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An association of like-minded persons formed for the purpose of carrying on some business or undertaking. It denotes a joint stock enterprise in which the capital is contributed by a large number of people. A company owes its existence either to a special Act of Parliament or to Company Legislation. A company is a legal person separate from
Company
means
company
formed
and
An association of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business and who
Characteristics
Corporate Personality Limited Liability Perpetual Succession Separate Property Transferability of Shares Common Seal Contractual Rights Capacity to sue and be sued Limitation of Action Separate Management Termination of its Existence
SOLE TRADER
Easy to set up (no legal documents) Keep all the profits Make all the decisions Personal contact with customers
Unlimited liability ( if your business fails you could lose all your own personal wealth) Suffer all losses yourself
2 to 50 owners called shareholders. Shares (part ownership) cannot be bought by the general public.
Private Company
A company which has a min. paid-up capital of Rs.100,000 and by its Articles (a) restricts the right to transfer its shares; (b) limits the number of its members to fifty; (c) prohibits any invitation to subscribe for any shares in, or debentures of the company; and (d) prohibits any invitation or acceptance of deposits from public. [Sec 3(1)(iii)] Must necessarily have its own Articles of Association. Should have at least two directors. The word 'Private Limited' must be added at the end of its name.
Conversion by default
Where a default is made by in complying with the provisions of Section 3(1)(iii), i.e. restriction on transfer of shares; limitation of the number of members to fifty; prohibition of invitation to the public to buy shares or debentures; and prohibition of invitation or acceptance of deposits from the public; The company ceases to enjoy the privileges and exemptions conferred on a private company.
Where not less than 25% of its paid-up capital is held by one or more bodies corporate; or where the annual average turnover is not less than Rs 25 crores or more for three consecutive financial years; or where a private company holds 25% of the paid-up capital of a public company; or where a private company accepts, or renews deposits from the public. In case a private company becomes a public company, it shall inform the RoC within three months.
Limited liability - If the business fails you can only lose the money that you invested in the company. Your own personal wealth cannot be touched. Business continues even when an owner dies. Easier to raise finance as you have up to 50 shareholders.
Legal Documents are needed to set up a co. More costly to set up. Decision making and profits are shared.
Co-operative
Characteristics of a Co-operative
Each member must buy at least one share. Each member has only one vote. Each member has an equal say in the running of the business.
Advantages of a co-op
Disadvantages of a co-op
For members who own a lot of shares they only get one vote. Profits are shared in the form of dividends.
A government minister is responsible for each state company. They appoint a board of directors. The government keeps the profits or reinvests it in the company.
Ensure that essential services are provided to all people in the country. Provide employment to a large no. of people.
Privatisation
When a Semi-State Body is sold to the general public. A huge amount of money is received by the government. The government no longer has control of the company.
Nationalisation
When a company that is important to the economy is making a loss. The government takes over in order to avoid massive job losses.
Public Company
A Public Company means a company which is not a Private Company; has a minimum paid-up capital of Rs 5 lakhs or such higher capital as may be prescribed; is a private company which is a subsidiary of a company which is not a private company. [S. 3 (1) (iv)] It consists of not less than seven members and three directors. Distinction between a public company and a private company.
A company is deemed to be the holding company of another if, but only if, that other is its subsidiary." [Sec 4(4)] Where a company controls the composition of Board of Directors of another company, the latter becomes the subsidiary of the former; or When a company holds more than half of the equity capital of another company, the latter becomes the subsidiary company of the former; or Where a company is subsidiary of another company which is itself a subsidiary of the controlling company, the former becomes the subsidiary of the controlling company.
Government Company
A Government Company means any company in which not less than 51 per cent of the paidup share capital is held by (a) the Central Government, or
Statutory Corporations
Formed under an Act of Parliament or State Legislature. Change in its structure is possible only by a legislative amendment. Immunity from Parliamentary scrutiny in day-today working. Freedom in regard to personnel, its employees are not civil servants. It is a body corporate having characteristics of a corporation. Independent finances- Obtains funds by borrowing and through revenue derived from sale of goods/services. Commercial Audit - audit is entrusted to CAG.
