Ques1_Formation_of_the_company.docx

8/14/2019 Ques1_Formation_of_the_company.docx

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Ques1 Formation of the company

Steps to be taken to incorporate a new company

Select, in order of preference, at least one suitable name up to a maximum of six names,indicative of the main objects of the company.

Ensure that the name does not resemble the name of any other already registeredcompany and also does not violate the provisions of emblems and names (Prevention ofImproper Use Act, 1950) by availing the services of checking name availability on theportal.

Apply to the concerned ROC to ascertain the availability of name in eForm1 A bylogging in to the portal. A fee of Rs. 500/- has to be paid alongside and the digitalsignature of the applicant proposing the company has to be attached in the form. Ifproposed name is not available, the user has apply for a fresh name on the sameapplication.

After the name approval the applicant can apply for registration of the new company byfiling the required forms (that is Form 1, 18 and 32) within 60 days of name approval

Arrange for the drafting of the memorandum and articles of association by the solicitors,vetting of the same by ROC and printing of the same.

Arrange for stamping of the memorandum and articles with the appropriate stamp duty. Get the Memorandum and the Articles signed by at least two subscribers in his/her own

hand, his/her father's name, occupation, address and the number of shares subscribed forand witnessed by at least one person.

Ensure that the Memorandum and Article is dated on a date after the date of stamping. Login to the portal and fill the following forms and attach the mandatory documents

listed in the e-Form

Declaration of compliance - Form-1 Notice of situation of registered office of thecompany - Form-18. Particulars of the Director's, Manager or Secretary - Form-32.

Submit the following reforms after attaching the digital signature pay the requisite filing

and registration fees and send the physical copy of M emorandum and Ar ticle of Association to

theROC

The company is required to file e-Form 1 first and then the company can file all the othere-Forms (18, 32, 37 and 39) simultaneously or separately

After processing of the e-Form is complete and Corporate Identity is generated obtainCertificate of Incorporation from ROC.


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To obtain Commencement of Business Certificate after incorporation of the company the publiccompany has to make following compliance

File a declaration in e-Form 20 and attach the statement in lieu of the prospectus(scheduleIII) OR

File a declaration in e-Form 19 and attach the prospectus (Schedule II) to it.

Obtain the Certificate of Commencement of Business.

Additional steps to be taken for registration of a Part IX Company:

The Part IX Company is required to file e-Form 37 and e-Form 39 apart from filing e-Form 1, 18

and 32.

2 WHAT IS A CONTRACT?

Contract

In the words of Pollock, every agreement and promises enforceable by law is contract.

Section 2(h) of the Indian Contract Act, 1872 states that an agreement enforceable by law is

contract. This definition gives us two ingredientsan agreement and enforceable by law. It can

summarize it as under.

Agreement

An agreement means a promise and a reciprocal set of promises forming consideration for each

otherSection 2(e). This definition gives us three ingredientspromise and a consideration. We

can summarize it as under.

Promise

As per Section 2(b) of the Contract Act, a proposal when accepted becomes a promise.

Proposal

Section 2(a) states that when one person signifies another person his willingness to do or abstain

from doing anything with a view to obtaining the assent of that other to such an act or

abstinence, he is said to make a proposal. A Proposal is also known as an offer.


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Parties to an Agreement/a Contract

Promisor: A person making the proposal (offer) is known as a promisor. He is also known as an

offeror. We can also recognize him as a proposer.

Promisee: A person accepting the proposal (offer) is known as a promisee. He is also known as

an offeree. We can also recognize him as an acceptor.

Enforceability of an Agreement

It means an agreement which creates some legal obligation; if this agreement is not followed by

any party to contract, he can be sued.

ESSENTIAL ELEMENTS OF VALID CONTRACTS

SECTION 10

In order to determine whether an agreement is a contract or not, one has to see whether all the

essentials, as required under the Indian Contract Act, are present in the agreement. The essentials

required to be satisfied for a valid contract are as under.

Offer and Acceptance

There must be an offer and its acceptance. An offer is a starting point for any contract. No valid

contract can come into existence without an offer. The offer is considered as the first step in the

contract. The offer should be accepted to form a valid contract.

