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THE COMPANIES, ACT 1956

Presented by: Ashish Chandna Jitin Mehta Kashish Dureja Surbhi Munjal Vinay Pratap

Meaning of a Company under Companies Act,1956


"company" means a company formed and registered under this Act or an existing company.

Here, existing company refers to a company formed and registered under any previous companies law. For e.g. the Indian Companies Act, 1866, 1882 and 1913.

Definition of a company

A Company may be defined as a voluntary association of person who have come together to carry on some business and sharing the profits there from.
Or It is an artificial person created by law, formed for the purpose of business, registered under law having an independent legal entity, a distinctive name, common seal and perpetual succession.

FORMATION OF A COMPANY
Formation or incorporation of A Company For the formation of a company, a company passes through the following thee stages :-

1. Promotion Stage 2. Incorporation Stage 3. Commencement of business stage.

1. Promotion Stage
The stage of conceiving an idea and its working is termed as promotion of a company. The person involved in this task is termed as Promoter. There are certain important decisions which are taken before the formation of the company. There first important matter to decide could be either :(1) To start a new business altogether, or (2) To acquire an already running business, if it is available at considerable attractive terms and conditions. Some time it does happen that some people may start a business without having sufficient knowledge or sufficient experience or sufficient funds and later on they decide to

dispose of that business to avoid huge losses. In such a case it may be better to acquire a running
business with favorable terms and conditions and it may prove to be a good decision. The other important matters be decided before the formation of the company could be the decision regarding the product to be produced, the size of the company, the capital involved in the

project, the sources of the capital and whether it shall be a Private Company or a Public Company.

contd

Any of the above decisions i.e., to start a new business altogether or to acquire an already running business, along with the other matters shall have to be taken by some person or persons who are at the helm of the affairs. They are called PROMOTERS. Where it has been decided to form a Private Company 2 persons and where it has been decided to form a Public Company at least 7 persons shall subscribe their names to a Memorandum of Association and they shall also comply with the other formalities in respect of the registration of the company under the Indian Companies Act, 1956. Document to be filed with the Registrar: It is desirable to ascertain from the Registrar (Registrar of the State in which the Registered office of the company shall be situated) of the companies that whether the proposed name of the company shall be approved if registration is sought for a new company with such name. Where already a company with such name is existing, it shall not be allowed by the Registrar, because tow companies with the similar name cannot be registered.

contd

But if he says yes, because no other company is registered with that name, an application for the registration of the company should be presented to the Registrar of the State in which the Registered office of the company shall be situated. The appl9ication along with necessary fee shall be presented along with the following documents :
(1)

The Memorandum of Association.

(2) The Articles of Association, if any which should be signed by the subscribers to the Memorandum

of Association.
(3) Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company. (4) A statement of the nominal capital of the Company. (5) A notice of address of the registered office of the company.

(6) A list of the Directors who have agreed to become the first Directors of the company along with
their consent to act as Directors and to take up the qualification shares of the company in the case of a public company. (7) A declaration that all the requirements of the Companies Act have been complied with, shall also be submitted, which shall be signed by one nay of the following persons :

(i)

An advocate of the Supreme Court or High Court, or

(ii) An attorney or a pleader entitled to appear before a High Court, or

contd

iii)

A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the

formation of the company, or


(iv) A person named in the Articles as a Directors, Manager or Secretary of the company. Where the Registrar of Companies is satisfied that all the requirement have been complied with, he will register the company and enter the name of the company in the Register of Companies.

2. Incorporation Stage
Where the Registrar of Companies is satisfied that all the requirements have been complied with, he

will register the company, and enter the name of the company in the Register of Companies. When a
company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation in which he certifies that the company is incorporated under his hand and in the case of a limited company that the company is a Limited Company. Minimum number of Directors and shareholders: -

a) For incorporating a Private Limited Company a minimum of two directors are required and minimum two shareholders.
b) For incorporating a Public Limited Company a minimum of three directors are required and minimum seven subscribers.

contd

3. Commencement of business stage


A private company can commence business on receipt of its certificate of incorporation. A public company has the option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus, which provides information about the company to potential investors. The Companies Act specifies the information to be contained in the prospectus. The prospectus has to be filed with the ROC before it can be issued to the public. In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a statement in lieu of prospectus with the ROC. On fulfillment of these requirements, the ROC issues a Certificate of Commencement of business to the public company. The company can commence business immediately after it receives this certificate.

contd

Name Approval

The approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the company will maintain its registered office.

