IMT- CDL COMPANY LAW

The Company
Meaning A company is an incorporated association, which is an artificial person created by law, having separate legal identity with a perpetual succession and common seal.

Features of a Company
Incorporated association

Separate legal identity

Separate property Perpetual succession

Artificial legal person

Limited liability Common seal

Lifting of corporate veil

A legal concept that separates the personality of a

corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations. This protection is not ironclad or impenetrable. Where a court determines that a company's business was not conducted in accordance with the provisions of corporate legislation (or that it was just a faade for illegal activities) it may hold the shareholders personally liable for the company's obligations under the legal concept of lifting the corporate veil.

Formation and Incorporation of company

Stages in the process of formation of a company are: Promotion Incorporation Capital subscription Commencement of business

ILLEGAL COMPANIES
Under the Companies Act, 1956, not more than 10 persons can come together

for carrying on any banking business and not more than 20 persons can come together for carrying on any other of business, unless the association is registered under the Companies Act or any other Indian law. Any association which does not comply with the above norms is an illegal association. Therefore, a partnership of more 10 or 20 members, as the case may be, is an illegal association unless the registered under the Companies Act or any other Indian law. Exemption: A Joint Hindu Family business comprising of family members only.

Types of Companies
Registered company

Unregistered company
Chartered company Statutory company

Private company
Public company

MOA
MEANING 2. CLAUSES NAME CALUSE CAPITAL CLAUSE REGISTERED OFFICE CLAUSE OBJECT CLAUSE LIABILITY CLAUSE ASSOCIATION CLAUSE 3. ALTERATION OF MEMORANDUM 4. DOCTRINE OF ULTRA VIRES
1.

AOA
MEANING 2. ALTERATION OF ARTICLES 3. DOCTRINE OF INDOOR MANAGEMENT
1.

PROSPECTUS
MEANING: A 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 for the subscription or purchase of any shares in or debentures of the company. SEBI guidelines to be adhered Must be issued within 90 days unless fine of Rs. 50,000.

Remedies for misstatement and omissions in a prospectus

1. Remedies against the company Rescission of contract Claiming damages 2. Remedies against the directors, promoters and experts Damages for fraud Damages for misrepresentation Liability for omissions Criminal liability

Shelf Prospectus
It means a prospectus issued by any financial institution or bank for one or more issues of securities or class of securities specified in that prospectus.

SHAREHOLDERS AND MEMBERS

Distinction between shareholders and member: 1. Public company do not differentiates 2. Private/ unlimited companies

HOW TO BECOME MEMBER OF THE COMPANY?

By subscription to shares

By agreeing to purchase qualification shares

Signatory to MOA of the company By transfer/ transmission By beneficial ownership

No minor. No partnership firm. No insolvent. No alien enemy

COMPANY MANAGEMENT AND ADMINISTRATION

COMPANY MANAGEMENT AND ADMINISTRATION: By whom

DIRECTORS (MANAGING AND WHOLE TIME

DIRECTORS) COMAPNY SECRETARY AUDITORS

Company Management and Administration

1. Who is managing director?

Section 2(26) defines a managing director as "a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Directors or, by virtue of its memorandum or articles of association, is entrusted with substantial powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.
2. Define director.

Section 2(13) defines a director as any person occupying the position of director, by whatever name called. We can define a director thus, 'a director is one of those persons, who are responsible for directing, governing or controlling the policy or management of a company.'
3. Define wholetime director.

Companies Act does not define the term 'wholetime director'. This term is used in the Act to denote such a director who is in the wholetime employment of a company and is not entrusted with substantial powers of management. A wholetime director is just an ordinary employee of the company having no discretionary power to take decisions on policy matters.

4. How is casual vacancy of director filled? If the office of a director falls vacant for some reason before his term expires the same may, subject to any regulations in the articles, be filled by the Board of Directors. But a director, so appointed, will cease to act the moment the term of the original director is completed. 5. Define manager. Section 2(24) defines a manager as "an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole or substantially the whole of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, and whether under a contract of service or not."