Foreign Companies
Incorporated in a country outside India and has a place of business in India. Every foreign company shall, within 30 days, file with RoC the following documents: A certified copy of the Charter, Statutes, Memorandum and Articles of the company in English. The full address of the registered or principal office of the company. A list of the directors and secretary of the company. The names and addresses of any person/s
Foreign Companies
The full address of the principal place of business in India. The documents which a foreign company has to file with the Registrar, shall be delivered to the Registrar of the state where the principal place of business of the company is situated and also with the Registrar at New Delhi.
Section 25 Companies
Types of Company Availability of Name The Memorandum and Articles of Association duly signed, and stamped. The agreement, if any with any individual for appointment as its Managing or whole-time director. Consent of directors in Form 29. Notice of Registered address in Form 18 to be given within 30 days of the date of incorporation. Particulars of Directors in Form 32.
Payment of Registration Fees. Power of attorney, to fulfill various legal and other formalities. Statutory Declaration in Form No. 1 that all requirements of the Companies Act and the rules thereunder have been complied with. The declaration should be made by either an advocate of Supreme Court / High Court, a practicing Chartered Accountant or a director, or a manager or a secretary named in the Articles of the proposed company. [Section 33 (2)]
Promoters
According to SEBI (Substantial Acquisition and Takeover) Regulations, 1997 the term promoters means: the person or persons who are in control of the company ;or person or persons named in any offer document as promoters. a relative of the promoter within the meaning of Section 6 of the Companies Act. Should be members of HUF only;or Are husband or wife; or Related to other as indicated in Schedule IA.
Promoters
in case of a corporate body : i) a subsidiary or a holding company; or ii) any company in which the promoters hold 10% or more equity capital; or iii) any body corporate in which a group of individuals or corporate bodies or a combination thereof holds 20% or more of equity capital.
Judicial interpretation
Whether one is promoter or not will be determined with reference to the nature of the role he/they play in implementing the objectives for which the company is formed. The persons who assume the primary responsibility of matters relating to promotion of a company are called Promoters. One who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose.
Judicial interpretation
Promoter is a term not of law but of business usually summing up in a single word a number of business operations familiar to the commercial; world by which a company is generally brought in to existence. (Bowen L.J., 1880) Who constitutes a promoter in a particular case is therefore a question of fact. A promoter may be a natural person or a company.
Memorandum of Association
It contains the fundamental rules regarding the constitution of the company. It lays down how the company is going to be constituted and what work it shall undertake. It sets out the constitution of the company. It is a foundation on which the structure of the company stands. Its purpose is to enable the shareholders, creditors, and those who deal with the company to know what is the permitted range of its enterprise. It defines as well as confines the power of the company.
Name Clause
Name Clause
A company not to be registered under a name which is undesirable, identical or too nearly resembles another company. [Section 20] It must not be misleading or intended to deceive with reference to its object. A mere similarity of name does not give right to injunction, there should be likelihood of deception or confusion. The name and address must be printed or affixed outside every office in English and local language. Inadvertent mistake in name can be changed by passing an ordinary resolution and by obtaining written approval of Central Government.
Situation Clause
incorporation.
Object Clause
Must divide object clause into two subclauses - Main Objects and Other Objects. It determines the purpose and capacity of the company hence carry great importance. Acts beyond this ambit are ultra vires and hence void. Even the entire body of shareholders cannot ratify such acts. Subscribers enjoy unrestricted freedom to choose the objects.
An act or transaction, which may not be illegal, is beyond company's power by not being within the object of the Memorandum. An act ultra vires the company is incapable of ratification. Act which is intra vires the company but outside the authority of directors may be ratified by the company in proper form. The shareholders can ratify an act ultra vires the directors.
Liability Clause
The Memorandum of a company limited by shares or by guarantee shall state that the liability of its members is limited. Where the liability is limited by shares, a member can be called upon to pay only the unpaid balance on his shares. In case the company is limited by guarantee the members are liable up to the maximum amount which they have guaranteed. Where the company is limited by both share and guarantee the liability of members is dual.