Conditions

This approval is subject to certain conditions. For instance, there should not be an existing company by the same name. and the last words in the name are required to be "Private Ltd." in the case of a private company and "Limited" in the case of a Public Company.

Foreign entry

Foreign companies engaged in trading and manufacturing activities are permitted through RBI to open its branch office in India. The company need to submit form FNC-5 in case opening a branch office or FNC-10 for site office.

Approval

The ROC informs the applicant within seven days from the date of submission of the application weather the names are available or not. Once the name is approved, it is valid for 6 months.

MoA, AoA

Within 6 months MoA & AoA together with miscellaneous documents are required to be filed. A company is formed by registering the MoA & AoA with the Registrar of Companies.

Filing & Scrutiny

After the duly stamped MoA & AoA, documents and forms are filed and the filing duly fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorized person to make necessary corrections.

Approval

The ROC will give the certificate of incorporation after the required documents are presented along with the requisite registration fee, which is scaled according to the share capital of the company, which will be stated in its MoA. In case the MoA & AoA is to be signed by any of the promoters outside India, then the signatures are required to be made in the presence of Consul of India at the Indian Consulate.

CLASSIFICATION OF COMPANIES
Companies under the Companies Act,1956 may be classified on various grounds as under

I. On the basis of business activities taken COMPANIES

(1) Manufacturing Activities

(2) Service Activities

(3) Non-banking finance activities

(4) Non-profit making

(5) Producer

Manufacturing Activities
The use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale. Such finished goods may be used for manufacturing other, more complex products, such as aircraft, household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users the "consumers".

Service Activities
An industry made up of companies that primarily earn revenue through providing intangible products and services. Service industry companies are involved in retail, transport, distribution, food services, as well as other service-dominated businesses. Also called service sector, tertiary sector of industry.

Non-banking finance activities


Engaged in the business of loans and advances, acquisition of shares/stock/bonds/deb entures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/constructi on of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

Non-profit making
A nonprofit organization (abbreviated as NPO, also known as a not-forprofit organization) is an organization that does not distribute its surplus funds to owners or shareholders, but instead uses them to help pursue its goals. Examples of NPOs include charities (i.e., charitable organizations), trade unions, trade associations and public arts organizations. They can be registered in four ways: Trust Society Section-25 Company Special Licensing

Producer
Company involved in producing good and services.

II. On the basis of liabilities of members and directors COMPANIES

(1) With limited liability


a. Limited by Shares

(2) With unlimited liability

b. Limited by Guarantee & having share capital

c. Limited by Guarantee

With Limited Liability


Limited by Shares When the liability of the members of a company is limited by its memorandum of association to the amount (if any) unpaid on shares held by them, , it is known as a company limited by shares Limited by Guarantee and having share capital Where initial working capital is not available through grants, etc., but once the company is set in motion, the normal working funds would be available through fees, subscriptions, charges, etc., received from the services rendered, a guarantee company having share capital may be formed. Limited by Guarantee
A company limited by guarantee is a registered company having the liability of its members limited by its memorandum of association to such amount as the members may respectively thereby undertake to pay if necessary on liquidation of the company. The liability of the members to pay the guaranteed amount arises only when the company has gone into liquidation and not when it is a going concern. A guarantee company may be a company with share capital or without share capital.

With Unlimited Liability

The liability of members of an unlimited company is unlimited. Therefore their liability is similar to that of the liability of the partners of a partnership firm.

III. On the basis of membership pattern/size COMPANIES

(1) Public

(2) Private

(3) Government

a. Listed

a. Inde-pendent

b. Unlisted

b. Subsidiary of Public Co.

Public Listed A public company or publicly traded company is a company that offers its securities (stock/shares, bonds/loans, etc.) for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets. Unlisted a company whose shares are not listed on an exchange

Private Inde-pendent a company whose shares are not listed on an exchange Subsidiary of public Co. If A Pvt Ltd is a subsidiary of B Ltd(which is a Foreign Listed Company) and C Ltd(another foreign Company) holds 25% and an Indian Company holds the remaining Share Capital of A Pvt Ltd. In this case it is a private subsidiary of a Public Co.

Government

Means any company in which not less than 51% of the paid up share capital is held by the Central Government or any State Government or partly by the Central Government and partly by the one or more State Governments and includes a company which is a subsidiary of a government company. Government Companies are also governed by the provisions of the Companies Act. However, the Central Government may direct that certain provisions of the Companies Act shall not apply or shall apply only with such exceptions, modifications and adaption's as may be specified to such government companies.

