee.

Meaning of Memorandum of Association

• It is the document which contains the rules regarding constitution and activities or objects of the company.

• It is a fundamental charter of the company.

• The company is governed by it.

• The company is allowed to work within the framework of it. By it outside world knows the state of affairs.

• It defines the extent and powers of the company.

• If the acts of the company are beyond the limits of the MoA, such acts would be void and ultra vires.

• Directors are personally liable to make good the Company’s loss if company’s money is spent on an unauthorized object.

Definition of Memorandum of Association

• S.2 (28) of the Act 1956 defines Memorandum of Association as,

• “Memorandum means memorandum of association of the a company originally formed or

as altered from time to time in pursuance of any companies law or of this Act.”

CONTENTS OF MoA : Sec 13

THE NAME CLAUSE.

THE REGISTER OFFICE CLAUSE.

THE OBJECT CLAUSE.

THE CAPITAL CLAUSE.

THE LIABILITY CLAUSE.

THE ASSOCIATION CLAUSE.

NOTE : The MoA must be signed by at least seven subscribers in the case of Public Company and two in the case of Private company.

The Department of company Affairs, has held that if the company uses any of the following key

word in the name, it must have minimum authorized capital as stated below:-

Sr.no Key Word Required authorized

capital ( Rupees)

1 Corporation 5 Crores

2 International, Global, Universal, Continental, Inter-continental.

Asia, Asiatic (Being The First Name)

1 Crores

3 If any of the words mentioned in (ii) is used within the name

(with or without brackets)

50 Lakhs

4 Hindustan, India, Bharat being the first word of the name 50 Lakhs

5 If any of the words mentioned in (iv) is used within the name

(with or without brackets)

5 Lakhs

6 Industries/Udyog 1 Crores

7 Enterprises, Products, Business, Manufacturing 10 Lakhs

The Doctrine Of Ultra Vires

• It means ‘beyond powers’. That is, any act done by the company beyond its legal powers and authority.

• Any act done by the company which is neither authorized by its objects nor by the Act, that act is ultra vires the powers and authority of the company.

• Such an act is void and cannot bind the company. And since it is void, it cannot be ratified by shareholders either.

Articles of Association

• Regulations of the company are prescribed by the Articles of Association.

• It can be altered at any time according to the wishes of the members.

• It is subordinate to the MoA and is under full control of the members.

• Members can make their regulations through AoA subject to Companies Act.

• It contains rules & regulations for the internal management of the company subject to provisions of the Companies Act.

PROSPECTUS

Prospectus means any document described or issued as a prospectus inviting

deposits from public or inviting offer from public for the subscription or purchase

of any shares , or debentures of the company.

“CERTIFICATE OF LIEU OF PROSPECTUS” is issued by a public

company, where the company doesn’t invite public subscription.

CONTENT OF PROSPECTUS:

Date of issue of prospectus.

Name and register office of the company.

Consent of Central Govt. for the present issue/compliance with the with the SEBI guidelines.

Voting rights ,dividend ,expenses on issue etc.

Name of the stock exchange.

Punishment for fictitious application.

Refund of issue if 90% min. subscription not received.

Names and addresses of leading managers.

Continue….

Issue of allotment letter or refund within 10 weeks with interest.

Date of opening and closing of issues.

Credit rating from CRISIL (CREDIT RATING INFORMATION SERVICES OF INDIA LIMITED)

Terms of Underwriting & Risk Factors.

Capital Structure of the company

Terms and particulars of the issue.

Restriction on transfer and transmission of shares..

Liability For Mis-Statement In a Prospectus

Civil Liability (Sec.62 & 56)

Against The Company

Rescission of contract Claim For Damages

Against the Promoters, Directors, other Offices

And Expects

Damage Compensation under

section 62 and 56

Criminal Liability (Sec.63)

Against The Company

Fine Up to

Rs.50000

Against the Promoters, Directors, other Offices

(not available against expects)

Imprisonment up to 2 years

Fine Up To

Rs 50000 Both

Liability for Mis-Statement In a Prospectus

Membership of a Company

• Members (Section 41): A company when incorporated is an artificial person. It is a constitution of natural persons called members of a company.

• Who are the members of a company?

(1) Subscribers to the memorandum of a company and entered as members in the Register of Members;

(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its Register of Members;

(3) Every person holding equity share capital and whose name is entered as beneficial owner in the records of the depository.

Rights of a Member/Shareholder

• To receive notices of all general meetings.

• To attend & vote at general meetings, appoint directors & auditors.

• To receive copies of accounts of company.

• Entitled to a copy of report of a statutory meeting.

• To inspect the minutes of proceedings of any general meeting.

• To inspect the register, index of members, debenture holders.

• To transfer his shares.

• Priority to have shares offered if there is increase of capital by the company.

• To receive share certificate.

• To receive dividends in case of preference shares.

• To make an application to the Central Government for ordering investigation into the affairs of the company.

• To apply to CG to convene the AGM when Board of Directors fail to convene the same.

• To present a petition to the Court for winding up of company.

• Entitled to share in the surplus assets, if available, on liquidation.

Thank You