COMPANY LAW

ACT 1956
PRESENTED BY:GROUP LEADER:- HARSHITA BHATIA
ABHISHEK KUMAR
PRAGYA SHARMA
RAFEEQ AHMAD

INTRODCUTION
The Company act came into force from 1 April
1956
The act was based upon the recommendation
of company law committee appointed under the
Chairmanship of Mr. C.H. BHABA on
25.10.1950.
The company submitted its report in 1952 the
Indian company act extends to whole India

 Under the section 3(1)(i)&(ii) of the

Companies Act, 1956 defines a company as: a
company formed and registered under this act
or an existing company.
Existing company means a company formed
and registered under any of the earlier
Company Laws

DEFINIATION
The word 'Company' is a mixture of the Latin
word 'Com' meaning "with or together" and
'Pains' meaning "bread". Originally, it referred to
a group of persons who took their meals together.
A company is nothing but a group of persons who
have come together or who have contributed
money for some common person and who have
incorporated themselves into a distinct legal entity
in the form of a company for that purpose.

INCORPORATION
UNDER COMPANY ACT
1956
Separate legal entities

Artificial person
Perpetual existence
Common seal
Limited liability
Transferability of shares

Separate legal
entity

A company is an separate legal entity means

it is different from its members. It works as
an individual body.
It can make contracts, open bank account,
can sue and can be sued by others.

Salomon V Salomon &

Co. Ltd (1897)
Salomon sold his business of leather merchant
for 30,000 to Salomon & Co. Ltd which
consisted of Salomon himself, his wife, his
daughter and four sons. The purchase
consideration was paid by company by
allotment of 20,000 fully paid 1 shares and
10,000 in debentures conferring a floating
charge over all the companys assets to
Salomon.

 In law, a debenture is a document that either creates a

debt or acknowledges it. In corporate finance, the term
is used for a mediuOne share of 1 each was
subscribed by the remaining six members of his family.
Salomon was the MD of the company and as he
virtually had whole of the stock and he had absolute
control over the company.
Only a year later, the company became insolvent and
winding up commenced. On winding up the statement
of affairs of the company was assets 6000, Liabilities
Salomon as debenture holder 10,000 and unsecured
creditors 7000.m- to long-term debt

Artificial person
A company is purely a creation of law. It is
invisible, intangible and exists only in the
eyes of law.
It has no soul, no body but has a position to
enter or exist into a contract.
In short it can do anything just like a normal
person.

Perpetual existence
sec 34(2)

Section 34(2) of the act states that an

incorporated company has a perpetual life.
The life of the company is not related to the
life of its members.Law creates the company
and law alone can dissolve it.
The existence of the company is not affected
by death, insolvency, retirement or transfer
of share of members.

Common seal
A company being an artificial person can
not work as a natural being.
Therefore, it has to work through its
directors, officers and other employees.
Common seal used as a official signature of
a company.

Limited liability
It means that the liability of a member shall
be limited to the value of the share held by
him, he cannot be called upon to bear the
loss from his personal property.

Transferability of
share sec82

The share of a company are freely

transferable. The shareholder can transfer
his share to any person without the consent
of other members.
A company cannot impose absolute
restrictions on the rights of members to
transfer their shares.

 Capacity to sue and being

sued:
A company can sue or be sued in its own name
as distinct from its members.

Separate Management:
A company is administered and managed by its
managerial personnel i.e. the Board of
Directors. The shareholders are simply the
holders of the shares in the company and need
not be necessarily the managers of the
company.

One Share-One
Vote:

The principle of voting in a company is one

share-one vote. I.e. if a person has 10
shares, he has 10 votes in the company. This
is in direct contrast to the voting principle
of a co-operative society where the "One
Member - One Vote" principle applies i.e.
irrespective of the number of shares held,
one member has only one vote.

Distinction between
Company and
A PartnershipPartnership
firm is sum total of persons who have come
together to share the profits of the business carried on by
them or any of them. It does not have a separate legal
entity.
A Company is association of persons who have come
together for a specific purpose. The company has a
separate legal entity as soon as it is incorporated under
law.
Liability of the partners is unlimited. However, the liability
of shareholders of a limited company is limited to the
extent of unpaid share or to the tune of the unpaid amount
guaranteed by the shareholder

 Property of the firm belongs to the partners and they are

collectively entitled to it. In case of a company, the property
belongs to the company and not to its members.
A partner cannot transfer his shares in the partnership firm
without the consent of all other partners. In case of a
company, shares may be transferred without the permission
of the other members, in absence of provision to contrary in
articles of association of the company.
In case of partnership, the number of members must not
exceed 20 in case of banking business and 10 in other
businesses. A Public company may have as many members
as it desires subject to a minimum of 7 members. A Private
company cannot have more than 50 members

 There must be at least 2 members in order to form a

partnership firm. The minimum number of
members necessary for a public limited company is
seven and two for a private limited company.
In case of a partnership, 100 % consensus is
required for any decision. In case of a company,
decision of the majority prevails.
On the death of any partner, the partnership is
dissolved unless there is provision to the contrary.
On the death of the shareholder the company'
existence does not get terminated