IV. On the basis of place of registration COMPANIES

(1) Indian Company (Incorporated in India)

(2) Foreign Company (Company incorporated outside India but having place of business in India)

Indian Company A company which is incorporated within India, under the Indian law

Foreign Company A company incorporated in a country outside India under the law of that other country and has established the place of business in India

IV. On the basis of control of management COMPANIES

(1) Holding Company

(2) Subsidiary Company

Holding Company A parent corporation that owns enough voting stock in another corporation to control its board of directors (and, therefore, controls its policies and management). A holding company must own at least 80% of voting stock to get tax consolidation benefits, such as tax-free dividends.

Subsidiary Company A company controlled by another company. A company is deemed to be a subsidiary of another if (but only if): (a) that other (i) is a member of it and controls the composition of its board of directors; or (b) holds more than half in nominal value of its equity share capital; or (b) the first-mentioned company is a subsidiary of any company which is that others subsidiary.

Definition Purpose Importance Clauses

The memorandum of association of a company is the document that governs the relationship between the company and the outside.

The purpose of memorandum is two-fold: First, to enable the prospective investors to know the purpose for which their money is going to be used and what risk they are taking in making the investment. The second, to inform the outsiders dealing with the company as to what is its permitted range of activities in which it may lawfully engage.

Contains the basic conditions on the strength of which a company is incorporated, namely, the name of the company, the place of its registered office, the objects within which it can operate, the nature of liability of its members. It defines the powers of the company. It states what the company can do, what are its powers and at the same time sets out the limit outside which the company cannot function. It also regulates the affairs of the company in relation to the outsiders.

Name Clause Situation Clause (Domicile clause or Registered office clause) Objects Clause of a company is split up as follows: i) main objects of the company, ii) objects incidental or ancillary to the attainment of main object, & iii) any other objects Liability Clause Capital Clause Association Clause(must be signed by each subscriber in presence of one witness)

I. Change of Name: Section 21 provides that the name of a company may be changed at any time by passing a special resolution at a general meeting of the company and with the written approval of the Central Government..

Since the situation clause in the memorandum does not contain the exact location or city address of the company, the need for alteration in the registered office clause will arise only when the registered office shifted from one state to another

A) Within the same City B) Within the same State - Within the jurisdiction of the existing RoC in the same state - Within the jurisdiction of another RoC in the same state C) From one State to another State

A)Grounds for shifting. A company can shift its registered office from one State to another for certain purposes only as specified in sec. 17(1). These are :

The liability of a member of a company cannot be increased unless the members agrees in writing . On alteration, the Registrar shall close the former registration of the company and the new registration shall take effect as if it were the first registration.

These alterations can be done by passing an ordinary resolution, if authorised by the articles (Sec. 94). Alteration of capital clause may involve the following types of alterations A) Increase of authorised share capitalB) Consolidation and sub-division of shares-

What you should know : Definition Need Purpose Contents of Memorandum of Association Difference between AOA and MOA

It defines as well as confines the powers of the company.It states what the company can do, what are its powers and at the same time sets out the limit outside which the company cannot function. It alsoregulates the affairs of the company in relation to THE OUTSIDERS..

Contains the basic conditions on the strength of which a company is incorporated, namely, the name of the company, the place of its registered office, the objects within which it can operate, the nature of liability of its members and capital structure. Also described as - Charter or Constitution of the Company.

The purpose ; two-fold: First - To enable prospective investors to know purpose for which their money is going to be used and what risk they are taking in making the investment. Second - To inform outsiders dealing with company as to what is its permitted range of activities in which it may lawfully engage.

A. Name Clause B. Situation Clause (Domicile clause or Registered office clause) C. The objects clause of the memorandum of association of a company is split up as follows: i) main objects of the company, ii) objects incidental or ancillary to the attainment of main object, & iii) any other objects. D. Liability Clause

MOA
It is the character of the company indicating the nature of its business

AOA
They are regulations for the internal management of the company

It defines the scope of the activities They are rules for carrying out the of the Company objects of the company It is being the character of the company Every Compant must have its own memorandum There are strict restrictions on its alteration They are subordinate to the memorandum A Company limited by shares need not have Articles of its own. Can be altered by Special Resolution

SHARES
Meaning
A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder (the shareholder) to an equal claim on the company's profits and an equal obligation for the company's debts and losses.