Capital Clause
Shares must be of fixed value. Nominal, authorised or registered capital. Not authorised to issue capital beyond its authorised capital unless the Memorandum is altered. In case of unlimited company having share capital, the liability is unlimited as against creditors only in case of winding up. In case of going concern, liability is limited to shares subscribed.
Association Clause
Must be signed by each subscriber in presence of one witness. Each subscriber must take at least one share. A subscriber cannot, after registration of company, repudiate his liability even on the
Articles of Association
Articles are by-laws or rules and regulations for the govern the management of its internal affairs and conduct of business. It also includes regulation contained in Table A of Schedule I. Deals with the rights of the members inter se. Articles are subordinate to and controlled by Memorandum.
Articles of Association
Unlimited companies, companies limited by guarantee and private companies must have their own Articles of Associations.
Must be printed, divided into paragraphs, numbered consecutively, stamped adequately, signed by each subscriber to Memorandum and duly witnessed.
Alteration of Articles
Subject to the provisions of the Act and Memorandum, a company, by special resolution alter the Articles. [Section 31]
The alteration binds members in the same way as original Articles. A company cannot in any manner deprive itself of the powers to alter its Articles.
Limitation on Alteration
Must not exceed the power in the Memorandum. Must not be inconsistent with the provisions of the Act. Must not include anything illegal or opposed to
public policy.
Must be bona fide for the benefit of the company. Must not constitute fraud on minority. Cannot be altered so as to have retrospective effects.
Prospectus
"Any document described or issued as a prospectus and includes any notice, circular, advertisement, or other document inviting deposits from the public or for the subscription or purchase of any shares in, or debenture of a body corporate." [(Section 2(36)]
An invitation to public.
Judicial Pronouncements
If the statement contains any misinformation or omission, the liability, civil and criminal, is same as in case of Prospectus - Fine up to Rs 10,000.
The process of issuing securities through a statement in lieu of prospectus is a kind of private placement.
Shelf Prospectus
Concept introduced by Amendment Act 2000 by the insertion of Section 60A. A prospectus issued by any financial institution or bank for one or more issues of securities.
Public Financial Institutes, public sector banks or scheduled banks whose main object is financing shall file a shelf prospectus. Not required to file prospectus afresh at every stage of offer by it within the period of validity of such prospectus.
a process undertaken prior to the filling of a prospectus by which a demand for the securities proposed to be issued is elicited and
the price and terms of issue is assessed by means of a notice, circular, advertisement or document."
Information Memorandum
Companies intend to issue securities may circulate Information Memorandum to public. Offer a Red-Herring prospectus 3 days before the opening of offer. "Red-herring prospectus means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities
Abridged Prospectus
prospectus.
Abridged Prospectus
The information in Abridged Prospectus to be given under 9 heads: (a) General Information (b) Capital Structure of the company (c) Terms of the Present Issue (d) Particulars of the Issue (e) Company, Management & Project (f) Financial Performance for last 5 years (g) Payments / Refunds (h) Particulars of Companies under Same Management (i) Management's perception of Risk Factors
Share Capital
In relation to a company limited by share it means share capital - in terms of rupees divided into specified number of shares of a fixed amount each. The memorandum must state the amount of capital and its various division. (a) Nominal, Authorised or Registered Capital (b) Issued Capital (c) Subscribed Capital (d) Called-up Capital (e) Un-called Capital (f) Paid-up Capital
"A share means a share in the share capital of a company, and includes stocks except where a distinction between stocks and shares is expressed or implied." [Section 2(46)] "The interest of a shareholder in a company measured by a sum of money, for the purpose of liability in the first place and of dividend in the second." Farewell J
"An interest measured by a sum of money and made up of diverse rights conferred by Articles." The Supreme Court of India
"A share is right to participate in the profits made by a company, while it is a going concern and declares dividend, and in the assets when it is wound up."