Intention to Create Legal Relation

There must be an intention to create a legal relation. In all social, domestic, moral, religious or

political agreements, the usual presumption is that the parties do not intend to create the legal

obligations. However, in business agreements, the usual presumption is that the parties intend to

create the legal obligations.

Example:A invites B to a dinner and B accepts it. If A fails to serve the dinner, B cannot go to

court. The invitation for dinner is a social agreement.

Lawful Consideration

The lawful consideration means something in return. As a contract contains the reciprocal set of

promises, a consideration is necessary. The consideration must be lawful and should have a

commercial value.


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Possibility to Perform

Every agreement contains reciprocal promises. The promises under the contract must be possible

to perform. If the parties have agreed on the contract which contains any promise not possible to

perform in real life, the contract will not be considered as a valid contract.

Example:A agrees to discover treasure by magic for B. The agreement is void because the act in

itself is impossible to be performed from the very beginning.

Legal Formalities

In some cases, the document in which the contract is incorporated has to be stamped. In some

other cases, a contract, besides being a written one, has to be registered. Thus, where there is a

statutory requirement that the contract should either be made in writing or registered, the

required formalities must be complied with.

Therefore, we can say that an agreement will become a contract when it satisfies all theessentials of a valid contract. If any one of the elements of a valid contract is missing, it is treated

as an invalid contract. All the agreements may or may not be a contract but all the contracts are

basically agreements. All agreements are contracts if they are made by the free consent of the

parties competent to contract, for a lawful consideration and with a lawful object, and are not

hereby expressly declared to be void. Nothing herein contained shall affect any law in force in

India and not hereby expressly repealed, by which any contract is required to be made in writing

or in the presence of witnesses, or any law relating to the registration of the document

TYPES OF CONTRACT

On the basis of validity:

1. Valid contract: An agreement which has all the essential elements of a contract is called a

valid contract. A valid contract can be enforced by law.

2. Void contract [Section 2(g)]: A void contract is a contract which ceases to be enforceable by

law. A contract when originally entered into may be valid and binding on the parties. It may

subsequently become void.There are many judgments which have stated that where any crime

has been converted into a "Source of Profit" or if any act to be done under any contract is

opposed to "Public Policy" under any contractthan that contract itself cannot be enforced

under the law-


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3. Voidable contract[Section 2(i)]: An agreement which is enforceable by law at the option of

one or more of the parties thereto, but not at the option of other or others, is a voidable contract.

If the essential element of free consent is missing in a contract, the law confers right on the

aggrieved party either to reject the contract or to accept it. However, the contract continues to

be good and enforceable unless it is repudiated by the aggrieved party.

4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if

permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury

to a person or property of another, or court regards it as immoral or opposed to public policy.

These agreements are punishable by law. These are void-ab-initio.

All illegal agreements are void agreements but all void agreements are not illegal.

5. Unenforceable contract: Where a contract is good in substance but because of some technical

defect cannot be enforced by law is called unenforceable contract. These contracts are neither

void nor voidable.

On the basis of formation:

1.Express contract: Where the terms of the contract are expressly agreed upon in words (written

or spoken) at the time of formation, the contract is said to be express contract.

2.Implied contract: An implied contract is one which is inferred from the acts or conduct of the

parties or from the circumstances of the cases. Where a proposal or acceptance is made otherwise

than in words, promise is said to be implied.

3. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not

contracts as there is no intention of parties to enter into a contract. It is legal obligation which is

imposed on a party who is required to perform it. A quasi contract is based on the principle that aperson shall not be allowed to enrich himself at the expense of another. Examples

claim for necessaries supplied to person incapable of contracting or on his account Reimbursement of person paying money due to another, in payment of which he is

interested


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obligation of person enjoying benefit of non-gratuitous act Responsibility of finder of goods Liability of person to whom money is paid or thing delivered

E-contract:An e-contract is a contract made through the electronic mode.

On the basis of performance:

1.Executed contract: An executed contract is one in which both the parties have performed theirrespective obligation.

2.Executory contract: An executory contract is one where one or both the parties to the contract

have still to perform their obligations in future. Thus, a contract which is partially performed orwholly unperformed is termed as executory contract.

3. Unilateral contract: A unilateral contract is one in which only one party has to perform hisobligation at the time of the formation of the contract, the other party having fulfilled hisobligation at the time of the contract or before the contract comes into existence.