Two major types of shares are (1) ordinary shares (common stock), which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings,

(2) preference shares (preferred stock) which entitle the shareholder to a fixed periodic income (interest) but generally do not give him or her voting rights.

In other words, A share is the interest of a shareholder in the company, measured by a sum of money, for the purpose of liability in the first place, and of interest the second, but also consisting of a series of mutual agreement entered into by all the shareholder inter se in accordance with the companies act.
Thus a share, i) Measures the right of a shareholder to receive a certain proportion of the profits of the company while it is a going concern and to contribute to the assets of the company when it is being wound up; and ii) Forms the basis of the mutual agreement contained in the articles binding the shareholders between themselves.

Types of shares
According to section 86 of the companies act, a company can issue only two types of shares: (a) Preference shares; and (b) Equity shares.

Preference shares:
A preference share must satisfy the following two conditions: I) It shall carry a preferential right as to the payment of dividend at a fixed rate; and II) In the event of winding up, there must be a preferential right to the repayment of

the paid up capital.


These are two dominant characteristics of preference shares. So preference share may or may not carry such other right as: (a) A preferential right to any arrears of dividend; (b) A right to share in surplus profits by way of additional dividend; (c) A right to be paid a fixed premium specified in the memorandum; and (d) A right to share in surplus assets in the event of a winding up, after all kinds of capital have been repaid.

Types of Preference shares:

Cumulative and Non-Cumulative


In the case of cumulative preference shares, if the profits of the company in any years are not sufficient to pay the fixed dividend, on the preference shares the deficiency must be made up out of the profits of subsequent years. The accumulated arrears of dividend must be paid before anything is paid out of the profits to the holders of any other class of Shares In the case of non-cumulative preference shares, the dividend is only payable out of the net profits of each year. If there are no profits in any year, the arrears of dividend cannot be claimed in the subsequent years.

Participating and Non-Participating


Participating preference shares are those shares which are entitled, in addition to preference dividend at a fixed rate, to participate in the balance of profits with the equity shareholders after they get a fixed rate of dividend on their shares. The participating preference shares may also have the right to share in the surplus assets of the company on its winding up. Non-participating preference shares are entitled only to a fixed rate of dividend and do not share in the surplus profits. The preference shares are presumed to be nonparticipating, unless expressly provided in the memorandum or the articles or the terms of issue.

Redeemable and Irredeemable


According to section 80, a company limited by shares, if so authorized by its articles, may issue redeemable preference shares. Such shares may be redeemed either after a fixed period or earlier at the option of the company. In the case of irredeemable shares, the capital is to be returned on the winding up of the company.

Equity shares:
All shares which are not preference shares are equity shares. Equity shareholders have the residual rights of the company. They may get higher dividend than preference shareholders if the company is prosperous or get nothing if the business of the company flops. In the winding up, the equity shares are entitled to the entire surplus assets remaining after the payment of the liabilities and the capital of the company; unless the articles confer right on the preference shares a right to participate in the distribution of surplus assets.

Categories

Advantages of Equity Shares


It is a good source of long-term finance. A company is not required to payback the equity capital during its life-time and so, it is a permanent sources of

Long-tern Capital

and

Permanent

capital. equity shares suppose no fixed burden on the company's resources, because

No Fixed Burden

the dividend on these shares are subject to availability of profits and the intention of the board of directors. Issuance of equity share capital creates no change on the assets of the

Credit worthiness

company. A company can raise further finance on the security of its fixed assets. Equity capital is said to be the risk capital. A company can trade on equity in bad periods on the risk of equity capital.

Risk Capital

Dividend Policy

A company may follow an elastic and rational dividend policy and may create huge reserves for its developmental programmes.

Categories

Disadvantages of Equity Shares


Each sale of equity shares dilutes the voting power of the existing equity

Dilution/division in control

shareholders and extends the voting or controlling power to the new shareholders. Equity shares are transferable and may bring about centralization of power in few hands. Excessive issue of equity shares may result in over-capitalization. Dividend

Over-capitalization

per share is low in that condition which adversely affects the psychology of the investors.

