Companies Act for Entrepreneu

8/8/2019 Companies Act for Entrepreneu

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5 DECEMBER 09 www.afterschool.tk 1

What are the characteristics of a

company ?

Common seallegal identity

artificial person

perpetual succession

right to sue and be sued


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What is corporate veil?

A company is different from its members.

There is a veil between company and its

members


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When can the court lift corporate

veil ?When there is a possibility of fraud / tax avoidance /

illegal work / government revenue escape etc.

When company violates rules / law / proceduresWhen company is a sham

when comapany has been formed to avoid one's

contractual liabilities

When company is agent of its shareholders

when company has been created against public interest /

for vested interest


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What are the types of companies

on the basis of liability ?

Limited liability company

unlimited liability company

Limited by guarantee company


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on the basis of control ?

Holding company

subsidiary company


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on the basis of ownership ?

Private company

Public company

government company

foreign company


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on the basis of incorporation ?

Chartered company (which used to work in

pre-independence India having charter fromBritain)

statutory company (created by an act of

parliament)registered company (ordinary company,

registered under companies act)


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What are the privileges of a private company

in comparison to public company ?

They can start with only 2 members (sec 12))

It can allot shares without minimum subscription (Sec. 69)

No need of prospectus / statement in lieu of prospectus(sec.70)

No requirement of rights issue in case of next issue (sec.

81)

No need of certificate of commencement of busienss, it

can start just after incorporation (sec 148)


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What are the privileges of a private company

in comparison to public company ?

It can work with only 2 directors (sec. 252)

No need of statutory meeting and statutoryreport (Sec. 165)

No need to keep index of members (sec 151)

No restriction on managerial remunerationRules regarding directors are less stringent


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When will a private company

convert into a public company ?

By Mistake -

if it gives public invitation for its shares

if its members increase beyond 50

etc.

(sec. 43)

Company law board may pardon the mistake


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When at least 25% of its capital is with public company /

public companies

Average annual turnover over Rs 10 crores

When a private company holds at least 25% shares of a

public company

when a private company accepts public deposit(sec. 43A - in all these cases, it will become deemed

public company)


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By CHOICE

A private company can change its articles and

become public company and file a prospectus

with registrar in 30 days of conversion(read sec. 44)


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How will a public company

convert into a private company ?

It is more difficult1. special resolution

2. permission of govt.

3. in 1 month new copy of articles have to besubmitted


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What is the difference between

private and public company? PRIVATE

Only 2 directors can

start

Cant transfer shares

freely

No prospecus /

statutory meeting

Min 2 max 50

members

PUBLIC

Min. 3 directors can

start

Can transfer shares

freely

prospecus / statutory

meeting essential

Min 7 max no

limit on members


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What are the documents which

promotors prepare before startinga company ?1 memorandum of association

2 articles of association3. prospectus

4 preliminary contracts

5. underwriting contracts

6 contracts with lead banker / lead manager /

manager to issue


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How to pick up name of the

company ?

Check availability of name

(name should not be similar to existing

company and should not be restricted) (sec. 20)


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How to apply for a Name?

First check out availability of name on the

website :

http://www.mca.gov.in/DCAPortalWeb/dca/co

mpName.do

Submit the filled in Form-1A along with theapplication fee of Rs.500/- at the cash counter

of RoC or send the application and DD by post.


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Hwo to get name approved ?

You can apply for a name in the prescribed

form (Form-1A) along with the application fees(Rs.500/-) at the RoC. You can give a

maximum of 4(four) names in order of

preference in your name application.RoC=registrar of companies


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What after name is approved?After getting the name approved, prepare the

necessary documents for registration of the

company and file the same at RoC along withthe registration and filing fees. Registration and

filing fees vary depending upon the Authorised

capital. In addition, Memorandum of

Association and Articles of Association and

Form-1 require payment of stamp duty as per

concerned state stamp act.


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What is the validity period of the

Name approved?the approved name is valid for a period of 6months from the date of approval. The

Applicant can renew the name within 6 months

by submitting a fresh Name application (Form-1A) along with the fees of Rs.500/-, by

mentioning that the application is for renewal

of the name already approved. ( Names

inadvertently allowed or which are against the

guidelines, which have subsequently come to

the notice, may be withdrawn by the RoC

before or after incorporation of the company).


