Meaning of Company

A company can be defined as an "artificial person", invisible, intangible, created by or under law,
with a discrete legal entity, perpetual succession and a common seal.
[citation needed]
It is not affected
by the death, insanity or insolvency of an individual member.
Types of Companies
Private Ltd Company
A private company has the following features:
Restricts the right of the shareholders to transfer their shares.
Has a minimum of 2 and maximum of 50 members.
does not invite public to subscribe to its share capital
Must have a minimum paid up capital of Rs. 1 lakh or such a higher amount which may be
prescribed from time to time.

Public Ltd Company :
A public Ltd company has the following characteristics.
It allows the shareholders to transfer their shares.
Has a minimum of 7 members, and for maximum there is no limit.
it invites the general public to subscribe to its shares
Must have a minimum paid up capital of Rs 5 lakh or such a higher amount as may be
prescribed from time to time.

Unlimited Company
Unlimited Company is a form of business organization under which the liability of all its members is
unlimited. The personal assets of the members can be used to settle the debts. It can at any time re-
register as a limited company under section 32 of the Companies Act.


Sole proprietorship
Sole proprietorship is a form of business entity where a single individual handles the entire business
organization. He is the sole recipient of all profits and bearer of all loses. There is no separate law
that governs sole proprietorship.


Joint Hindu Family
Joint Hindu Family is a form of business organization wherein the members of a family can only own
and manage the business. It is governed by Hindu Law.


Partnership
Partnership is the relation between persons who have agreed to share the profits of the business
carried on by all or any one of them acting for all. It is governed by the Indian Partnership Act 1932.


Co-operatives
Co-operatives is a form of voluntary organization, wherein the members work together for the
promotion of the interests of its members. There is no restriction to the entry or exit of any
member. It is governed by Cooperative Societies Act 1912.


Limited Liability Partnership
Under LLP (Limited Liability Partnership) the liability of at least one member is unlimited whereas
rest all the other members have limited liability, limited to the extent of their contribution in the
LLP. Unlike general partnership this kind of partnership does not get terminated by the death or
insolvency of the limited partners. It is governed by Limited Liability Partnership Act of 2008

What are the Characteristics of a company?
The distinctive features of the company form of organisation are as follows:
1. Separate legal existence:
Under Incorporation law, a company becomes a separate legal entity as compared to its members. The company
is distinct and different from its members in law. It has its own seal and its own name, its assets and liabilities are
separate and distinct from those of its members. It is capable of owning property, incurring debt, and borrowing
money, employing people, having a bank account, entering into contracts and suing and being sued separately.

The separate legal entity of a company was recognised in the famous case of Salomon, v. Salomon
and Co. Ltd. The facts of the case were as follows:
Salomon formed a company which acquired his own shoe business. He took all the shares except
six shares which he distributed among his wife, daughter and four sons.
Salomon also purchased some debentures of the company which gave him a charge over its
assets. At the time of winding up, the company's assets were not sufficient enough to pay its
debts.
The creditors of the company (other than Salomon) argued that their debts should be cleared
before paying Salomon for his debentures because Salomon and the company was one and the
same person.
The Court decided that after incorporation, Salomon and Co. had an identity separate from
Salomon even though he owned virtually all the shares in the company.

Limited Liability:
The liability of the members of the company is limited to contribution to the assets of the company upto the face
value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him. If the
assets of the firm are not sufficient to pay the liabilities of the firm, the creditors can force the partners to make
good the deficit from their personal assets. This cannot be done in the case of a company once the members
have paid all their dues towards the shares held by them in the company.

Perpetual Succession:
A company does not cease to exist unless it is specifically wound up or the task for which it was formed has been
completed. Membership of a company may keep on changing from time to time but that does not affect life of the
company. Insolvency or Death of member does not affect the existence of the company.

Separate Property:
A company is a distinct legal entity. The company's property is its own. A member cannot claim to be owner of
the company's property during the existence of the company.

Transferability of Shares:
Shares in a company are freely transferable, subject to certain conditions, such that no share-holder is
permanently or necessarily wedded to a company. When a member transfers his shares to another person, the
transferee steps into the shoes of the transferor and acquires all the rights of the transferor in respect of those
shares.

Common Seal:
A company is an artificial person and does not have a physical presence. Thus, it acts through its Board of
Directors for carrying out its activities and entering into various agreements. Such contracts must be under the
seal of the company. The common seal is the official signature of the company. The name of the company must
be engraved on the common seal. Any document not bearing the seal of the company may not be accepted as
authentic and may not have any legal force.

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

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

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





Formation of Company
Steps to be taken for registering/incorporating a private limited
company in India:-
~Select, in order of preference, a few suitable names, not less
than four, indicative of the main objects of the company.
~Ensure that the name does not resemble the name of any
other company already registered and also does not violate the
provisions of Emblems and Names (Prevention of Improper
Use) Act, 1950.
~Apply to the concerned ROC to ascertain the availability of a
name in Form-1 A of the General Rules and Forms along with a
fee of Rs.500/-. If the proposed name is not available apply for
a fresh name on the same application.
~Arrange for the drafting of the Memorandum and Articles of
Association & the vetting of the same by the ROC and the
printing of the same.
~Arrange for the stamping of the Memorandum and Articles
with the appropriate stamp duty.
~Get the Memorandum and Articles signed by at least two
subscribers in his/her own hand, his/her fathers name,
occupation, address and the number of shares subscribed for
and witnessed by atleast one person.