4.Bilateral contract: A bilateral contract is one in which the obligation on both the parties to thecontract is outstanding at the time of the formation of the contract. Bilateral contracts are alsoknown as contracts with executory consideration.

ISO 9000 and ISO 14000

What are ISO 9000 and ISO 14000?

The International Organization of Standardization (ISO) is a worldwide federation consisting of

member bodies from 91 countries, which promotes the development of international

manufacturing, trade and communication standards.

ISO 9000 refers to a generic series of standards published by the ISO that provide quality

assurance requirements and quality management guidance. ISO 9000 is a quality system

standard, not a technical product standard. The ISO 9000 series currently contains four standards


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- ISO 9001, ISO 9002, ISO 9003 and ISO 9004. Firms select the standard that is most relevant to

their business activities. However, these four standards will be revised in late 2000. More

information is provided later in this paper under ISO 9000:2000.

ISO 14000 refers to a series of standards on environmental management tools and systems. ISO

14000 deals with a company's system for managing its day-to-day operations and how they

impact the environment. The Environmental Management System and Environmental Auditing

address a wide range of issues to include the following:

1. Top management commitment to continuous improvement, compliance, and pollutionprevention.

2. Creating and implementing environmental policies, including setting and meetingappropriate targets.

3. Integrating environmental considerations in operating procedures.4. Training employees in regard to their environmental obligations.5. Conducting audits of the environmental management system.

ISO 9000 and ISO 14000 are tools to assist business and government to insure the quality of

their products and services, and to manage the impact of their activities on the environment. Like

all ISO standards, their use is voluntary unless a business sector makes them a marketrequirement or a government issues regulations making their use obligatory. Organizations that

implement ISO 9000 and ISO 14000 voluntarily do so to improve operations and provide real

benefits.

Why Consider ISO 9000 Registration

There are several benefits to implementing this series in your company. There is also a strong

belief that having a documented quality procedure gives a firm a strong advantage over its

competitors. For example, it will guide you to build quality into your product or service and

avoid costly after-the-fact inspections, warranty costs, and rework.

Most importantly, more contractors are working with ISO certified customers every year as the

certifications are more widely used and accepted in the United States.


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which occur every six months and the re-audit process every three years. Additionally, each firm

must have an internal audit team for continuous improvement and auditing.

Though the investment of time, money and staff resources are considerable in the ISO

9000/14000 certification process, most certified firms report returns on their investment through

monetary savings, marketing advantages and better procedures and information to help them to

continue to reduce costs and waste in their firms.

Approval

When a firm is approved, they receive a certificate of registration for the facility registered and

ISO standard used. They can then use the certificate number and symbol on advertising and

correspondence. The registrar lists them in its directory identifying facility locations; ISO

standard used and certificate number. For continued certification, they should expect registrar

surveillance audits about every six months and a re-audit every three years.

Changes Planned to ISO 9000 in 2000

The International Standards Organization (ISO) periodically reviews the ISO 9000 Standards to

ensure they are current and relative to the needs of industry. As a result from feedback of the

1994 version of the standard, a new draft standard called ISO 9000:2000 is currently under

review and is expected to be released in the last 3 months of 2000.

Key needs addressed in the new standard include:

1. A process or whole system approach2. Compatibility with other management systems likes ISO 140003. Continuous improvement4. Stakeholder needs5. User friendly language

What is expected to change when the new draft if approved can only be considered as tentative at

this time.The following items are most likely to change when the ISO 9000 is finalized.


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1. The current series has 20 published standards. The proposed new model will have a merefour, which are:

a. ISO 9000 - Concepts and Terminologyb. ISO 9001 - Model for Quality Assurancec. ISO 9004 - Model for Quality Managementd. ISO 10011 - Guidelines for Auditing Quality Systems

2. Many elements of the 20 standards will be folded into the core set. Additionally, onceISO 9001:2000 Standard, the standard that applies to contracting firms is finalized, it will

replace the need/use of ISO 9002 and ISO 9003 in this standard. This new standard will

be flexible enough to incorporate all three previous standards into one.