Kinds of Shares
Two classes of Shares [Sec 86 as amended in 2002] (A) Equity Share [Sec 85(2)] "Equity Share Capital means all share capital which is not preference share capital." The equity shareholders receive dividend out of profits declared in AGMs. Dividend declared only after depreciation allowance and payment of preference shareholders. Voting right is in proportion to paid-up equity
Kinds of Shares
(B)
Preference shares capital is that part of share capital which fulfills following two conditions:
Sweat Equity Shares means equity shares issued to employees or directors at a discount for consideration other than cash for providing know-how or making available rights in the nature of intellectual property or value addition by whatever name called. Issue must be authorised by a special resolution. Resolution to specify number, current market price and consideration of shares, and the class or classes of directors or employees.
years has, at the date of the issue, elapsed since the company was entitled to commence business.
If
shares are listed, the issue must be in accordance with SEBI regulations.
limitation, restriction and provisions of equity shares are applicable.
All
From Promoters
Private companies cannot invite general public to subscribe its share capital. Public companies can raise the necessary capital by private placement without inviting the general public to subscribe. (not made to more than 49 persons at a time)
From Public
By issuing a prospectus. By an offer for sale or by deemed prospectus: a) Company offers/agrees to allocate shares to a financial institution or an Issue House for sale to public. (b) The issue house publishes a document called an Offer For Sale at a price higher than what its holder/s had paid or at par. The document is deemed to be a prospectus u/s 64(1).
From Public
By a)
placing of shares:
A broker or an underwriter finds persons who wish to buy shares. broker acts merely as an agent.
(b) The
(c) No
Companies are required to issue Letter Of Offer to the existing shareholders of the company.
Book Building
A process by which demand for proposed securities is build up and a fair price and quantum of the issue is determined. The Book Runner Lead Manager (BRLM) maintains a book wherein bids by individual and institutional investors (through syndicate member-merchant banker) are recorded.
Syndicate member have an underwriting agreement with BRLM and BRLM in turn enter into an underwriting agreement with the company.
Book Building
Two scheme of book building process - 75% Scheme (i.e. 75% of the issue size is offered by
Companies may issue shares at premium irrespective of the fact whether the shares are listed or not. No restriction in Companies Act on issue at premium, the only restriction is on the utilization of premium amount. Premium cannot be treated as profit as such the amount not available for distribution as dividend. Premium amount must be kept in separate account called Securities Premium Account.
If premium is received in kind, an amount equal to premium amount must be transferred to Securities Premium Account. Premium to be used only for the following purposes as mentioned in Section 78(2):
Called Right Shares. May be issued at any time after two years from incorporation or one year from first allotment, whichever is earlier. Must be offered to the existing shareholders in proportion to their holding. For listed company, information on quantum and proportion shall be supplied to the concerned stock exchange. Company must give notice of offer and the number of shares offered to existing
Give shareholders 15 days to decide. The notice must state the shareholder's right to renounce the offer in whole or in part in favour of some other person. The board may dispose of the shares in a manner beneficial to the company. Condition of issue of shares to persons other than existing shareholders. [Section 81 (1A)]: 1. Pass a special resolution in general meeting, and 2. In case of ordinary resolution Central Govt.'s approval must be obtained.
Bonus Issue
When company accumulates large distributable profits it convert it into capital. Divide the capital among the existing shareholders in proportion to their entitlement. Members do not have to pay for such shares. Bonus issue is a machinery for capitalizing distributable profits.
Bonus Issue
Paid-up capital increases. Conversion of free reserves, like general reserve, capital redemption reserve, development rebate reserve, securities premium account, etc. Must be authorised by the Articles. Must be sanctioned in the AGM on the recommendation of the board. Authorised capital must be increased wherever necessary.
The offer is subject to approval of shareholders by a special resolution. Minimum one year period is prescribed between the grant of offer and its vesting.
After the lapse of one year the period would be determined by the company. ESOP Scheme to be under the superintendence and direction of Compensation Committee of the board.
A company cannot buy its own shares as it amounts to reduction of share capital without court's consent. [Section 77(1)] A company may not get another person to buy its share on its behalf, indirectly. A public company or its subsidiary must not finance the purchase, directly or indirectly, of its own shares or of its holding company.
Exceptions
Company may redeem redeemable preference shares u/s 80. A banking company may lend money in the ordinary course of business to buy shares. Financial assistance for purchase of fully paid shares by trustee of or for share held for the benefit of employees of the company. Loan may be advanced to the bona fide employee other than directors, or managers to purchase fully paid shares for amount not exceeding six months' salary / wages. Company may buy its share from a member under a Court order under Section 402.
