Company Law 2013
Company Law 2013
Private Company
Public Company
One-person company
I . Private Company
A private company means a company which has a minimum
paid up capital of Rs.1, 00,000 or such higher paid up
capital as may be prescribed, and by its articles-
a) Restricts the right to transfer its shares, if any
b) Minimum number of members required is 2
b) Maximum number of its members to 200, sec 2 (68) of
2031 act. and
c) Prohibits any invitation to the public to shares in or
debentures of the company.
d) Prohibits any invitation or acceptance of deposits from
persons other then its members, directors or their
relatives
Paid up share capital means
Paid up capital is the amount of money that a
company receives for the issue of shares in
the IPO(Initial Public Offering) from the share
holders. It is the total of Par value and
additional paid in capital(also called share
premium).
A share face value is Rs 10
Only 6 has been collected - 6 is paid capital
If company is having 100 shares of Rs10 and only 6 has been
collected
10X100 =1000 is authorised capital
6X100 = 600 paid up capital
4 X100 =400 is uncalled capital .The company can call this amount
later
The Authorised Capital is the capital according to the Memorandum
and Articles of Association of the company.
Issued capital is capital actually issued in IPO or other wise
Paid up capital is actual capital received
Uncalled capital is balance amount that can be called
ii. Public Company
The term public company has been defined under
section 2(71) of companies act 2013.
A public company means which has minimum paid up
share capital of rs 5 lakh and which is not a private
company.
It has the following features:
It does not restrict transferability of shares
At least 7 members are required to start it
There is no restriction on maximum memebers.
It names end with the word Limited
It has atleast 3 directors.
iii One-person company
The 2013 Act introduces a new type of entity
to the existing list i.e. apart from forming a
public or private limited company, the 2013
Act enables the formation of a new entity a
one-person company (OPC). An OPC means
a company with only one person as its
member [section 3(1) of 2013 Act].
4.Classification On the Basis of
Control
Company S 1(Subsidiary
of Company H)
Company S2(Subsidiary
of Company S1)
Company S3(Subsidiary
of Company S2)
5. Classification on the Basis of
Ownership
i. Government Company
ii. Foreign Company
Government Company:
A government company means any company in which at
least 51% of the paid up share capital is held by the central
government or by any state government or government or
partly by the central government and partly by one or more
state governments and includes a company which is a
subsidiary of a government company as thus defined.
Example: Hindustan Aeronautics Ltd. state trading
corporation
Non-Government Company
A company which may not be termed as a government
company as a defined in Section 617 is regarded as a non-
government company
Foreign Company
A foreign company means a company which is
incorporated in a country outside India under
the companies act 2013
Equity shares
Equity shares are the main source of finance
of a firm. It is issued to the general
public. Equity shareholders do not enjoy any
preferential rights with regard to repayment of
capital and dividend.
Equity shares and preference shares
A Company can issue two types of shares viz. Equity Shares
and Preference Shares.
Equity shares are also known as Ordinary Shares.
While Preference shareholders enjoy the benefit of
receiving their dividend distribution first;
the equity shareholders enjoy voting rights in major
company decisions, including mergers or acquisitions.
Preference shares have the right to receive dividend at a
fixed rate before any dividend is paid on the equity shares.
Further, when the company is wound up, they have a right
to return of the capital before that of equity shares.
Minimum Subscription
. The minimum shares the company needs to
get from the public out of the total issue by
the date of closure. (Presently every company
need to raise 90% of the issued amount). Else,
the company shall refund the whole amount
received.
IPO
An initial public offering, or IPO, is the very
first sale of stock issued by a company to the
public.
Underwriting
Securities underwriting refers to the process
by which investment banks raise investment
capital from investors on behalf of
corporations and governments that are
issuing securities (both equity and debt
capital). The services of an underwriterare
typically used during a public offering in a
primary market.
Reliance power
The objects of the Issue are to achieve the
benefits of listing on the Stock Exchanges & to
raise capital to
1. Fund subsidiaries to part-finance the
construction and development costs of certain
of 12 power generation projects currently
under various stages of development;
2. General corporate purposes;
3. Achieve the benefits of listing on the Stock
Exchanges.
Reliance power
Issue Open: Jan 15, 2008 - Jan 18, 2008
Issue Type: Book Built Issue IPO
Issue Size: 260,000,000(two sixty million
Equity Shares of Rs 10 aggregating up to Rs
11,563.20 Cr
Face Value: Rs 10 Per Equity Share
Issue Price: Rs 405 - Rs 450 Per Equity Share
Market Lot: 15 Shares
Minimum Order Quantity: 15 Shares
Listing At: BSE, NSE
Special Privileges of a Private
Company
i.Number of Members: a private company may have
minimum 2 members and maximum 200
ii. Allotment before minimum subscription: a private
company can allot shares before the minimum
subscription is subscribed for or paid
iii. Prospectus or statement in lieu of prospectus:
may allot shares without issuing a prospectus or
delivering to the registrar a statement in lieu of
prospectus.
iv.A private company is not required to have
independent directors
A private company is exempt from the constitution of a
nomination & remuneration committee (Section 178(1)
as well as stakeholders relationship committee (section
178(5)
v. Kinds of shares: a private company may issue share
capital of any kind, and with such voting rights, as it
may think fit.
vi. Commencement of Business: a private company
can commence business immediately on
incorporation.
vii. Index of members: need not keep any index of
members
.
viii. Statutory meeting and statutory report:
need not hold statutory meeting or file with the
registrar the statutory report.
ix. Demand for Poll: even one member having
the right to vote and present in person or by
proxy (substitute) may demand a poll. If the
number of members present in more than 7,
two members present in person or by proxy may
demand a poll.