3. The biggest change in the ISO 9001:2000 will be a new emphasis on the closed loopprocess. The revised standard is designed to place more emphasis upon "the processes" of

a business, rather than being "system" based. This means emphasis is placed on the plan,

do, check-act modelalready incorporated in ISO14001, the environmental standard.


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THE PRIVATE SECTOR OF INDIAN ECONOMY

In a private sector enterprise, the owner of assets and resources is an individual or a group of

individuals. Market force (demand: supply) determine the price of articles. The main aim is

PROFIT

E.g.: Toyota

The private sector of Indian economy is the past few years have delineated significant

development in terms of investment and in terms of its share in the gross domestic product. The

key areas in private sector of Indian economy that have surpassed the public sector are transport,

financial services etc.

Indian government has considered plans to take concrete steps to bring affect poverty alleviation

through the creation of more job opportunities in the private sector of Indian economy, increase

in the number of financial institutions in the private sector, to provide loans for purchase of

houses, equipments, education, and for infrastructural development also. The private sector of

Indian economy is recently showing its inclination to serve the society through women

empowerment programs, aiding the people affected by natural calamities, extending help to the

street children and so on. The government of India is being assisted by a number of agencies to

identify the areas that are blocking the entry of the private sector of Indian economy in the arena

of infrastructural development, like regulatory policies, legal procedures etc.

The most interesting fact about the private sector of India economy is that though the overall

pace of its development is comparatively slower than the public sector, still the investment of

private sector in the recent past, i.e. in the first quarter of 1990 registered approximately 56 %

which rose to nearly 71 % in the next quarter, accounting for an increase of 15 %. Certain steps

taken by the Indian government are acting as the stepping stone of the private sector continued

journey to success, include industrial deli censing, devaluation that was implemented previously.

The private sector of Indian economy is also adversely affected by the huge number of permits

and enormous time required for the processing of documents to initiate a firm; however the

central government has decided to abolish MRTP Act and incorporate a Competition

Commission of India to bring the public sector and the private sector at the same platform.


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The participation of the private sector of Indian economy is desired by the government of India

for infrastructural development including specific sectors like power, development of highways

and so on. As the contribution of public sector, these sectors have been arrested due to the shift

of the attention of the Indian government to issues like population increase, industrial growth.

The main reasons behind the low contribution of the private sector in infrastructural development

activities are that:

The small and medium scale companies in the private sector of Indian economy suffer from lack

of finances to welcome the idea of extending their business to other states or diversify their

product range.

The private sector of Indian economy also suffers from the absence of appropriate regulatory

structure, to guide the private sector and this speaks for its unorganized framework.

The unorganized framework of the private sector is interrupting the proper management of this

sector resulting in the slowdown of its development


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PUBLIC SECTOR OF INDIAN ECONOMY

In a public sector, the government owns the resources and determines the price, and the main aim

is the welfare of the citizens

e.g.: in India, BSNL, SAIL, and Indian Airlines

OBJECTIVES: The public sector aims at achieving the following objectives:

i. To promote rapid economic development through creation and expansion ofinfrastructure

ii. To generate financial resources for developmentiii. To promote redistribution of income and wealthiv. To create employment opportunitiesv. To promote balanced regional growth

vi. To encourage the development of small-scale and ancillary industries, andvii. To promote exports on the one side and import substitution, on the other.Role of Public Sector: The public sector has been playing a vital role in the economic

development of the country. Public sector is considered a powerful engine of economic

development and an important instrument of self-reliance. The main contributions of public

enterprises to the country's economy may be described as follows:

1. Filling the Gaps in Capital Goods: At the time of independence, there existed serious gaps in

the industrial structure of the country, particularly in the fields of heavy industries such as steel,

heavy machine tools, exploration and refining of oil, heavy Electrical and equipment, chemicals

and fertilizers, defense equipment, etc. Public sector has helped to fill up these gaps. The basic

infrastructure required for rapid industrialization has been built up, through the production of

strategic capital goods. In this way the public sector has considerably widened the industrial base

of the country.


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2. Employment: Public sector has created millions of jobs to tackle the unemployment problem

in the country. Public sector accounts for about two-thirds of the total employment in the

organized industrial sector in India. By taking over many sick units, the public sector has

protected the employment of millions. Public sector has also contributed a lot towards the

improvement of working and living conditions of workers by serving as a model employer.