From the open market (through Stock Exchanges). From odd lot holders.
Conditions of Buy-back
Must be authorised by the Articles. Special resolution is AGM authorizing Buyback. Buy-back is, or less than, 25% of paid-up capital or free reserves in that financial year. Debts owned by company is not more than twice its capital and free reserves after such buy-back. (Central Govt. may relax the ratio) Buy-back should complete within 12 months
Conditions of Buy-back
Declaration of solvency (Form 4A) signed by the MD and one director must be filled with the RoC and SEBI. After buy-back is complete the securities must be physically destroyed within 7 days. Company shall not make a further issue of shares / securities for 6 months, except by way of bonus shares. Prescribed return in Form 4C to be filled with RoC and SEBI within 30 days.
Conditions of Buy-back
The company must maintain a register of buy-back mentioning the consideration paid, date of cancellation / destruction of securities. Contravention of Section 77A would make the company or officer punishable with fine up to Rs 50,000 and /or imprisonment up to 2 years. If buy-back is out of free reserve, a sum equal to the nominal value of shares be
No company shall directly or indirectly purchase its own securities: Through any subsidiary including its own subsidiary or, Through any investment company. If any default in repayment of deposit, interest thereon, redemption of debenture / preference shares, payment of dividend, repayment of any term loan is subsisting. If company has not complied with provisions of Sections 159, 207 and 211 of the Act.
Board of Directors
The Board of Directors of a company is a nucleus selected according to the procedure prescribed in the Act and the Articles of Association, out of the entire mass of shareholders and even nonshareholders. Acting collectively as a Board of Director, they can exercise all the powers of the company except those, which are prescribed by the Act to be specifically exercised by the company in the general meeting. Directors, as a body, frame the general policy of the company, direct its affairs, appoints the company officers, ensures that they carry out their duties and recommend to the share holders
Board of Directors
There are mainly two types of company directors - Executive Directors or Whole-Time Directors (MD, Technical Directors) and, Non-executive or part-time Directors who are professionals and serve on the board of many companies. Executive directors have employment stake in the company. They wield substantial power, enjoy maximum remuneration, perquisites, fees, commission and allowances. Part-time directors get only sitting fees for the board meetings attended by them and wield little or no powers.
Board of Directors
"A director includes any person occupying the position of director by whatever name called." [Section 2(13)] Only individual, and not a body corporate, association or firm, shall be appointed as director. [Section 253] "An individual who direct, control, manage, superintend the affairs of the company in the form of the board of directors."
Types of Directors
Professional Directors Specialist in different fields of management. Income derives principally from sitting fees. Nominee Directors Appointed by FIs, or Banks Powerful tool of project supervision, monitoring and control. Executive Directors Is a full time employee of the company. May not be members of the board, as such not a director in strict sense.
Types of Directors
Independent Directors Do not have any material pecuniary relationship or transaction with the company. Entitle to receive director's remuneration. Government Directors (Section 408) Appointed by the Central Government on the recommendation of the CLB. To safeguard the interest of the company or its shareholder or in public interest. When the operations of the company are conducted in such a manner as to oppress any member of the company or in a manner prejudicial to the company.
Types of Directors
Whole-time Directors [Section 269(1)] Includes a director in the whole time employment of the company. Technical director, legal director, works director sales director if appointed on full time basis. A whole-time director is also a managerial person. [Section 268(1)] They cannot accept the office of executive or whole-time director in any other company. There is no restriction on the period of appointment of a whole time director, he may be appointed for a longer period.
Types of Directors
There are mainly two types of company directors Executive Directors or Whole-Time Directors (MD, Technical Directors) and, Non-executive or parttime Directors who are professionals and serve on the board of many companies. Executive directors have employment stake in the company. They wield substantial power, enjoy maximum remuneration, perquisites, fees, commission and allowances. Part-time directors get only sitting fees for the board meetings attended by them and wield little or no powers.