DIRECTORS
The primary agents for the company to transact its operations. Top administrative organ of the company Collectively called as BoD. Legal position of directors: 1. 2. 3.

DIRECTORS AS AGENTS DIRECTORS AS MANAGING PARTNERS DIRECTORS AS TRUSTEES

Appointment of Directors
No body corporate, association firm can be

appointed as a director of a company. Only an individual can be a director of the company No individual is appointed as a director if they havent been allotted DIN (Director Identification Number)

Contd.
The directors of a company can be appointed in the following

ways: By small shareholders as regards nominee directors (only in public companies) By the articles as regards first directors By a company in general meeting By the directors (additional directors and filling up the casual vacancy) By proportionate representation (appointed by minority shareholders) By central government (in case of oppression and mismanagement) By tribunal in case of sick companies By third parties

Maximum number of directorships

A person can not be a director of more than

15 companies. Directorships of the following shall not be included: Private companies Unlimited companies Section 25 companies

Removal of Directors
1. 2.

3.

Removal by shareholders (during mismanagement, breach of trusts, misfeasance, misconduct on the part of directors) Removal by central government (fraud, misfeasance, breach of trust, default, negligence, injury to the interest of trade or business to which the company belongs) Removal by tribunal (tribunal can order the termination of the agreement between the company and director)

COMPANY SECRETARY
CS acts as the link between the directors and the shareholders,

the medium through which the company communicates with the outside world. While the directors are the brains of the company , the CS is its ears and hands. Only an individual may be appointed as a CS CS must be a member of ICSI or has requisite qualifications as prescribed by the Central Government. Every company having a paid up share capital of Rs 2 Cr or more must have a CS.

Maximum Managerial Remuneration

I n c a s e o f p u b l i c c o m p a n y, t o t a l m a n a g e r i a l r e m u n e r a t i o n payable to directors, managing directors or manager and whole time directors in respect of any financial year s h o u l d n o t e x c e e d 11 % o f t h e n e t p r o f i t s o f t h a t c o m p a n y f o r f i n a n c i a l y e a r. If in any financial year a company has no profits or its profits are inadequate, the company is required to seek the approval of the central government for payment of any remuneration to the managerial personnel.

MEETINGS OF BOARD
Notice

At any time summon a meting of the board on the requisition of directors. It has to be sent to in writing to every director in India and at his usual address in India to every other director who is outside India for the time being.

Quorum

M i ni mu m n u mb e r o f q u al i f i e d p er s o n s w h o se p r e s e nc e i s nec es s a r y f o r t r a n sa ct i n g l e gal l y b i n d i n g b u s i n e s s a t t h e me e t i n g . 2 . F o r a me et i n g o f t h e b oar d s h al l be o n e t hi r d o f i t s t ot a l s t r e n gt h hi g h e r o r 2 d i r ect o r s, w h i c he ve r i s h i g h e r. 3. Unless a q u o r u m i s pr es e nt , t he b u s i n e ss transacted is void. 4 . I f a me e t i n g o f t he b oa r d co u l d n ot b e hel d f o r w a n t o f qu o r u m t h en u nl e s s t h e a r t i cl es ot h er w i se p r o vi de , t he me et i n g s h al l a ut o ma t i c al l y st an d a dj o ur n e d t i l l t he sa me d a y i n t he ne xt w ee k and a t t h e s a me t i me a n d p l a c e .

1.

Duties of directors

A l l m o n e y r e c e i v e d f r o m a p p l i c a n t s f o r s h a r e s i s d e p o s i t e d i n

scheduled bank or money is returned to applicants C a l l e g m s A t e v e r y A G M b o a r d s h a l l l a y d o w n b e f o r e t h e c o m p a n y a balance sheet and P& L A/c. To m a k e a d e c l a r a t i o n o f s o l v e n c y o f t h e c o m p a n y i n t h e c a s e of members voluntary winding up. M u s t a c t b o n a f i d e f o r t h e b e n e f i t o f t h e c o m p a n y M u s t n o t b e n e g l i g e n t