3. Balanced Regional Development: Public sector undertakings have located their plants in

backward and untrodden parts of the county. These areas lacked basic industrial and civic

facilities like electricity, water supply, township and manpower. Public enterprises have

developed these facilities thereby bringing about complete transformation in the socio-economic

life of the people in these regions. Steel plants of Bhilai, Rourkela and Durgapur; fertilizer

factory at Sindri, are few examples of the development of backward regions by the public sector.

4. Contribution to Public Exchequer: Apart from generation of internal resources and payment

of dividend, public enterprises have been making substantial contribution to the Government

exchequer through payment of corporate taxes, excise duty, custom duty etc. In this way they

help in mobilizing funds for financing the needs for the planned development of the country. In

recent years, the total contribution from the public enterprises has increased considerably,

between the periods 2002-03 to 2004-05 the contribution increased by Rs 81,438 crores on the

average.

5. Export Promotion and Foreign Exchange Earnings: Some public enterprises have done

much to promote Indias export. The State Trading Corporation (STC), the Minerals and Metals

Trading Corporation (MMTC), Hindustan Steel Ltd., the Bharat Electronics Ltd., the Hindustan

Machine Tools, etc., have done very well in export promotion. The foreign exchange earnings of

the public sector enterprises have been rising from Rs 35 crores in 1965-66 to Rs 42,264 crores

in 2004-05.

6. Import Substitution: Some public sector enterprises were started specifically to produce

goods which were formerly imported and thus to save foreign exchange. The Hindustan

Antibiotics Ltd., the Indian Drugs and Pharmaceuticals Ltd. (IDPL), the Oil and Natural Gas


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3. Excessive Overheads: Public enterprises incur heavy expenditure on social overheads like

townships, schools, hospitals, etc. In many cases such establishment expenditure amounted to 10

percent of the total project cost. Recurring expenditure is required for the maintenance of such

overhead and welfare facilities. Hindustan Steel alone incurred an outlay of Rs. 78.2 crore on

townships. Such amenities may be desirable but the expenditure on them should not be

unreasonably high.

4. Overstaffing: Manpower planning is not effective due to which several public enterprises like

Bhilai Steel have excess manpower. Recruitment is not based on sound labour projections. On

the other hand, posts of Chief Executives remain unfilled for years despite the availability of

required personnel.

5. Under-utilisation of Capacity: One serious problem of the public sector has been low

utilisation of installed capacity. In the absence of definite targets of production, effective

production planning and control and proper assessment of future needs many undertakings have

failed to make full use of their fixed assets. There is considerable idle capacity. In some cases

productivity is low on account of poor materials management or ineffective inventory control.

6. Lack of a Proper Price Policy: There is no clear-cut price policy for public enterprises and

the Government has not laid down guidelines for the rate of return to be earned by different

undertakings. Public enterprises are expected to achieve various socio-economic objectives and

in the absence of a clear directive, pricing decisions are not always based on rational analysis. In

addition to dogmatic price policy, there is lack of cost-consciousness, quality consciousness, and

effective control on waste and efficiency.

7. Inefficient Management :The management of public enterprises in our country leaves much

to be desired. Managerial efficiency and effectiveness have been low due to inept management,

uninspiring leadership, too much centralisation, frequent transfers and lack of personal stake.

Civil servants who are deputed to manage the enterprises often lack proper training and use

bureaucratic practices. Political interference in day-to-day affairs, rigid bureaucratic control and

ineffective delegation of authority hamper initiative, flexibility and quick decisions. Motivations

and morale of both executives and workers are low due to the lack of appropriate incentives.


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4. Sources of Funds for Economic Development: Initially, state was an important source of

funds for development. The surplus of government enterprises could be re-invested in the same

industries or used for the establishment and expansion of other industries. Profits of public sector

industries can be directly used for capital formation which is necessary for the rapid development

of the country.

5. Socialistic Pattern of Society:The socialistic pattern of society envisaged in the Constitution

calls for expansion of public sector. For one thing, production will have to be centrally planned

as regards the type of goods to be produced, the volume of output and the timing of their

production. Besides, one of the objectives of the directive principles of the Indian Constitution is

to bring about reduction of the inequalities of income and wealth and to establish an egalitarian

society. The Five Year Plans have taken this up as a major objective of planning. The publicenterprises were used as major instruments for the reduction of inequalities of income and to

bring about a more equitable distribution of income in several ways.