Managing Director
A director who, by virtue of an agreement, or of a resolution passed in the general meeting or board meeting or by virtue of the Memorandum or Articles, is entrusted with substantial power of management and includes a director occupying the position of MD, by whatever name called. [Section 2(26)] Powers exercised subject to the superintendence, control, and direction of the company's board of directors. A person who is not a director of the company must be first appointed as an additional director in accordance with Section 260 to be appointed as MD.
Managing Director
He must sign and file his consent to act as a director pursuant to the provisions of Section 264 and obtain qualification shares u/s 270. He may have dual capacity that of an employee and agent. It obligatory for public companies having paid up capital of Rs 5 crore or more to appoint a MD or whole-time director. Appointment of MD or whole-time director in a public company only with the prior approval of the central govt.
Qualification of Directors
According to Sec 274 a person shall not be capable of being appointed as director if: found to be of unsound mind; an un-discharged insolvent; applied to be adjudicated as an insolvent; convicted of any offence involving moral turpitude and sentenced for not less than six months and a period of 5 years has not elapsed;
Qualification of Directors
has not paid any call in respect of shares and six months have elapsed; an order u/s 203 is passed by a court disqualifying him;
is already a director of a public company which has not filled annual returns for three years, or has failed to repay the deposits or interest thereon or redeemed its debentures.
Appointment of Directors
First directors may be named in the Articles or subscriber to the memorandum shall be first directors. One third of the total directors are liable to retire by rotation every year and are eligible for reappointment in the General Meeting. [Section 256] Directors who have been longest in the office to retire first. Directors nominated by financial institutions or by the Central Govt. u/s 408 are not liable to retirement. MD and Whole-time director shall not be liable to
Appointment of Directors
A
retiring director may be re appointed at the same AGM, some other person may also be appointed in his place. [Section 256(3)] the adjourn meeting, if the vacancy is not filled and it was not expressly resolved not to fill the vacancy, the retiring director shall be deemed to have been reappointed, provided:
At
Appointment of Directors
Any person other than the retiring director may give a notice not less than 14 days before an AGM about his candidature as a director or any member may give such notice signifying his intention to propose him as a candidate for that office. Two or more directors should not be appointed en bloc or by single resolution. [Sec 263(1)] unless a resolution to do so has first been agreed by the meeting without any vote given against it.
Hold office for a maximum period of three years. Same person may be reappointed for another term if so decided. He is treated as director for all purposes but cannot be appointed as MD or whole-time director. No individual can hold office of Small Shareholder's Director at the same time in more than 2 companies.
Managerial Remuneration
Not defined in the Act but reference to be found in Sections 198, 309, 311 and 387 suggesting that director and managerial personnel are entitled to receive managerial remuneration. Managerial Remuneration may take the form of monthly payment, say, salary or a specified percentage of net profits or a commission and /or by way of a fee for each meeting of the board, besides any or all of the following: Rent free accommodation; Any other amenity provided free of charge or at concessional rate; and
Managerial Remuneration
Any insurance, annuity, or gratuity. Payment received for holding an office/place of profit is not managerial remuneration. [Section 309(1)] The overall Managerial Remuneration payable not to exceed 11% of the net profit. [Section 198 (1)] MD and Whole-time directors may be paid a monthly salary or specified percentage of net profit. [Section 309 (3)]
The company with the approval of Central Govt. in an AGM authorise a higher commission than 1% or 3%. Such resolution shall remain in operation for five years, though renewable. If a director is paid sitting fees for attending board meeting it shall not be considered for computing overall Managerial Remuneration u/s 198 Provisions of Sections 309 and 198 shall not apply to a private company.
Capital of company Less than 1 crore B/wn Rs 1 and Rs 5 cr B/w Rs 5 and Rs 25 cr B/w Rs. 25 and Rs 100 cr Above Rs 100 crore
1,50,000 2,00,000
Managerial Remuneration
In addition, the managerial personnel shall also be eligible for: Contribution to PF, Superannuation Fund or annuity fund to the extent not taxable under Income Tax Act, 1961; Gratuity @ not exceeding half a month's salary for each completed year; Encashment of leave at the end of tenure. In case of an expatriate managerial person:
Managerial Remuneration
Children education allowance - maximum Rs 5000 per month per child; Holiday passage for children, spouse and members of family; and Leave travel concession. All remuneration payable aforesaid shall be subject to approval by a resolution in AGM.
