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 partnership firm should not be more than 100 in case of partnerships.

As per the
previous Companies Act 1956, the maximum limit in case of partnerships was 10
and 20 for banking business and other businesses respectively

 In case of private companies, the maximum limit has been increased by the new
Companies Act,2013 from 50 to 200. There is however no maximum limit on the
no. of members in a public company

 . The minimum number of members in case of a public company is seven and in


case of a privatecompany is 2. In case of a partnership, the minimum number of
partners is 2

 A Partnership Firm has no separate legal entity distinct from its partners. A
Company, on the other hand, is a separate legal entity different from its members

 A Partnership Firm has no separate legal entity distinct from its partners. A
Company, on the otherhand, is a separate legal entity different from its
membersIn partnership each partner has unlimited liability and is personally liable
for all the debts of thefirm. In a company, on the other hand, a shareholder has
limited liability – limited to the extent ofthe share capital.

 All the partners in a partnership firm are entitled to take part in the management of
a business(unless stated otherwise); but in the case of a company the right to
control and manage the business is vested in the hands of the Board of Directors
elected by the shareholders
 A partner cannot transfer his interest in the firm without the consent of all the
partners In case of a private company also the transfer of shares requires the
prior permission of the Board of Directors. But, in case of a public company a
shareholder can transfer his shares freely without restriction and the transferee
succeeds to all rights of membership

 In case of companies, annual audits of accounts are a necessity. However, in


case of PartnershipFirms, audit of accounts is required to be conducted only if the
turnover exceeds Rs. 25 Lakhs/ Rs.1 Crore
 A Partnership Firm may or may not be registered. However, in case of a company
– registration isessential
 There is no minimum prescribed capital in case of a Partnership Firm. However, in
case of aPrivate Company, the minimum paid up capital is Rs. 1 Lakh and in case
of a Public Company, theminimum paid up capital is Rs. 5 Lakhs
 In a partnership firm, the profits are distributed among the partners as per the
partnership deed.However in a company, the members get a share in profits only
when dividend is declared by theBoard of Directors and approved by all the
members.
 A Partnership Firm can be wound up any time by any partner if it is ‘at will’ without
legal formalities.In the case of company, no one member can require it to be
wound up at will and winding upinvolves legal formalities
 According to Companies Act 1956, a report is prepared by the board of directors of
every public limited company and forward the same to its every shareholder,
called statutory report, at least 21 days before the day on which the statutory
meeting is to be held. A copy of statutory report should be submitted before the
Registrar of Joint Stock Companies.
 Resources of Buy Back
A Company can purchase its own shares from
(i) free reserves; Where a company purchases its own shares out of
free reserves, then a sum equal to the nominal value of the share so
purchased shall be transferred to the capital redemption reserve and
details of such transfer shall be disclosed in the balance-sheet or
(ii) securities premium account; or
(iii) proceeds of any shares or other specified securities. A Company
cannot buyback its shares or other specified securities out of the
proceeds of an earlier issue of the same kind of shares or specified
securities.

2. Permissible Securities

2.1 A company can buy-back the following securities

a. Own shares,
b. Other specified securities - includes employees’ stock options or other securities as may
be notified

3. Methods of buy-back

3.1 The buy-back may be—

a. from the existing shareholders or security holders on a proportionate basis;


b. from the open market
c. by purchasing the securities issued to employees of the company pursuant to a scheme of
stock option or sweat equity.

4. Modesof the Buy-back [Sec. 68(1)]

4.1 The buy-back is permitted out of:

a. Free reserves;
b. Securities premium account; or
c. Proceeds of the issue of any shares or other specified securities.

4.2 No buy-back is permitted out of the proceeds of earlier issue of the same kind of shares or other
specified securities. [Proviso to sec. 68(1)]

5. Maximum Quantum of the Buy-back5.1 25% or less of the aggregate of the paid-up capital and free
reserves of the company. [Sec 68(2)(c)].For the purpose of buy-back of equity shares in any financial
year, 25% shall be construed with regards to total paid-up equity capital in that financial year.
6. Conditions of the Buy-back

6.1 The buy-back of securities under sub-section (1) of section 68 of the new act shall be subject to
following conditions [Sec. 68(2)]:

a. It should be authorised by the Articles of Association of the Company.


b. A special resolution must be passed at the general meeting of the company.

Special resolution is not required, provided [proviso to sec. 68(2)(b)]:


i. buy-back is 10% or less of the total paid-up equity capital and free reserves of the
company; and
ii. buy-back is authorised by a board resolution passed at its meeting.
c. The debt-equity ratio of the company, after buy-back is completed should not more than
2:1 [sec. 68(2)(d)].

 Equity includes paid-up capital and its free reserves


 Debt includes secured and unsecured debts owed by the company.

d. Buy-back of only fully paid-up shares and securities is permitted.


e. No offer of buy-back shall be made within a period of 1year reckoned from the date of
the closure of the preceding offer of buy-back.
f. The company is not permitted to utilize any money borrowed from banks or financial
institutions for the purposeof buying back its shares;

7. Notice for the Buy-back

The notice for general meeting pursuant to Sec. 102 of the new Act at which a special resolution u/s.
68(2)(b) is proposed to be passed is required to be accompanied by an explanatory statement giving full
and complete details of buy-back. [S. 68(3) of the new act read with Rule 17(1) of the Rules].

