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COMPANIES ACT 1956

Definition:
The companies Act 1956 defines the word company as a company formed and registered under the Act or an existing company formed and registered under any of the previous company laws (sec-3). Sec 12 permits the formation of different types of companies . These may be 1) companies limited by shares 2) companies limited by guarantee 3) unlimited company Majority of the companies in India are with limited by shares

FEATURES OF A COMPANY
1.Incorporate Association: - A company must be incorporated or registered - minimum number required for this purpose is - 7 members in case of public company - 2 members in case of private company - more than 10 incase of banking business - 20 incase of any other business - if the company is not registered it becomes an illegal association.

2. Artificial Person: - A company being a artificial person, it doesnt possess the physical attributes of a natural person. - It is invisible and exist only in the eyes of law.
3. Separate legal entity: - Company is distinct from the persons who constitute it. - It has right to own and transfer the title to property in any way it likes 4. Limited Liability: - In case of a company is limited by shares, the liability of members is limited to the nominal value of shares

- In case of company limited by guarantee, the liability of each member shall be determined by the guarantee amount he shall be liable to contribute the amount guaranteed by him. - In case of a unlimited liability company, members shall continue to be liable till each paise has been paid off. 5. A company may sue and be sued

- a company can sue and be sued in its own name.


- Creditors of the company can sue the company not against members personally

6. Transferability of shares: - The shares of the company are transferable in the manner provided in the articles of company.

7. Perpetual Existence: - A company being a artificial person, it doesnt have allotted span of life. - The death, insolvency or retirement of its members leaves the company unaffected. - Members may come and go but the company can go for ever

8. Common Seal: - A company being an artificial person is not bestowed with a body of human being. Therefore it has to work through its directors. - Common seal is the official signature of the company.

CLSSIFICATION OF COMPANY
I) According to the mode of incorporation:
1) Chartered Company: - If a company is registered by a charter granted by Monarch (King), it is called chartered company. - For ex: East India Company it was granted by royal charter, England. - Such type of companies do not exists in India

2) Statutory Company:
- A company which is created by special Act of legislature is called a statutory company. - E.g: State bank of India 3) Registered Company: - A company which is incorporated under the companies Act 1956 is called registered company.

II) Based on the Liability:


1) Company Limited by Shares: - it is a registered company having the liability of its member limited by their shares only. - A shareholder cant be called upon to pay more than the amount remained unpaid on his shares. - His personal assets cant be called upon for the payment of liabilities of the company. - Companies based on the liability may be a) Private Limited Company b) Public Limited Company

a) Private Limited Company: - The name of the company ends with the words PRIVATE LIMITED. - Minimum paid up capital 1 lakh - Minimum 2 members and maximum 50 b) Public Company: - Minimum paid up capital 5 lakhs - Minimum members to form a public company is 7 - There is no limit for maximum members.

2) Company Limited by Guarantee: - In the event of winding-up of this company , the member may respectively contributes. - The liability of the members of a guarantee company is limited by a fixed sum which is specified in the memorandum.

- A company limited by guarantee may or may not have the share capital.

3) Unlimited Company: - A company not having any limit on the liability of its members is termed as unlimited company.

- The members of unlimited company are liable like the partner without any limit

C) Other Companies: 1) Government Company: - The companies Act defines a Govt. company as a company in which not less than 51% of the paid up share capital is held by: - Central Govt. - State Govt. or Governments - Partly central Govt. and Partly one or more state governments

2) Holding and Subsidiary Company: - When a company has control over another company is known as holding company. - Company so controlled is regarded as a subsidiary company. - Where one company holds majority of the shares in another company the later becomes subsidiary and the former is known as holding company.
3) Foreign Company: - Foreign company means a company incorporated outside India which has a place of business in India. - Within 30 days, the company has to submit the registrar of companies certain companies.

FORMATION OF A COMPANY
1) Name of the Company: - A company cant given a name which is in the opinion of central govt. is undesirable or identical with or closely resembles the name of the existing company.
- The word limited shall be added to name of a public company and the name of the private limited company shall end with the words private limited.

2. Memorandum of Association: - It is the charter of the company defining the object of its formation and operation. - It is the ultravire of the company and if a company act beyond this scope of its memorandum is invalid and can not be validated. - If it is a private company 2 persons and if it is a public company 7 persons shall subscribe their names to the memorandum. -The memorandum of every company is required to state the following: a) The name of the company with limited incase of a public company and with private limited incase of a private company.

b) The state in India in which the registered office of the company is located. c) The main objects and objects incidental or ancillary to the attainment of the main object and other objects of the company. d) the memorandum of the company whether limited by shares or guarantee also state the liability of the members. e) The capital of the company - The memorandum shall be a) printed b) be divided in to paragraphs c) numbered consecutively d) be signed by each subscriber (with his address and description) in the presence of at least one witness who shall attest the signature and shall add his address and description and occupation if any.

EXAMPLE FOR MEMORANDUM OF ASSOCIATION I. The name of the company is The Eastern steam packet company limited II. The registered office of the company is located in the state of Kerala III. The main object of the company is the conveyance of passengers and goods in ships or boats between such places as the company may decide from time to time a) The objects incidental or ancillary to the main object are acquisition, construction, building, setting and provision of establishments for repairing ships, for the training of personnel required for running ships. b) The other object of the company is carrying on the business of carriers by land and air and running hotels for tourists IV. The liability of the members is limited

V. The share capital of the company is two Lakh rupees, divided into 1000 shares of 200 Rs. Each. VI. The name, address and signature of the subscribed person VIII. The name, address and sign of the witness.

iii) Articles of Association: - Articles of association are the rules, regulations and by-laws for the internal management of the company. - The articles usually contains provisions relating to: a) Rights of shareholders b) Calls on shares c) Transfer of shares d) Alteration capital e) Voting and Poll f) Proxies g) Directors appointment, remuneration, qualification power and proceedings h) General meeting and proceedings and so on.

iv) Certification: For the registration of the company the following documents shall be presented to the registrar of the state in which the registered office of the company is to be situated: a) The memorandum of the company b) Articles of association c) Agreement with any individual for acting as a manager or whole time director If the registrar satisfied about the information provided then he will issue a certificate of incorporation