~Get the following forms duly filled up and signed:-
*Declaration of compliance Form-1.
*Notice of the situation of the registered office of the company
Form-18.
*Particulars of the Director, Manager or Secretary Form-32.
Present the following documents to the ROC with the filing fee
and the registration fee:-
*The stamped and signed copies of the Memorandum and
Articles of Association (3 copies).
*Form-1, 18 & 32 in duplicate.
*Name availability letter issued by the ROC.
*Power of Attorney from the subscribers in favour of any
person for making corrections on their behalf in the documents
and papers filed for registration.
~Pay the Registration and Filing Fee by Demand Draft/
Bankers Cheque if it exceeds Rs.1000/-.
~Obtain the Certificate of Incorporation from ROC.

~Additional Steps to be taken for formation of a Public Limited
Company
*Consent of Directors to act as such in Form No.29.
*Arrange for payment of application and allotment money by
Directors on shares taken or agreed to be taken.
*File the Statement in Lieu of Prospectus with the ROC in
schedule-iv of the Companies Act.
*File a declaration in Form-20 duly signed by one of the
Directors.
*Obtain the Certificate of Commencement of Business.

Lifting of Corporate Veil
Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or
duties of a corporation as the rights or liabilities of its shareholders. Usually a corporation is
treated as a separate legal person, which is solely responsible for the debts it incurs and the sole
beneficiary of the credit it is owed. Common law countries usually uphold this principle of
separate personhood, but in exceptional situations may "pierce" or "lift" the corporate veil.


Pre- incorporation Contrat
Sometimes contracts are made on behalf of a company even before it is duly
incorporated. These are called as pre-incorporation contracts. Two consenting
parties are necessary to a contract, whereas a company before incorporation is a
non-entity. Therefore, following are the effects of pre-incorporation contracts.
Company cannot be sued on pre-incorporation contracts- A company, when it
comes into existence, cannot be sued on pre-incorporation contracts. In English
and Colonial Produce Co, Re, a solicitor on the request of promoters prepared a
companys documents and spent time and money in getting it registered. But the
company was not held to be bound to pay for those services and expenses.
Company cannot sue on pre-incorporation contracts- A company cannot by
adoption or ratification obtain the benefit of a contract made on its behalf before
the company came into existence. In Natal Land and Colonization Co v. Pauline
Colliery Syndicate, the promoters of a proposed company obtained an agreement
from a landlord that he would grant lease of coal mining rights to the company.
The company could not, after incorporation, enforce this contract.
Agents may incur personal liability- The agents who contract for a proposed
company may sometimes incur personal liability. In Kelner v. Baxter, the
promoters of a projected hotel company purchased wine from the plaintiff on
behalf of the company. The company came into being but, before paying the price
went into liquidation. They were held personally liable to the plaintiff.



Who is a company promoter?
A company promoter is a person/group of individuals who get people to invest money into a
corporation, usually when it is being formed. Promoters general owe a duty of utmost good faith, so
as to not mislead any potential investors, and disclose all material facts about the company's business.


Module 2
Article of association
In corporate governance, a company's articles of association (called articles of incorporation in
some jurisdictions) is a document which, along with the memorandum of association (in cases
where the memorandum exists) form the company's constitution, defines the responsibilities of
the directors, the kind of business to be undertaken, and the means by which the shareholders
exert control over the board of directors.
memorandum of association
The memorandum of association of a company, often simply called the memorandum (and
then often capitalised as an abbreviation for the official name, which is a proper noun and usually
includes other words), is the document that governs the relationship between the company and
the outside. It is one of the documents required to incorporate a company in the United
Kingdom,
[1]
Ireland, India, Bangladesh, Pakistan and Sri Lanka, and is also used in many of
the common law jurisdictions of theCommonwealth.

Shares
The capital of the company can be divided into different units with definite value called shares.
Holders of these shares are called shareholders or members of the company. There are two types
of shares which a company may issue (1) Preference Shares (2) Equality Shares.

(1) Preferences Shares

Shares which enjoy the preferential rights as to dividend and repayment of capital in the event of
winding up of the company over the equity shares are called preference shares. The holder of
preference shares will get a fixed rate of dividend.
Commulative ,non commulative ,redeemable, participating or non participating
(2) Equity Shares

Equity shares will get dividend and repayment of capital after meeting the claims of preference
shareholders. There will be no fixed rate of dividend to be paid to the equity shareholders and
this rate may vary form year to year. This rate of dividend is determined by directors and in case
of larger profits, it may even be more than the rate attached to preference shares. Such
shareholders may go without any dividend if no profit is made.

Prospectus, Borrowing Power , Debentures , security for debenture holders ,
Mortgage & Charges