6. Limitations and Abuses of the Private Sector: The behavior and attitude of the private

sector itself was an important factor responsible for the expansion of the public sector in the

country. In many cases the private sector could not take initiatives because of the lack of funds

and their inability to take risk with large long-gestation investments. In a number of cases, the

government was forced to take over a private sector industry or industrial units either in the

interest of workers or to prevent excessive exploitation of consumers. Very often the private

sector did not function as it should and did not carry out its social responsibilities. Accordingly,

the government was forced to take over or nationalize the private sector units.

To sum up, the expansion of the public sector was aimed at the fulfillment of our national goals,

viz., the removal of poverty, the attainment of self-reliance, reduction in inequalities of income,

expansion of employment opportunities, removal of regional imbalances, acceleration of the

pace of agricultural and industrial development, to reduce concentration of ownership and

prevent growth of monopolistic tendencies by acting as effective countervailing power to the

private sector, to make the country self-reliant in modern technology and create professional,

technological and managerial cadres so as to ultimately rid the country from dependence on

foreign aid.


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COOPERATIVE SECTOR

when the same people produce the raw material of an industry and also process it into products

for distribution, it is called cooperative sector.

e.g. in india is Amul (Gujrat Cooperative Society Ltd.) and Lijjat.

The beginning of the Co-operative movement in India dates back to about 1904 when official

efforts were initiated to create a new type of institution based on the principles of co-operative

ideology. Co-operative institutions considered to be solution for the problems particularly to the

Indian conditions concerning to over-all rural development. Co-operatives are the vast and

powerful instrument which engaged in the tasks of production, processing, marketing and

distribution, servicing and banking in Indian economy. Co-operation has shown its effectivenessin various fields like removal of poverty by reducing members indebtedness, lowering interest

rates, increasing productivity and thrift, lowering of the cost of necessary members, arranging

disposal of their produce and discouraging unnecessary social expenditure. It has done

something to raise the standard of living. It has increased country s banking facilities. It has

given the people hope. In all these directions and in others, co-operation has made more or less

progress, although it has so far admittedly affected only border of the situation.

In brief, it may be observed that- the co-operatives in different sectors function more or less in

isolation and do not lend sufficient support to one another. Except in the sphere of credit, the

principle of federalism has not been significant developed within the respective sectors

themselves. There has been inadequate linking of credit with supplies, services, thrift and

marketing, etc. the initiative still comes from the Government and not from the people. The

dynamism that is associated with the term movementis still lacking to an appreciable degree.

Primary Societies concern themselves only with credit. The area of operation is either too small

or enable the society to be viable, or too big to ensure mutual knowledge and social cohesion. A

rigid adherence to principles of unlimited liability had kept some of the solvent farmers from

such societies. There has 166

been a lack of co-ordination on the part of the central banks with the societies on the one hand

and apex bank on the other. The general lack of education and the inadequacy are the important

causes of the unsatisfactory record of co-operation in India. In the context of economic reforms


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introduced since 1991, sound, healthy and competitiveness have become very important for co-

operatives. In the arouse of economic reforms quality is more important than quantity so

emphasis on excellent quality management, technology up gradation, cost minimization

measures which increases profitability, professionalism, and base of financial resource have utter

importance. The co-operatives in the contest economic reform should make themselves viable

and sustainable to accept challenges and to overcome on it effectively. Mutual Aided Co-

operative Societies Act of 1995, by government of Andhra Pradesh, marked a significant step

towards reform to govern and regulate mutually aided co-operatives, which promote democratic

nature, self-reliant and member centric atmosphere without any State involvement or financial

support from State. Similar legislation passed by other state too (viz. Bihar, Chhattisgarh, Jammu

and Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Orissa and Uttaranchal). The number of

co-operatives registered under the new Act increasing slowly, and the conversion from old to

new Act mostly takes place in commodity co-operatives. However, most of the existing co-

operatives remain themselves attached with the old law.


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Ques1_Formation_of_the_company.docx