No

flexibility

in

capital

Equity shares cannot be paid back during the lifetime of the company. This characteristic creates inflexibility in capital structure of the company. It costs more to finance with equity shares than with other securities as the

structure

High cost

selling costs and underwriting commission are paid at a higher rate on the issue of these shares. Equity shares of good companies are subject to hectic speculation in the stock

Speculation

market. Their prices fluctuate frequently which are not in the interest of the company

DEBENTURES
a debenture is a document that either creates a debt or acknowledges it.
In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. Debentures are generally freely: freely transferable by the debenture holder Debenture holders have no rights to vote in the company's general meetings of shareholders The interest paid to them is a charge against profit in the company's financial statements

TYPES OF DEBENTURES
Convertible/ Non-convertible
Convertible debentures which can be converted into equity shares. These debentures have an option to convert them into equity or preference shares at the stated rate of exchange after a certain period. Non-convertible debentures are those which cannot be converted either into equity shares or preference shares.

Redeemable/ Irredeemable
Redeemable debentures are issued by the company for a specific period only. On the expiry of period, debenture capital is redeemed or paid back. Irredeemable debentures are issued for an indefinite period which are also known as perpetual debentures. The debenture capital is repaid either at the option of the company by giving prior notice to that effect or at the winding up of the company.

Secured/Unsecured
Secured debentures which are secured against the assets of the company which means if the company is closing down its business, the assets will be sold and the debenture holders will be paid their money. Unsecured debentures which are not secured against the assets of the company which means when the company is closing down its business, the assets will not be sold to pay off the debenture holders.

Advantages

Disadvantages
Unlike ordinary shares, debenture

Debentures are more secure

holders

are

not

considered

the

owners of the company. They are long term loan capital and holders will have no right to vote at the annual general meeting

Debt

can

be

redeemed

when

Get a lower rate of theoretical return

company has surplus funds

Debentures are for those who want


a safe and secure income as they are guaranteed payments

Cost of raising debt is high

DIRECTORS

The company carries on its business through individuals called directors.

Collectively they are called Board of Directors


No body corporate, association or firm can be appointed as a director of a company, and only an individual can be appointed

ABOUT THE DIRECTORS


Every Public Company must have at least 3 directors A Public Company having A paid up capital of Rs. 5 crore or more and One thousand or more shareholders Can elect a director by small shareholders. A private company must have at least 2 directors Subscribers of the memorandum who are individuals, are deemed to be the directors of the company, until the directors are duly appointed in accordance with the Act. A company, at a general meeting may, by ordinary resolution, increase or reduce the number of its directors within the limits fixed in that behalf by its articles.

A company can have a maximum number of 12 directors and to increase this number, the approval of Central Government is required.

QUALIFICATION
There are the minimum number of shares a person must own, as provided in the articles of the company, in order to qualify to become a director of the company. Each director must take his qualification shares within two months after his appointment.

The face value of the qualification shares cannot exceed five thousand rupees, or if the face
value of one share is more than five thousand rupees, then the qualification share will be one qualification share. A director is required to hold certain shares as qualification shares if such requirement is here in the Articles of Association of the company. The articles cannot require a director to acquire qualification shares within a shorter period.

DISQUALIFICATION OF DIRECTORS
A person shall not be capable of being appointed director of a company, if,
he has been found to be of unsound mind by a Court of competent and such finding remain in force he is an undercharged insolvent he has applied to be adjudicated as an insolvent and his application is pending he has been convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence

Appointment of Directors
This can be done in following way:

Appointment of first directors Appointment at general meeting

Appointment by the board of directors


1. As an additional directors 2. To fill causal vacancies 3. To appoint alternate directors. Appointment by third parties Appointment by central government Appointment by proportional representation

VACATION OF OFFICE BY DIRECTORS


The directorship of a director automatically ceases if,
He fails to obtain qualification shares He fails to pay any call in respect of shares of the company held by him He absents himself from 3 consecutive meetings of the board of directors, or from all meetings of the board for a continuous period of 3 months, whichever is longer, without obtaining leave of absence from the board He is removed by the shareholders by resolution passed in a general meeting He is found to be unsound mind by a court of competent jurisdiction.