Liability of directors
F o r F o r F o r F o r F o r F o r F o r

ultra vires act, beyond MOA or AOA breach of trust acting dishonestly gross negligence in the performance of their duties wilful misconduct the acts of his co-ordinators misstatement or concealment of the prospectus

CRIMINAL LIABILITIES OF A DIRECTOR :

F o r m i s s t a t e m e n t i n t h e p r o s p e c t u s F o r f a i l u r e t o f i l e a r e t u r n w i t h r o c F o r f a i l u r e t o i s s u e c e r t i f i c a t e s o f s h a r e s a n d d e b e n t u r e s w i t h i n

specified time limits F o r n o t k e e p i n g r e g i s t e r s o f m e m b e r s a n d d e b e n t u r e h o l d e r s F o r f a i l u r e t o l a y b e f o r e t h e c o m p a n y a t A G M , a n n u a l a c c o u n t s and balance sheet F o r h o l d i n g n u m b e r o f d i r e c t o r s h i p s i n m o r e t h a n 1 5 c o m p a n i e s F o r t a k i n g t h e l o a n f r o m t h e c o m p a n y w i t h o u t t a k i n g p e r m i s s i o n from the central government

MEETINGS AND RESOLUTIONS

There are 3 types of general meetings of shareholders : 1. Statutory meeting 2. Annual general meeting 3. Extraordinary general meeting

Statutory meeting
it is the first official general meeting of the shareholders. all

public comapnies having share capital are required to hold such meeting compulsorily. it must be held after one month but within 6 months of obtaining the "certificate of commencement of business" this meeting is held only once in the lifetime of the comapny objective: to provide an opportunity to the members, as early as possible, of acquainting themselves with the assets and properties acquired so far and to dicsuss the success of flotation. with notice send: statutory report to all members

Statutory Report
directors prepare it and send it to every member a

document known as the statutory report at least 21 days before the day on which the meeting is to be held. to be filed with ROC

Contents of the Statutory Report

1. the total number of shares allotted 2. total cash received in respect of the shares allotted. 3. an abstarct of the receipt and payments up to datewithin 7

days of the receipt and the balance in hand. 4. the names, addresses and occupations of the company's directors, auditors, MD, or manger and secretaryand the changes if any. 5. particulars of any contract to be submitted to the meeting for approval. 6. the details of arrears of calls due from directors and MD's or managers 7. particulars of any commission or brokerage paid or to be paid

Annual General Meeting

every comapny must in each year hold in addition to

any other meetings a general meeting as its annual general meeting. ti is held each year with a view to reviewing and evaluating the overall progress of the company. also called as ordinay business meeting. most important for the members of the company

 matters to be discussed are:

1. consideration of annual accounts, balance sheets and

reports 2. declaration of dividend 3. appointment of directors in the place of those retiring and 4. the fixation of the remuneration of the auditors

default in holding the meeting

fine: 50k rupees and in the cas of continuing default the fine may be further extended to Rs. 2500 for every day of default.

EXTRAORDINARY GENERAL MEETING

All gneral meetings other than statutory and annual general

meeting are called as EGM's. can be convened by the comapny at any time. the business transacted at an EGM comprises anything which cannot be postponed till the next AGM e.g. chanages in MOA and AOA, reduction ans reorganisation of share capital WHO CAN CALL SUCH MEETINGS: 1. by the directors 2. by the directors on requisition by the requistionist themselves (if directors dnt call up) by the company law board

FILING OF RETURNS

Overview of Annual eFiling under the Companies Act, 1956

As a part of Annual eFiling, Companies incorporated

under the Companies Act, 1956 are required to efile the following documents with the Registrar of Companies (RoC):

Various e-Forms
1 Balance-Sheet Form 23AC to be filed by all Companies* 2 Profit & Loss Account Form 23ACA to be filed by all

Companies 3 Annual Return Form 20B to be filed by Companies having share capital 4 Annual Return Form 21A to be filed by companies without share capital 5 Compliance Certificate Form 66 to be filed by Companies having paid up capital of Rs.10 lakh to Rs. 5 crore

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