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What is the minimum Authorised

Capital for a company?

The minimum authorised capital for Private

Limited Company Rs.1,00,000/-For Public Limited Company Rs.5,00,000/-


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What is the minimum number of

directors required to form acompany?

Minimum no. of directors for Private Limited

Company Two.For Public Limited Company Three.


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subscribers required forregistration of a company?

Minimum no. of subscribers for Private

Limited Company Two.For Public Limited Company Seven.


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What is the minimum Paid-up

Capital at the time of registrationof a company?

The minimum paid up capital for PrivateLimited Company Rs.1,00,000/-

For Public Limited Company Rs.5,00,000/-


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shares to be subscribed at the timeof incorporation?

Minimum subscription for Private Limited

Company Shares worth Rs. One lakh.

Minimum subscription for Public Limited

Company Shares worth Rs. Five Lakhs.


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Authorised capital and Paid-upcapital?

Authorised capital is the capital with which the

company is registered. The company can issue

shares up to the level of Authorised Capital.

Paid up capital means the amount of capitalactually paid by the shareholders in respect of

shares allotted to them.


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Where can the company under the

Companies Act, 1956 beregistered?

The Company can be registered with the

Registrar of Companies of the state under

whose jurisdiction the proposed companys

registered office will be situated


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What are the documents to be

filed with RoC every year?Invariably, the Balance Sheet and Annual

Return have to be filed every year. Other

documents such as, Return of Allotment(Form-2), Change of Registered office (Form-

18), Change among the Directors (Form-32),

Charges (Form-8, 10, 17, 13)etc., have to be

filed within the due date from the events taking

place in the company as per the Companies

Act, 1956


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Can I inspect a companys

documents available with RoCand how?Yes. You can inspect the documents processed

and registered in the companies document file

for a particular company by paying the

Inspection fee of Rs.50/- per company.

You can see them on portal also

Visit : http://www.mca.gov.in/


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an o ta n a copy o a

companys document available in

the records with RoC? If so, whatis the procedure for the same?

Yes. A certified copy of the requesteddocument will be issued on payment of Rs.25/-

per page of document, together with a formal

application and a non-judicial stamp paper of

Rs.10/- for each document.


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a) Unpaid dividend,

b) Unpaid Application Money received by

company for allotment of shares,

c) Unpaid matured deposits under section 58A

of the Companies Act, 1956,

d) Unpaid matured debentures,


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What are the requirements

regarding appointment of directors?

1. obtain the consent (approval) of directors

and submit it to RoC2. Director to submit undertaking (on stamp

paper) that he would buy qualification shares

3. Particulars of first directors / subsequentdirectos appointed should be submitted to RoC

in 30 days of appointment.


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What is the role of directors?

They are employees

they are agent of the company

they are trustees of the company

they are officers of the company


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Directors powers (only through

directors' meeting)

1. make call on shares2. issue debenture

3. borow money

4. invest funds of company5 make loan


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Directors powers (only through

directors' meeting) (only at board

meeting) ?1. to fill vacancy in the board (sec 262)

to sanction contracts in which a director is

interested (sec 297)

to appoint MD / MD when the person isalready an MD in another company (sec. 316,

386)

to invest in companies of the same group (sec.372)

directors shareholding notice (sec 308)

directors' interest notice (sec 299)


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What are the statutory duties of a

director?

1. to file return of allotment in 30 daysto disclose interest (sec. 299, 300)

to disclose receipt from transferee of property /

compensation from transferee of shareto not to issue irredeemable preference share


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What are general duties of

directors?

Not to delegate except as per articles /companies act

not to make secret profit

to take care of the companyto attend board meetings regularly


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What are disqualifications for

director? (sec. 274)

Unsound mind

undischarged insolvent

convicted for moral turpitude

calls in arrears for more than 6 month

disqualified by court under sec. 203 due to

fraud etc.


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How to remove director ?

Ordinary resolution after special notice (14 day

notice) by shareholders (sec. 284)Govt may refer the case to company law board

and remove the director on advise of CLB

(388B to E)Company law board (CLB) when there is

oppression and mis-management (397,398,402)


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Meetings of director ?

