32293757 indian compny law
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The Companies Act, 1956 The Companies Act, 1956
Why study company law ?
Most popular form of business organisation.
Why«««.? It provides an organisational framework
it is a means to an end
A company is a person in Income-tax.More than 60% of income-tax revenue
comes from corporate assessees
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Non-corporate form of business enterprises-
Sole proprietorship Joint Hindu Family (HUF)
Partnership
Corporate Form of business enterprises ±
Co-operative organisation ± Can be
converted into a Producer company. Company
Limited Liability Partnership (LLP)
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MEANING OF A COMPANY
Separate
Legal Entity
Transferable
Shares
Limited
Liability
Separate
Property
Perpetual
Succession
Common
Seal
REGISTERED OR INCORPORATED UNDER
THE COMPANIES ACT WHERE BY IT AQUIRES
CERTAIN ATTRIBUTES
FOR SOME COMMON PURPOSE VIZ.
BUSINESS, CHARITY, RESEARCH ETC.
A COMPANYI
S ANASSOCIATION OF PERSONS
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By a company is meant an association of many
personswho contribute money or money¶s worth to acommon stock and
employ it in some trade or business, and
who share the profit and loss (as the case maybe) arising there from.
The common stock so contributed is denoted inmoney and is the capital of the company.
The persons who contribute it, or to whom it
belongs, are members. The proportion of capital to which each
member is entitled is his share.
The shares are always transferable althoughthe right to transfer is often more or less
restricted. (Lord Justice Lindley)
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On the basis of itscharacteristics, acompany can bedefined as
³ an incorporated association, which isan artificial personcreated by law, having a separate entity , with
a perpetual successionand a common seal ´.(Haney)
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Characteristic Features
of a Company
S eparate Legal entity
S olomon v S olomon &Co.Ltd.
Limited liability of members
Perpetual S uccession
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S eparation of ownership frommanagement
Transferable shares
S eparate Property
Common S eal
Capacity to sue and being sued
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Lifting the corporate veil
Fictional veil between the company and its members.
Lifting the veil means disregarding the corporate
entity and paying regard to the realities behind the
legal form When entity relies on its corporate personality as
a shield to cover its wrongdoings
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S tatutory recognition of lifting of
corporate veil
Under Statutory Provisions
1. R eduction of membership below the statutory
minimum (sec. 45)
2.
Misrepresentations in prospectus (sec.6
2 &63
)
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3. Failure to return application money (sec. 69)
4. Misdescription of name (sec. 147)5. Piercing the veil in holding and subsidiary
company relationships
6. Company under investigation
7. Fraud during winding up
8. For ultra vires Act
9. For violations of the provisions of other
statues
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UNDER J UDI C I AL DE C ISIONS
1. Lifting corporate veil in tax matters.
2. Lifting corporate veil where company
is used for evasion of personal and
statutory obligation.
3. Lifting corporate veil for
determination of the enemy character
of the company.
4. Lifting corporate veil in associated
companies.
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5. Lifting corporate veil where company
is used to avoid welfare legislation.
6. Lifting corporate veil where body
corporate is used to commit fraud or
improper conduct.
7. Lifting corporate veil for determining
technical competence of the company.
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DIFFERENCE BETWEEN
COMPANY & BODY CORPORATE
Is Company a Citizen?
Is a Company a property of the
shareholders?
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Body Corporate is wider than the term
company
It has three distinct attributes:
Separate legal personality
Perpetual succession
Common seal
Includes foreign company, PFI, N.Bank, AOP
declared as a BC by CG. e.g ONGC
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Distinction between Company and
Corporation Generally speaking, an association of persons
incorporated and clothed with legal personality separate from the persons
constituting it is known as corporation.
As per Section 2 (7) of the Companies Act theword corporation is synonymous with bodycorporate.Every company is a body corporate but every body corporate is not a company.
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Disadvantages of Corporate form
1. Formalities and expenses ± to form a company
with the authorized capital of ten lakhs registration fees
is Rs. 27,200.2. Corporate Disclosures
3. Separation of control from ownership.
4. Greater social responsibility.5. Greater tax burden; MAT, DDT etc.
6. Detailed winding up procedure
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K INDS O F C O MPANIES
A. The Companies not covered by the
Companies Act, 1956.