Company Meetings
A company being an artificial person expresses its will or takes its decision through resolutions passed at regularly convened meeting of the general body of the shareholders, and the directors. The companies Act provide the shareholders a forum of self-protection, which is general meeting of shareholders. The shareholders can use the forum to appoint directors as well as auditors of their own choice who may safeguard them from the possible manipulation.
Shareholders Meetings: Statutory Meeting under Section 165; Annual General Meetings under Section 166; Extraordinary General Meetings: Convened by directors suo moto between two AGMs. Convened by directors on requisition under Sec 169.
Types of Meetings
Meetings of the Board of Directors. Meetings of the Board Committee. Class Meetings of Shareholders. Meetings of the Debenture holders. Meetings of the Creditors.
Companies limited by guarantee and share shall, within one month and not more than six months from the date of commencement of business, hold a general meeting of the members to be called the Statutory Meeting. Failure to hold Statutory Meeting renders the company liable to be wound up u/s 433(b). This provision is not applicable to a private company. [Section 165(10)] The board shall, at least 21 days before the day on which the meeting is held, forward a report to every member of the company called Statutory
Every company must, in each calendar year, hold an annual general meeting so specified in the notice calling it, provided that not more than 15 months shall elapse between two AGMs. First AGM may be held within 18 months from the date its incorporation. Subsequent AGM should be held on the earliest of the following: [Sec 166 & 210] 15 months from the last AGM; The last day of the calendar year; or 6 months from the close of the financial year.
AGM
In case of difficulty in holding meeting the Registrar may extend time by not more than 3 months. Application for extension of time should be made before the due date of holding AGM. Any delay including extension by RoC, shall make the officer in default punishable with fine extending up to Rs 50,000 and Rs 2,500 for every day of the default. Delay in completion of audit or annual accounts do not constitute a special reason justifying extension of time for holding of AGM.
Every AGM called after giving 21 days notice must be held on a day other than a public holiday. Should be held on a working day, during business hours, at the Registered Office of the company, or a place within the city, town, or village in which registered office is situated. An adjourned meeting accidentally comes to be held on a public holiday does not contravenes the provisions of Section 166 (2). Time of subsequent AGMs may be fixed by the Article or by a resolution in the AGM.
Every general meeting of company with exception to Statutory Meeting and AGM is called an EGM. Every business at an EGM is a special business, which arises between two AGMs being urgent, and cannot be deferred to the next AGM. Usually the Articles contain provisions empowering the board for calling an EGM. If there are not within India directors capable who are not sufficient in number to form a quorum any director or two members may call an EGM.
The board shall on requisition of members holding 1/10th of the paid up capital or voting right, forthwith call an EGM. The requisition shall set the matters for consideration, duly signed and deposited at the registered office of the company. If the EGM is not called within 21 days of the requisition the meeting may be called on a day not later than 45 days from the date of deposit of requisition: By requisitionists themselves; or By 1/10th of the shareholders or members
If, for any reason it is impracticable to call an EGM, the CLB may, either of its own or on an application of any director ort member: order a meeting of the company; and give such ancillary or consequential directions as the CLB thinks expedient. A meeting so called shall be deemed to be a meting of the company duly called, held and conducted. The CLB will interfere very sparingly, and only when the application of a meeting is made bona fide in the larger interest of the company.
A meeting of the Board of directors shall be held at least once in every three months and at least four such meetings shall be held in one year. As long as four meetings are held in a calendar year, the interval between two meetings may be more than three months. Listed companies are required to hold at least four board meetings in a year with a maximum time gap of four months between two meetings. (LA Clause 49) Notice of every meeting of the board shall be given in writing to every director for the time being
Board Meetings
Failure would make the officer in default punishable with a fine extending up to Rs 1000. The notice should contain the time date and place of meeting. There is no provision for minimum days for giving notice. It is generally prescribed by the Articles. If the notice of the meeting is not given to even one director the meeting and any resolution passed thereat would be invalid. Notice of the adjourned meeting should be given to the directors who did not attend the original meeting.