4 meetings in a year, at least 1 meeting in 3

months

Notice (sec. 286) 7 day written notice to

every director

quorum = 1/3rd member or 2 (whichever is

higher )

if quorum is not present, the meeting is

adjourned for next week same time.


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What types of meetings are there ?

Directors meeting

creditors meeting

shareholders meeting


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What types of meetings do

shareholders have ?

AGM (annual general meeting)EGM (Extraordinary general meeting) (sec.

169)

Statutory meeting (sec. 165)class meeting


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What is a proper meeting ?

Properly convenedthere must be quorum and chairman

proceedings must be proper

minutes should be prepared


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ordinary resolution and special

resolution ?

Ordinary resolution = simple majority (51%)

(sec. 189(1)

SR = 75% majority (sec. 189(2)


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What are the matters that require

special notice (sec 190)?14 day notice to company is required for :

1. appointment / removal of director

2. appointment / removal of auditor

3. to remove a director before his term expire

4. any other matter which require special notice

as per articles / law

the company will inform shareholders at least 7

days before the meeting


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What is Foss v/s Harbottle case?

It is about prevention of oppression andmismanagement in a company

in this case it was held that majority will take

the decisions and only in exceptional cases,minority can also decide.


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Cases, when minority can also

decide ?1. when ultra vires (beyond the legal powers)

act is done

2 fraud on minority

3. when personal rights of individual members

are infringed

4. where acts requiring special notice andspecial resolutions are done with ordinary

resolutions

5. reconstruction / amalgamation (sec. 394)


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What to do in case of oppression

and mis management ?

Apply to govt for relief / winding up ofcompany

Apply to CLB for relief / winding up of

companyApply to court for winding up of company


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Who can apply ? (sec. 399, 401)At least 100 members

or

1/10th of total members

or

any member holding 1/10 of capital

if there is no share capital :1/5th of total number of members

govt cal also apply / govt can take application

with less number of members also


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What can govt. Do ?

Appoint new directors (sec 408)CLB may ask to change articles and introduce

proportioanal representation

CLB may prevent change in board (sec. 409)


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What are the various methods of

winding up ?

1. winding up by court sec. 4332. voluntary winding up

a. winding up by members

b. winding up by creditors3. winding up under supervision of court


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When will court order for winding

up of a company (sec. 433)

1. no statutory meeting2. no commencement of business

3. membership below 7 (2 for private)

4 inability to pay debt5. just and equitable cause


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What is certificate of

incorporation?

If RoC is satisfied about all the documents that

you have submitted (MoA, AoA, Prospectus,

Statutory declaration, Directors appointment),

the RoC will issue certificate of incorporation

(sec.33)

a private comany can now start business, but a

public company will have to obtain Certificate

for commensement of business.


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What is Certificate for

commensement of business ?

RoC will grant it only if :

1. directors have purchased qualification shares

2. statutory declarations and prospectus /

statement in lieu of prospectus have been

submittted

3 minimum subscription


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What about contract before

certificate of commencement of

business?All contracts between the date of incorporation

and date of certificate of commencement of

business are provisional and will bind the

company only after certificate of

commencement of business.

If a company doesnt start business in 1 year

from date of incorporation, the court may order

for the wound up of the company


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What is doctrine of contructive

notice ?

Every outsider who deals with a company issupposed to know about its MoA and AoA

any person can go to registrar of companies or

the website and read MoA and AoA of anycompany


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What is doctrine of indoor

management ?

All those who deal with a company can assume

that provisions of articles have been followed

by the officers of the company


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What are the exceptions to the

doctrine of indoor management ?

1. if you know about irregularity in the

company

2. if you are careless and it is your negligence

that you didnt notice violation of company

systems and procedures... if with little efforts

you could have discovered that articles are not

implemented properly, you are taking decisions

at your own risk.


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Viewing Company Documents on Portal Rs. 50.00 per

Company

Certified Copy of Company Documents

Certificate of Incorporation Rs. 50.00 per copy

Any other public document Rs. 25.00 per page per

documentTransfer Deeds

Nominal Face value of shares is upto Rs. 5000 Rs. 50.00

per deed

Nominal Face value of shares is more than Rs. 5000 Rs.

100.00 per deed

Efiling Inspection of Company Documents