PRESENTATION ON LEGAL ASPECTS OF

BUSINESSPRESENTED BY GROUP A1

Nikita Bali (11004)Neethi Nair (11044)Ranjini Nair (11045)

Chandan Pahelwani (11047)Himani Parihar (11049)Sonia Dadlani (10022)

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MEMORANDUM

OF

ASSOCIATION

DEFINITION

• A fundamental document.• The Memorandum of Association is a document of

great importance in relation to the proposed company.

• It contains the fundamental conditions upon which alone the company is allowed to be incorporated.

• It is the charter of the company and defines its reason for existence.

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Printing and Signing of memorandum

• As per SECTION 15 the Memorandum of Association of a company shall be –

(a) Printed(b) Divided into paragraphs numbered

consecutively, and(c) Signed by 7 (2 in case of a private company)

subscribers.

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• Each subscriber shall sign in the presence of at least 1 witness who shall attest the signature and shall likewise add his address, description and occupation, if any.

• The Memorandum of Association printed on computer laser printers should be accepted by the Registrar of a company provided it is neatly and legibly printed.

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ASSOCIATION CLAUSE

The name of a company establishes its identity and is the symbol of its existence. Every company name must end with Limited (Ltd.). No name of the company should be the name of the existing company, king, queen, president, prime minister, Father of Nation or anything that signifies government sponsorship.

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Name clause:-

Every company shall have a registered office from the day on which it begins to carry on business, or as from the 30th day after the date of its incorporation, whichever is earlier.

• The Registered Office Clause:

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The object clause both defines and confines scope of the company’s powers, and once registered, it can only be altered as provided by the Act.

Main objects of the company to be pursued by the company on its incorporation.

Other objects of the company not included in the above clause.

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The Object Clause:

The Memorandum of a company, having a share capital, shall state the amount of the share capital with which the company is to be registered and the division thereof into shares of a fixed amount.

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The Capital Clause:

The Memorandum of a company limited by shares or by guarantee shall also state that the liability of its members is limited. This clause tells about the duties and responsibilities of the Owners; i.e., whether the share holders are liable for their share capital or promise.

The Liability Clause:

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This clause is followed by the names, addresses and descriptions of the subscribers and the number of shares taken by each one of them. Each subscriber has to take at least one share.

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The Association Clause:

A company has the power to do all such things as are:-• Authorized to be done by the Companies Act,

1956;• Essential to the attainment of its objects

specified in the Memorandum.

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DOCTRINE of Ultra Vires

Cont..

Reasonably and fairly incidental to its objects Everything else is ultra vires the company.

‘Ultra’ means ‘beyond’ and ‘vires’ means ‘powers’. The term ultra vires a company means that the doing of the act is beyond the legal power and authority of the company.

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ARTICLES

OF

ASSOCIATION

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DEFINITION• The Articles of Association or just articles are

the rules, regulations and bye-laws for the internal management of the affairs of the company.

• The articles are next in importance to the Memorandum of Association which contains the fundamental conditions upon which alone a company is allowed to be incorporated. They are as such subordinate to, and controlled by, the Memorandum.

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Contents of articles

• Share capital, rights of shareholders, variation of these rights, payment of commissions, share certificates.

• Lien on shares.• Calls on shares.• Transfer of shares.• Transmission of shares.• Forfeiture of shares.• Conversion of shares into stock.• Share warrants.

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• Alteration of capital• General meetings and proceedings threat• Voting rights of members, voting and poll, proxies• Directors, their appointment, remuneration,

qualifications, powers and proceedings of Board of directors.

• Manager• Secretary• Dividends and reserves• Accounts, audit and borrowing powers• Capitalisation of profits• Winding up11/04/2023 Tolani Institute of Management Studies 20

Form and signature of Articles

• The Article shall be-a) Printedb) Divided into paragraphs, andc) Signed by each subscriber of the

Memorandum in the presence of at least 1 witness who will attest the signature and likewise add his address, description and occupation, if any.

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Distinction no. Memorandum of Association Article of Association

1The MA of a company is its charter and defined the

limitations of the powers of the company, established under the Company Act 1994

The AA of a company defines the rules and regulations concerning the internal affairs of the company.

2 The company can’t operate beyond this document The AA has to follow the MA for any matter.

3 There is no supplement for the MA Table-A could be used as the supplement of AA

4It determine the nature of relationship with the third

partyIt determine the internal affairs of the company

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Membership

in a company

MEMBERS AND SHAREHOLDERS

• The ‘members’ or ‘shareholders’ of a company are the persons who collectively constitute the company as a corporate entity.

• The terms ‘member’ and ‘shareholder’ and ‘holder of a share’ are used interchangeably.

• They are synonymous in the case of a company limited by shares, a company limited by guarantee and having a share capital and an unlimited company whose capital is held in definite shares.

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• But in the case of an unlimited company or a company limited by guarantee, a member may not be a shareholder, for such a company may not have a share capital.

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Who can

become a

member?

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• Any person who is competent to contract (sec.11 of the Indian Contract Act, 1872) may become a member of a company.

• This is the subject to the provisions of the Memorandum and the Articles of the company.

• The Articles may provide that certain persons cannot become members of the company.

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• A minor is not competent to become the member of a company because an agreement with a minor is absolutely void.

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A person may become a member of a company in the following ways:Membership by subscription:-

The subscribers to the Memorandum of Association of a company are deemed to have agreed to become its members. When the company is registered, their names are entered as members in the register of members.

How to become a member?

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Membership by application and registeration:Apart from the subscribers of Memorandum, every other person, who agrees in writing to become a member and whose name is entered in the register of members, is a member of the company. A written application for allotment of shares is, therefore, necessary before a person can be entered as a member in the register of members.

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Membership by beneficial ownership:Every person holding equity share capital of a

company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a member of the concerned company.Membership by qualification shares:

Before a person can be appointed a director of a public company, he must take, or sign an undertaking to take and pay for, the qualification shares, if any. He thus becomes a member and is in the same position as a subscriber to the Memorandum of the company.

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Statutory rightsThese are the rights which are conferred

on the members by the Companies Act. These rights cannot be taken away or modified by any provision in the Memorandum or the Articles. Some of the statutory rights are: Right to obtain copies of the Memorandum

and Articles.Right to transfer shares.

Rights of members

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Documentary rights:These are the rights given to the members

by the Memorandum and the Articles of Association.

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Legal rights:These are the rights which are given to the

members by the general law.e.g.. In case of any misstatement or concealment of a material fact in a prospectus, a person who has applied for shares on the faith of such prospectus and has been alloted shares can avoid the contract and claim damages under the general law.

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COMPANY

MANAGEMENT

DIRECTORS

• The directors are the brain of a company.• They occupy a pivotal position in the structure

of the company.• A director may be defined as a person having

control over the direction, conduct, management or superintendence of the affairs of a company.

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Number of directors• Every public company (other than a deemed public

company) shall have at least 3 directors and every other company (e.g. a private company, a deemed public company) at least 2 directors.

• A public company having :

a) A paid-up capital of Rs.5 crore or more;

b) One thousand or more small shareholders;

shall have at least one director elected by such small shareholders in the manner as may be prescribed.

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Appointment of directors

• First directors• Appointment of directors by the company• Appointment of directors by directors• Appointment of directors by third parties• Appointment by proportional representation• Appointment of directors by the central

government

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Position of directors

• Directors as agents• Directors as employees• Directors as officers• Directors as trustees

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THANK YOU

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