8. Offer for the Buy-back and the Time-period

8.1 The letter of offer is required to be dispatched to the shareholders or security holders immediately
after filing the same with the Registrar of Companies (Registrar) but not later than 21 days from its filing
with the Registrar.

8.2 The period during which the offer for buy-back has to remain open should be not less than 15 days
noexceed 30 days from the date of dispatch of the letter of offer.

8.3 The acceptance per shareholder has to be on proportionate basis in case the number of shares or other
specified securities offered by the shareholders or security holders exceeds the number of shares or
securities to be bought back by the company.

8.4 The company shall complete the verifications of the offers received within 15 days from the date of
closure of the offer and the shares or other securities lodged shall be deemed to be accepted unless a
communication of rejection is made within 21 days from the date of closure of the offer.

8.5 The buy-back must be completed within 1year from the date of passing of a special resolution at the
general meeting or a board resolution.
9. Opening of New Bank Account and payment of consideration

9.1 Immediately after the date of closure of the offer, the company is required to open a separate bank
account and deposit therein, such sum, as would make up the entire sum due and payable as consideration
for the shares tendered for buy-back in terms of the Rules.

9.2 The company, within 7 days of the expiry of 21 days from the date of closure of the offer, has to:
make payment of consideration in cash to those shareholders or security holders whose securities have
been accepted; or

a. return the share certificates to the shareholders or security holders whose securities have
not been accepted at all or the balance of securities in case of part acceptance.

10. Extinguishment of certificate

The Company has to extinguish and physically destroy the shares or securities so bought back
within 7 days of the last date of completion of buy-back

Circumstances when a private ltd company becomes a public ltd company


a. Conversion by default
b. Conversion by operation of law
c. Conversion by choice or by option
Once a private company becomes a public company under any of the above mentioned
circumstances, it would lose the privileges it enjoyed as a private company. On
conversion, the rules and regulations applicable to public limited companies would
become applicable.

1. Conversion by default

A private company:restricts the right to transfer shares,

i. limits the maximum number of members to 50 and


ii. prohibits invitation to the public for subscription of shares or debentures.
If any of these conditions are violated, a private company would become a public
Company by default.

2. Conversion by operation of law


In the following cases, a private company becomes a public company by the operation of
law:

i. When not less than 25% of the paid up share capital of a private company is held by one or
more public companies,
ii. When the average total turnover of the private company is not less than Rs.25 crores for
three consecutive years,
iii. When the private company holds not less than 25% of the paid up share capital of a public
company.
iv. When the private company invites, accepts or renews deposits from the public.
The Companies Amendment Act, 2000 has given an option to these companies, either to
continue as public limited companies or convert themselves into private limited companies by
making the necessary changes in their Articles.
3. Conversion by Choice or Option
A private company out of its own free will can choose to convert itself into a public company.
Generally, when private companies plan to expand and require more capital resources, they
would convert themselves into public companies.

By becoming public companies they can issue shares or debentures to the public and get the
required amount of capital. In India, many organizations which commenced operations as
private companies have got themselves converted into public limited companies in order to
expand and diversify.
Any private company which desires to get converted into a public company should make the
necessary changes in the Articles and follow the below mentioned steps:

a. It should convene a general meeting and pass a special resolution duly altering the
Articles.
b. The copy of the resolution along with the amended Articles should be filed with the
Registrar within 30 days of passing the special resolution.
c. The number of members should be increased to 7.
d. The company has to apply to the Registrar for obtaining a fresh certificate of
incorporation with the words ‘Private’ deleted from its name.
 As per the provision of section 96 of companies Act 2013, Company shall hold its first
AGM within 9 months from the closure of first Financial year.
 Every Company, other than One Person Company (OPC), must hold a general meeting in each
year apart from other meetings as Annual General Meeting (AGM). The AGM must be held within
six months from the closing date of financial year. A notice of 21 days has to be sent to all
members.
 Every Company, apart from OPC, must have to hold in addition to other meetings, by giving a
notice about the meeting, not more than 15 months in between the date of AGM to the next. A
Company may hold its first AGM within the period of 9 months from closing of its first financial
year otherwise in other cases within the period of 6 months. [Section 96(1) of the Companies
Act,2013]. As per the above, if a company holds its meeting, then it has no need to call an AGM
in the year of its incorporation

Who are all required to constitute the Audit Committee?

The following companies are required to constitute the Audit Committee:

 All Listed Companies


 All Public Company who satisfy the following conditions:
 Paid up capital of Rs. 10 Crores or exceeds Rs. 10 crores;
 Turnover of Rs. 100 Crores or exceeds Rs. 100 Crores;
 Outstanding loads or borrowings or debentures or deposits aggregate of Rs 50

crores or exceeds Rs 50 crores. DONE


The composition of the Audit Committee
The Audit Committee shall be constituted with a minimum number of 3 directors out of
which majority directors should be Independent Directors. All the Members of the
Committee shall be eligible to read and understand financial Statement.

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