Unit – 2Company Law

What Do you mean by Company??&

What are the Characteristics of the Company??

Assignment-2

Q.1 Write Short Notes:

1. Public Company

2. Private Company

3. Foreign Company

4. Government Company

Q.2 Conversion of Private Company into Public Company

– Incorporation/Registration

– Basic Information

– Pros & Cons

Types of Companies

STATUTORY COMPANIES REGISTERED COMPANIES

Other Consideration

Foreign

One-man/Family

Licensed

Deemed

Public

By Control

Holding

Subsidiary

Govt.

Number Of

Members

Private

Public

LIABILITY

Limited By Share

Limited by

Gaurantee

Unlimited

Liability

CHARTERERD COMPANIES

CHARTERED COMPANIES In the 17th and 18th centuries, chartered companies

could be established under a special Royal charter issued by the king. These are incorporated under a special charter by a monarch.

Example:The East India Company and

The Bank of England of chartered companies incorporated in England. The charter defined their powers and area of operation.

REGISTERED COMPANIES The Company formed/incorporated under the

Company’s Act 1956 or any other Company’s Act passed earlier is called Registered Company.

Such co. came into existences only when they are registered under the Act and a certificate of incorporation has been issued by the registrar.

Every co. registered under the Act has to prepare a memorandum.

Registered co. may further divided into 4 sub category.

Cont.

1. Classification of companies by liability of members– Companies limited by shares– Companies limited by guarantee

• not requiring large-scale capital• non-trading companies are formed with a

guarantee capital• These types of companies are formed for the

promotion of art, science, culture and sports etc• Company’s purpose • Such companies may be registered with or without

a share capital.– Unlimited liability companies

Cont.

2. Classification of companies by number of members

− Private company− As per Section 3 of the Act. “ Private Company ” means a

Company which, by its articles…

I. Restricts the right of transfer of its share,

II. Limits the number of its members between 2 to 50 and

III. Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

Cont.

− Public company

• A “ Public Company ” means a company , which is not a Private company.

I. The shares of company’s members are fully transferable.

II. The minimum number of members required in public company is seven (Maximum, no limit) .

III. Company can invite the general public for the subscription of its shares and debentures

Cont.

3. Classification of companies by control– Government company

• Either central or state government held 51 % or more than 51 % share of any company, it is known as a Government Company. A company subsidiary of a government company is also a government company.

– Holding company & Subsidiary company

Cont

4. Classification of companies by other consideration :

Foreign company

One-man company

Licensed company

Deemed Public company

Conversion of Private Company into a Public Company

• Conversion by default• Conversion by choice• Conversion by operation of law

Conversion by defaultStipulates that the Articles of a private company shall

provide for four restrictions:-• Restrictions on transfer of shares;

• Restrictions on invitation to public to subscribe to the shares or debentures of the company;

• Restrictions on the maximum number of members which should not exceed 50 excluding members who are employees or ex-employees of the company; and

• Prohibition on any invitation or acceptance of deposits from persons other than its members, directors or their relatives.

Conversion by Choice/Volition

• It shall pass a sp. Resolution. To alter its articles so as to eliminate the provisions relating to a pvt. Co.

• Within 30 days, prospectus or a statement in lieu of a prospectus together with a copy of special resolution and a copy of special resolution and a copy of altered articles should be filed with the registrar.

• It shall increase the no. of members to at least 7 if it is less than 7. and also increase the no. of directors to 3.

• The co. shall have to increase its paid-up capital to at least rs 5 lakh.

• It shall delete the word “PRIVATE” from its name.• The company shall cease to be a private company

from the date of the alteration.

Conversion by operation of law

• There are 4 circumstances mentioned, which would force a pvt co. to become a public co.

1. Where 25% more its paid-up share capital is held by 1 or more bodies corporate or public co.

2. Where the average annual turnover is more than 25 crores for 3 consecutive financial years.

3. Where a pvt. Co. holds out more than 25% of the paid- up share capital of a public co.

4. Where the pvt. Co. accepts by invitation or renew deposits from the public, other than from its members or directors and their relatives, than the pvt. Co. will become a public co., the day it accepts the deposits.

Incorporation of Company

• Company Incorporation procedure is divided into 3 parts

I. Promotion

II. Incorporation of company

III. Certificate of Company

Promotion

• Begins with potential business idea.

• Certain feasibility test/studies are conducted to determine the idea can be profitably exploited.

• In case the test results in favorable results, promoters may decide to form the co.

• The person who conceive the business idea, decide to form a co. take necessary steps for the same, and assume associated risks, are called promoters.

Incorporation of Company• Minimum paid-up capital

• Number of members

• Every directors of a company is required to obtain a unique identification number called DIN from Ministry of Corporate affairs.

• Ministry of Corporate Affairs has launched an e-governance project in the year 2006. with the implementation of this project e-filing of all the documents with the documents with the registrar of companies has been made mandatory using digital signature.

Step – 1 Name approval

• Submission of application for name availability.

• Online form submission i.e form no. 1A to RoC to ascertain the availability of the name along with filing fee of 500.

• The application should mention at least 4 names up to 6.

• Once the promoter gets name approved from the RoC, it will remain valid for the period of 6o days, however they can apply for the revalidation of name for further 30 days on payment of rs. 250 as filling fee.

Step -2 Memorandum & Articles of Association• Drafting of MoA and AoA of the co.• Stamping and dating of MoA & AoA.• The MoA and AoA should be stamped as per indian

stamp act and at the notified rate as per provisions of stamp duty rates of that state.

• The MoA and AoA should be subscibed by at least 2 persons in case of pvt. Ltd. Co. and 3 in case of public ltd co.

• Each subcriber should take atleast 1 share and will wite opposite to his name the number of shares he takes.

• All the personal details should be given with his sign. But in the presence of 1 witness.

Step 3 – Incorporation Forms

• Form – 1 for declaration of compliance the act.

• Form -18 for situation of the registered office of the company

• Form – 32 for particulars of directors

Step - 4 Certificate of Incorporation

• The RoC shall verify the documents and suggest modifications wherever required.

• If any then it will be e-filed again.

• Thereafter, Registrar on being satisfied that all the requirements for the registration of the co. as laid down under the act and have been duly complied.

• Then he will certify under his hand that Company is incorporated and issue a certificate of incorporation to the Company.