B. The Companies covered by the
Companies Act, 1956.
Companies not covered by the
Companies Act
i) S tatutory companies
ii) Chartered Companies
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Companies covered by the Companies Act
a) Private Company - S ec 3 (1) (iii)
b) Public Company - S ec 3(1)(iv)
These companies may be:
i) Companies with liability limited by shares.
ii) Companies with liability limited by guarantee.
iii) Companies with unlimited liabilities
(Unlimited Companies).
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COMPANIES
PUBLIC PRIVATE
COVERED BY THE
COMP ANIES ACT
STATUTORY CHARTERED
NOT COVERED BY
THE COMP ANIES ACT
OTHER COMP ANIES
1. Companies not for profit2. Government Companies, 3. Foreign Companies
4. Holding and Subsidiary Companies
THESE COMP ANIES MAY BE
1. Companies Limited by Shares2. Companies Limited by Guarantee
3. Unlimited Companies
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From the point of view of liability, public and
private companies may be organized as
I. Companies not for profitii. Government. companies
iii. Foreign companies
iv. Holding and subsidiary companies
Advantages and Privileges of Private
Companies
i) Formationii) Business
iii) Meetings
iv) Board of Directors
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Not allowed from
persons other than
its members, directors
or their relatives
FEATURES OF PRIVATE COMPANIES
Minimum2
Maximum 50
1. Number of
Members
Restricted
2. Transfer of
Shares
No public Offer
for Shares or
Debentures
3. Invitation
for Public
Subscription
4. Invitation or
Acceptance of
Deposits
A PRIVATE COMPANY
Means a Company which has a minimum paid-up
Capital of Rs. 1.00 lac
AND
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FEATURES OF PUBLIC COMPANIES
which is not aa private
company
which has apaid-up
capital ofRs. 5 lac
which is apvt company
& subsidiary ofa public company
Is formed by at least
Seven Persons
and
A PUBLIC COMPANYmeans a company which
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Distinction of a Private Company and a Public
Limited Company Number of Members
Number of Directors
Transfer of Shares
Public Subscription
Commencement of business
Allotment of Shares
Statutory Meeting
Managerial Remuneration
Index of members
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Other Companies
a. Government company [Sec 617]
b. Foreign Companies [Sec 591]
c. Holding and subsidiary Companies [Sec. 4]
d. Companies not for profit (or Association
not for profit) [Sec25]
e. Public financial institutions
f. Investment company
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ILLEGAL ASSOCIATION [SEC 11] An association or partnership is an illegal association if all
the following conditions are satisfied :
(a)The number of persons carrying on business exceeds
20 (10 persons in case of banking business).
(b) It is formed for the purpose of earning profits.
(c)It is not registered under the Companies Act or formed
under any other Indian law (e.g. Cooperative Societies Act
,Trust Act).
(d)It is not a Joint Hindu Family (i.e., an HUF is not an
illegal association even if he number of members exceed
20 or 10, as the case may be).
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ILLEGAL ASSOCIATION [SEC 11]
EXCEPTIONS
Associations µnot for profit-making¶
Joint Hindu Family
Effects of an illegal association ±Members personally liable and punishable with fine upto
Rs. 10,000.
An illegal association is liable to be taxed.
( KS Chattiar vs ITO 1957, ITR 457)
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Meaning of O fficer who is in default S ec 5
Conversion of private company into a Public
company
1. Conversion by default [ S ec. 43]
2. Conversion by operation of law
3. Conversion by choice [ S ec. 44 ]
Conversion of a public company into a Privatecompany
Defunct Company
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ADMINISTRATION OF COMPANIES
ACT - I
REGISTR AR OF COMP ANIES
REGIONAL DIRECTOR
CENTR AL GOVERNMENT
(Ministry of Company Affairs)
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National Company Law Tribunal
National Company Law
Appellate Tribunal
Supreme Court
JURISDICTION OF COURTS