Managerial Remuneration: The rule of overall
maximum managerial remuneration does not
apply to a private company which is not a
subsidiary of a public company; the overall
managerial remuneration must not exceed 11
percent of the net profits.
xi. Number of Directors: A private company can
have minimum of two directors and maximum is
15directors by passing a special resolution. xii.
Rules regarding directors: The rules regarding
directors of a private company are less stringent.
When does a private company
become a public company?
(a)Conversion by Default:
Where a default is made by a private company in complying with essential
requirements of a private company, the company ceases to enjoy the
privileges and exemptions conferred on a private company.
(b). Conversion by Choice or Volition (wish or desire):
Each subscriber must give his address, description and occupation (if
any).
The signature of each subscriber must be attested in the presence of
at least one witness.
The witness must attest the signature and add his address,
description and occupation (if any).
Contents of Memorandum
1. The Name Clause:
2. The Registered Office Clause:
3. The Objects Clause;
4. The Capital Clause
5. The Liability Clause;
6. The Association clause
1. The Name Clause
The name of a company establishes its identity and is
the symbol of its existence.
Rules regarding name-Undesirable name should be
avoided
- Too similar name of another company
- Injunction if identical name adopted
- Limited or Private limited as the last words
- Probhition of use of certain names the emblems and
names of government of India, name or pictorial
representation of rashtrapathi bhawan mahatma
Gandhi
2. The Registered Office Clause
Every company shall have a registered office from
the day on which it begins to carry on business or
as from the 15 th day after the date of its
incorporation, whichever is earlier.
All communications and notices are to be
addressed to that registered office
Notice of the situation of the registered office
and every change shall be give to the registrar
with 30 days after the date of incorporation fo
the company.
If default is done rs 500 fine .
3. The Objects Clause
The Company registered after the commencement of the Companies
(Amendment) Act, 2013 must divide its object clause into two sub-clauses,
namely:
(a) Main Objects
This sub-clause covers the following two:
Main Objects of the Company to be pursued on its incorporation, and
Objects incidental or ancillary (additional) to the attainment of the main objects
2. Lien on shares
3. Calls on Shares
4. Transfer of shares (voluntary transfer of shares from one person to
another)
5. Transmission of shares (transfer of shares from one person to another
by operation of law)
6. Forfeiture (surrender or give up) of shares
7. Conversion of shares into stock
8. Share warrants
9. Alteration of capital
10. General meetings and proceedings there at
Directors, their appointment, remuneration,
qualification, powers and proceedings of board of
directors
12. Voting rights of members, voting and poll, proxies
13. Manager
14. Secretary
15. Dividends and reserves
16. Accounts, audit and borrowing powers
17. Capitalization of Profits
18. Winding up
CONVERSION OF SHARES INTO STOCK
Stock is a consolidation of shares into one
divisible unit. When it is impossible for the
share capital to be one share, any amount
of stock may be transferred. ... A company can
convert its fully paid shares into stock as per
Section 94(c) of The Companies Act, 1956
Share Warrant
It is a document issued by a public company
stating that its bearer is entitled to the shares
specified therein.
It is transferable by mere delivery and is a
substitute for the share certificate.
Forfeiture of shares
If a shareholder, having been called upon to
pay any call on his shares, fails to pay the call,
the company has two remedies against the
shareholders, namely:
1 it may sue him for the amount due
2. it may forfeit his shares.
(forfeit means a fine or penalty for
wrongdoing)
Nomination of shares
Every holder of shares in or holder of
debentures of a company may, at any time,
nominate a person to whom his shares in or
debentures of the company shale vest in the
event of his death.
Transfer of shares Transmission of shares
It is effected by a voluntary It takes place by operation
act of the parties of law. Eg due to death,
It takes place for insolvency
consideration No consideration is involved
The transferor has to There is no prescribed
execute a valid instrument instrument of transfer.
of transfer.
Calls on shares
A call is a demand by a company on its
shareholders to pay the whole or part of the
balance remaining unpaid on each share
Lien of shares
Lien of shares : A lien is the right to retain
possession of a thing until a claim is satisfied.
In the case of a company lien on a share
means that the member would not be
permitted to transfer his shares unless he pays
his debt to the company.
Distinction between Memorandum
and Articles
1.Contents -It contains It contains the internal
the fundamental rules and regulations
conditions upon which relating to management
alone the company is of internal affairs.
allowed to be
incorporated
2. Fundamental / Articles is subordinate
Subordinate document: to the Memorandum
Memorandum is
Fundamental
document.
3. Compulsory or A public company
optional :Every limited by shares need
company must have its have its own Articles. It
own memorandum. may adopt Table A as
its articles.
4. Relationship It defines the
defined:It defines the relationship between
relationship between the company and its
the company and members and members
outsiders. only and as members
inter se.
5. Alteration whether Articles can be easily
easy or difficult :There altered by passing a
are strict restrictions on special resolution.
its alteration. Some of
the conditions of
incorporation contained
in it cannot be altered
except with the sanction
of the National
Company Law Tribunal
6.Binding Effect of ultra An act is intra vires the
vires act:Any act of the Memorandum but ultra
company which is ultra vires the Articles may
vires the memorandum be ratified by share-
is wholly void and holders by passing a
cannot be ratified special resolution.
(approve) even by the
whole body of
shareholders.
Doctrine of constructive notice (OR)
constructive Notice of Memorandum
and Articles
Every outsider dealing with a company is deemed to have
notice of the contents of the Memorandum and the
Articles of Association.
These documents, on registration with the Registrar,
assume the character of public documents.
This is known as constructive Notice of Memorandum and
Articles.
The Memorandum and the Articles are open and accessible
to all.
It is the duty of every person dealing with a company to
inspect these documents and see that it is within the
powers of the company to enter into the proposed
contract.
Doctrine of Indoor Management
1.Fiduciary Duties