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

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

,

“Memorandum means memorandum of association of the a company originally formed or as altered from 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.

NAME CLAUSE

Every company must have a name of its own. The name gives the company a personal existence. The

promoters who select the name of the company, are required to take name is not an undesirable one.

The name and emblems of UNO, WHO, Indian National Flag, the official seal and embled of central

and State Government or the name and pictorial representation of political leaders have been

prohibited.

Further in case of public company with limited liability must add the word ‘Limited’ at the end of its

name, and the private company the word ‘private Limited’ must be added at the end.

[Act 2013: In case of one person company, the same should be includes within bracket. Example: Rahul Dravid (One Person Company ).

Also under S.4(4) & 4(5) a newly incorporate provision to apply to reserve a name for a proposed

company which has to be in corporate within six month.]

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 authorized capital ( ( Rupees)

1 Corporation 5 Crores

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

REGISTERED OFFICE CLAUSE (SITUATION CLAUSE)

As the name indicates it describes the different situations. This clauses a company must have a

registered office at which all the communication and noticed are to be addressed. The memorandum

will only state the name of the province where office is situated.

Every company must have a registered office. At the time of registration, the memorandum must

contain the name of the state, in which the registered office of the company shall be situated.

However, the company shall, from the date on which it commences its business or within thirty days

of incorporation, whichever is earlier, have a registered office. The registrar shall be intimated within

30 days of incorporation.

[Act 2014, S.12:The Registrar to be intimated with 15 days of incorporation. Failing to apply

for verification will invoke penalty on the company and every offices who is responsible of

Rs.1,000 for every day of default but not exceeding Rs.1,00,000.]

OBJECT CLAUSE

This is the most important clause in the memorandum. It clearly defines the sphere of the company’s activities.

The object clause was divided into

This clause cannot be changed without the approval of Central government and shareholder.

LIABILITY CLAUSE

This clause states, the nature of liability of the member. In case of a company in with

limited liability, it must state that the liability of members is limited whether it is by

shares or by guarantee. In the absence of the causes in the memorandum means, that the

liability of its members is unlimited

CAPITAL CLAUSE

This clause is required to specify the amount of share capital with which the company

proposes to be registered and secondly the division of that capital into shares of a fixed

amount.

With the companies (Amendment) Act,2000, the Minimum paid up capital of a public

company must be rupees five lakhs or more and for a private company rupees one lakhs

or more.

ASSOCIATION CLAUSE (SUBSCRIPTION CLAUSE)

This clause contain a statement by the subscribers that they are eager of forming

themselves into company and agree to have a number of shares written against their

respective names. Anonymous

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.

An act ultra vires the powers of Directors but not ultra vires the company can be ratified by the shareholders.

Similarly and act ultra vires the Articles of the company but within the powers of the Memorandum can be ratified by altering the articles.

Essentially, an act ultra vires the company is void and cannot be ratified.

Any act ultra vires but intra vires the Memorandum can be ratified, as such an act is irregular.

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.

is issued by a public company, where the

company doesn’t invite public subscription.

DEFINITION

“Prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of of a boady corporate.”

An “abridged prospectus” means a memorandum containing such salient salient features of a prospectus as may be prescribed [Sect. 2(1)].

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 THE PROSPECTUS

The public, who are investing their money in the public company, comes to know of the company only by the prospectus.

The golden rule as regards, the prospectus was laid down in New Brunswick & Canada Rly.& Land Co.v/s Mugeridge (1860) 3 L.t.651- “ Nothing should be stated as fact, which is not so, and no fact should be omitted the existence of which might in any degree affect the nature quality of principle and advantage which the prospectus holds out as an inducement to take shares”

CONTINUE….

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

CIVIL LIABILITY Whenever a person subscribes to the shares or debentures of a company on

the basic of untrue statements in the prospectus, has the right of action both against persons responsible for the issue of such Mis-statements as well as against the company.

Example: The directors of a Tramway Company Issued a prospectus stating that they had the right to run tram-cars with team power instead of the horse drawn carriages.carriages.

This statements was issued, as their application satisfying the condition required was required was pending before the Board of Trade rejected their application. Peek, a a shareholder sued the directors for damages for fraud. Held, the director were not not liable for fraud, as they honestly believed what they said in the prospectus to be be true. ( Derry v/s Peek 1889 A.C,337)

CRIMINAL LIABILITY

Criminal Liability Against the company is a fine upto Rupees Fifty Thousand.

Where the prospectus contain any untrue statement, every person who authorizes the issue of

the prospectus is punishable with

1) Imprisonment Up to 2 year;

2) Fine Upto rupees 50000; or Both

He not able to be liable is he proves either, that

(a) The Statement was immaterial; or

(b) He had reasonable grounds to believe and did up to the time of the issue of the allotment

believe to be true.

STATEMENT IN LIEU OF A PROSPECTUS

A public limited company,

(1) Which has not issued a prospectus, or

(2) Which has issued a prospectus, but has not proceeded to allot any of the shares, offered to the public for subscription, is required to deliver to the Registrar a “Statements in lieu of Prospectus” for registration, at least three days before the allotment of shares or debentures.

PUBLIC DEPOSITS

Deposit means any deposits of money with the company and includes any amount borrowed by a company, but shall not include such categories or amount as may be prescribed in consultation with the RBI.

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 name is entered in its Register of Members;

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

ACQUISITION OF MEMBER

How is membership acquired? (In any of the following ways)

By subscribing to the MoA before registration.

By agreeing in writing and name is entered in the register of members.

By subscribing to the shares.

By purchase of shares in his own name and when entered in the register of members.

By succession.

On insolvency of a member where official assignee or receiver is entitled to be member in his place.

By allowing his name to appear in register of members.

By entry as beneficial owner in the records of the depository.

REGISTER OF MEMBERS

Every company must keep a register of members with the following particulars:

i) Name, address & occupation.

ii) Shares held by each member, distinguishing each share by its number, and the amount paid on those shares.

iii) Date at which each member was entered in the register.

iv) Date on which any person cease to be member.

INDEX OF MEMBERS

Every company having more than 50 members shall keep an index in the form of a ‘Card-index’ of the names of the members of the company.

The index, shall at all times, be kept at the same place as the register of members.

On payment of a fee of Re. 1 for each inspection, any member may make extracts from any register or acquire a copy of any register.

A company which has a share capital or which has issued debentures may keep in any State or country outside India a branch register of members or debenture holders resident in the State or country.

Every company has to file every year with the Registrar annual returns containing certain particulars. Shall give the particulars as on the date of holding the annual general meeting.

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.

LIABILITIES & DUTIES OF MEMBER

To pay calls on the shares whenever demanded by the company.

To pay the full nominal value of the shares held by him in case of a company limited by shares.

To pay all the debts of the company, in case of a company with unlimited liability.

All moneys payable by any member to the company under the Memorandum or Articles shall be a debt due from him to the company [Sec. 36(2)]

THANK YOU