Board Meetings
For sine die adjournment and to transact new business a fresh notice would be required. The meeting of the director may be held at any time and place convenient to directors, outside the business hours and even on public holiday unless Articles provides otherwise. Good practice demands that the agenda containing business to be transacted is circulated preferably along with the notice at least a week before the date of meeting.
Competition means activity in which businesses try to win in a certain market by defeating others which are trying to do the same. It can be also defined as the battle vying for customers acceptance. Market refers to any place where selling and buying are exchanged. In the market economy, the prices of products and services will be influenced by demand and supply in the market. However, markets can be divided by their geographical boundaries as follows in the table.
Some examples The market of houses in Guangzhou city The market of human resources in the South China The market of computers in China The market of foreign exchange in the world.
competition
1. 2. 3. 4.
A market structure where many buyers and sellers are exchanging similar products in the market and no one seller has any control over the price. Chinas open markets in the countryside are closer to this type of the market structure. Major characteristics:
Each business has no influence over price. If a business charges the price higher than others, no consumers will buy its product. If a business charges the price lower, it would be forced out of business.
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Advantages: Very competitive market Businesses have to be efficient. Disadvantages: Businesses are completely controlled by the market. Businesses can only make normal profit. Perfect competition can be difficult to find in real life.
Perfect competition
Monopoly
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Definition: A market structure in which only one single firm supplies the entire product. There is no direct competition, and there are barriers to entry (regulated by the government). Or: One business has total control over a market and is the only seller of the product so it has strong influence over the price. Examples of this type are China Rail, China Postal Service, China Electricity, etc. Advantages: Complete control over the price abnormal profit Disadvantages: Lack of competition Little incentive for innovation Inefficient management
Monopoly
Firm that is the sole seller of a product without close substitutes Price maker Barriers to entry
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Monopoly resources
A key resource required for production is owned by a single firm Higher price
Government regulation
Government gives a single firm the exclusive right to produce some good or service Government-created monopolies
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A single firm can produce output at a lower cost than can a larger number of producers
Arises because a single firm can supply a good or service to an entire market
Natural monopoly
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Quantity of output
When a firms average-total-cost curve continually declines, the firm has what is called a natural monopoly. In this case, when production is divided among more firms, each firm produces less, and average total cost rises. As a result, a single firm can produce any given amount at the smallest cost
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Monopoly
Price maker Sole producer Downward sloping demand
Competitive firm
Price taker One producer of many Demand horizontal line (Price)
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Price Discrimination
Price discrimination
Business practice Sell the same good at different prices to different customers Increase profit
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Price Discrimination
Rational strategy
Increase profit Charges each customer a price closer to his or her willingness to pay Sell more than is possible with a single price
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Price Discrimination
Arbitrage buy a good in one market, sell it in other market at a higher price
3.
More consumers get the good Higher producer surplus (higher profit)
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Price Discrimination
The analytics of price discrimination Perfect price discrimination
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Price Discrimination
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Perfect competition
Monopoly
Monopolistic competition
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Definition: A market structure in which a large number of relatively small firms compete in the market and there is some restriction on competition. Each firm has a product that is similar but differentiated from others. Examples in China are shops, supermarkets or other retailers, etc. Advantages: Few barriers to enter the market. Some incentive for innovation or differentiation Disadvantages: One business has only limited control over the price.
Perfect competition
Monopoly
Monopolistic competition
Oligopoly
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Definition: A market structure in which a small number of dominant businesses are providing heavilybranded products with some barriers to entry. Most businesses today belong to this type of competition, for example, Chinas banks, Chinas
Types of Competition
Advantages of oligopoly Differentiated products Brand loyalty customers Benefiting customers in price wars Prices are often stable for a long period
Disadvantages of oligopoly High advertising and promotion costs Some price wars
Definition: A very useful model of describing markets and determining the degree to which businesses can manage competition within their markets. It was introduced by Professor Porter in Harvard University of the United States in 1980. Porter is now very famous researcher or economist in strategic management of business.
2. The threat of new entrants 3. The threat of substitute products 4. The bargaining power of customers