Removal of directors
A company may, by ordinary resolution passed in annual general meeting, remove the director before the expiry of his term of office. Following directors cannot be removed by shareholders in general meeting:

Directors appointed by central government Directors appointed by principal of proportional representation Directors appointed by central government under industries Directors appointed by financial institutions under statutory powers Directors appointed by company law board

REMUNERATION OF DIRECTORS

Directors
The overall maximum remuneration payable to directors and its managers in one financial year If a company has only one director If a company has more than one director The director is not a whole time director

Remuneration
Not more than 11% of the net profits of the company for that financial year Not more than 5% of the net profits Not more than 10% of the net profits for all of them together Not more than 1% of the net profits

Power of directors:

Power to make calls on shareholders in respect of money unpaid on their shares Power to issue debentures Power to borrow money other than debentures Power to invest funds of company Power to make loans Power of filling causal vacancies Sanctioning contract in which director is interested Power to recommend rate of dividend at annual general meeting Power to make political contribution

Duties of directors
1. Statutory duties 2. General duties

Statutory duties:
a) c) e) f) To file return of allotments To disclose interest Duty to attend board meeting To authenticate and approve annual financial statement b) Not to issue irredeemable preference shares or shares redeemable after 20 years

d) To disclose receipt from transfer of property

g) To appoint first auditor of the company h) To make declaration of solvency in case of winding up

General duties:
a) Duty of good faith

b) Duty of care c) Duty not to delegate

Liabilities of directors
Liability to the company Liability to the company may arise from: I. II. III. Breach of fiduciary duty Ultravire acts Negligence

IV. Malafide acts Liability to third parties: I. II. III. Prospectus With regard to allotment Fraudulent activity

There are two modes :1. By tribunal under section 433 2. Voluntary members voluntary winding up creditors voluntary winding up under section 488

A company which was formed for a particular duration or event as per its articles , may wind up voluntarily after the expiry of period or occurrence of event by passing an ordinary resolution in general meeting. Any other company may wind up voluntarily by passing special resolution.

Within 14 days of passing the resolution, the company shall give the notice of the resolution in official gazette and also in newspaper circulating in the district where

registered office of the company is located.

If default is committed in publishing the notice, the company and officer shall be punishable with fine up to rupees 500 for everyday during for which the default continues.

A voluntary winding up is deemed to have commenced from the day when the resolution is passed at the general meeting. The company shall cease to carry on its business from that day except such business as may be required for the beneficial to winding up. The corporate status and the corporate powers of the company shall continue until it is dissolved.

The board of the directors shall make declaration at a meeting of the board and it should be approved by a majority of the directors where the company has more than two directors and by all directors in other cases.

Statement shall contain following particulars:

The assets of the company, cash balance in hand and at bank and the negotiable securities

Its debt and liabilities Names and occupation of its creditors, the amount due whether secured or unsecured Debts due to the company, names and occupation of debtors

The statement shall be submitted within 21 days from the date of commencement of voluntary winding up under

section 486

1.

Appoint or remove liquidator (section 515) :In voluntary winding up there is no need of liquidator, the tribunal may require official liquidator

For sufficient reasons the tribunal may remove a liquidator Liquidator shall within 30 days of his appointment publish a notice in the gazette and also deliver to the registrar for registration

Liquidators remuneration will be fixed by tribunal and credited to central government

Liquidator shall take part in examination sanctioned by tribunal Any creditor may participate in examination either personally or by chartered accountant or company secretaries or cost accountants or legal practitioners entitled to appear before tribunal

The tribunal may ask any question as he thinks fit

As soon as affairs of the company are wound up, liquidator

should take some steps:

Make an account as to how the winding up has been conducted and how the property of company has been

disposed off

Call a general meeting of the company and the meeting of creditors for the purpose of placing the accounts before the meetings

A meeting of the members of the company will be held

The meeting shall be called by giving advertisement given in


the newspaper circulated around the district where registered office is situated at least one month before the meeting

The notice of the meeting shall also be published in the


official gazette one month before the meeting Within one week after the date of the meeting, the liquidator

shall send a report to the registrar of the companies about


the date on which meeting was held

Foreign direct investment (FDI) or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. It usually involves participation in management, joint-venture, transfer o technology and expertise. There are two types of FDI:

inward foreign direct investment outward foreign direct investment, resulting in FDI inflow (positive or negative) and "stock of foreign direct investment", which is the cumulative number for a given period. Direct investment excludes investment through purchase of shares.

A foreign direct investor may be classified in any sector of the economy and could be any one of the following:

an individual; a group of related individuals; an incorporated or unincorporated entity; a public company or private company; a group of related enterprises; a government body; an estate (law), trust or other social institution

The foreign direct investor may acquire voting power of an

enterprise in an economy through any of the following


methods:

by incorporating a wholly owned subsidiary or company

by acquiring shares in an associated enterprise


through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor

or enterprise