Company law ppt

78
Company Law Company Law

Transcript of Company law ppt

Page 1: Company law ppt

Company LawCompany Law

Page 2: Company law ppt

What is a company?What is a company?► A Company is a A Company is a voluntary voluntary

association of personsassociation of persons formed for the formed for the purpose of doing business, having a purpose of doing business, having a distinct name and limited liability.distinct name and limited liability.

► They can be incorporated under the They can be incorporated under the Companies Act (it may be any type Companies Act (it may be any type of company) of company)

► Corporations Corporations enacted under special enacted under special enactments ( Even those which are enactments ( Even those which are incorporated outside India)incorporated outside India)

► Corporate soleCorporate sole ► Any Any other body corporateother body corporate notified by notified by

the central governmentthe central government

Page 3: Company law ppt

Features of a companyFeatures of a company

► A company is considered as a A company is considered as a separate legal entityseparate legal entity from its from its members, which can conduct members, which can conduct business with all powers to contract.business with all powers to contract.

► Independent corporate entityIndependent corporate entity (Saloman V. Saloman) It is (Saloman V. Saloman) It is independent of its members and independent of its members and shareholdersshareholders

Page 4: Company law ppt

Other featuresOther features

► Limited LiabilityLimited Liability ( either by share or guarantee ( either by share or guarantee) ) ► ItIt can own property, separate from its members can own property, separate from its members. .

The property is vested with the company, as it is a The property is vested with the company, as it is a body corporate.body corporate.

► The The income of the members are different from the income of the members are different from the income of the companyincome of the company ( Income received by the ( Income received by the members as dividends cannot be same as that of members as dividends cannot be same as that of the company)the company)

cont….cont….

Page 5: Company law ppt

Features continued..Features continued..

► Perpetual successionPerpetual succession: Death of the members is : Death of the members is not the death of the company until it is wound upnot the death of the company until it is wound up

► As it is a legal entity or a As it is a legal entity or a juristic person or artificial juristic person or artificial person it can person it can sue and be suedsue and be sued

► The company enjoys The company enjoys rights and liabilitiesrights and liabilities which which are not as that of the members of the companyare not as that of the members of the company

Page 6: Company law ppt

Lifting of Corporate VeilLifting of Corporate Veil► As the company is As the company is a separate legal entitya separate legal entity , is has , is has

been provided with a veil, compared to that of been provided with a veil, compared to that of individuals who are managing the company.individuals who are managing the company.

► But if the court feels that such veil has to been But if the court feels that such veil has to been used for any used for any wrongful purposewrongful purpose, the court lifts the , the court lifts the corporate veil and makes the corporate veil and makes the individual liable for individual liable for such acts which they should not have done or such acts which they should not have done or doing in the name of the companydoing in the name of the company

Page 7: Company law ppt

Circumstances to lift the Circumstances to lift the corporate veil…corporate veil…

The corporate veil can be lifted eitherThe corporate veil can be lifted eitherunder the under the ► Statutory provisionsStatutory provisions or or ► Judicial interpretationsJudicial interpretationsThe statutory provisions areThe statutory provisions areProvided under the CompaniesProvided under the CompaniesAct, 1956Act, 1956The other circumstances are decidedThe other circumstances are decidedthrough Judicial interpretations, whichthrough Judicial interpretations, whichare based on facts of each case as perare based on facts of each case as perthe decisions of the courtthe decisions of the court

Page 8: Company law ppt

Statutory circumstances Statutory circumstances for lifting the corporate for lifting the corporate

veilveil► Reduction in membership- Reduction in membership- Less than Less than seven in public company and less seven in public company and less than two if it is a private company than two if it is a private company

► Failure to refund application money- Failure to refund application money- After the issue of shares to the After the issue of shares to the pubic, the company has to pay back pubic, the company has to pay back the initial payment to the the initial payment to the unsuccessful applicants (SEBI unsuccessful applicants (SEBI Guidelines- 130 Days), if they fail to Guidelines- 130 Days), if they fail to do so, the corporate veil can be do so, the corporate veil can be lifted.lifted.

► Mis-description of companies name- Mis-description of companies name- While signing a contract if the While signing a contract if the company’s name is not properly company’s name is not properly described, then the corporate veil described, then the corporate veil can be lifted.can be lifted.

Page 9: Company law ppt

continuedcontinued► Misrepresentation in the prospectus- Misrepresentation in the prospectus- (Derry (Derry

Vs Peek) In case of misrepresentation, the Vs Peek) In case of misrepresentation, the promoters, directors and every other promoters, directors and every other person responsible in this matter can be person responsible in this matter can be held liable. held liable.

► Fraudulent Conduct- Fraudulent Conduct- In case the company In case the company is carried on with an intent to defraud the is carried on with an intent to defraud the creditors, then the court may lift the creditors, then the court may lift the corporate veil.corporate veil.

► Holding and subsidiary companies-Holding and subsidiary companies- A A subsidiary has a distinct legal entity from subsidiary has a distinct legal entity from the holding company other than in a few the holding company other than in a few circumstances, so if otherwise shown, the circumstances, so if otherwise shown, the court may under the Act , lift the corporate court may under the Act , lift the corporate veil of the subsidiary company.veil of the subsidiary company.

Page 10: Company law ppt

Circumstances to lift the corporateCircumstances to lift the corporateveil through judicial interpretations veil through judicial interpretations

► When the court feels that there are no statutory When the court feels that there are no statutory provisions which can pierce the corporate veil, and provisions which can pierce the corporate veil, and the identity of the company is not the one which the identity of the company is not the one which has to exist, and the court has to interfere in order has to exist, and the court has to interfere in order to avoid the activities that are done in the name of to avoid the activities that are done in the name of the company by persons managing themthe company by persons managing them, it has , it has been empowered to do so…… been empowered to do so……

The circumstances are…..The circumstances are…..

Page 11: Company law ppt

Judicial interpretations by the Judicial interpretations by the court are as follows:court are as follows:

► Protection of Revenue-Protection of Revenue- When ever a company uses its When ever a company uses its name for the purpose of tax evasion or to circumvent tax name for the purpose of tax evasion or to circumvent tax obligationsobligations

► Prevention of fraud or Improper conduct- Prevention of fraud or Improper conduct- The incorporation The incorporation has been used for fraudulent purpose, like defrauding the has been used for fraudulent purpose, like defrauding the creditors, defeating the purpose of law etc..creditors, defeating the purpose of law etc..

► Determination of the character of the company- Determination of the character of the company- Enemy Enemy company or all the members being the citizens of the company or all the members being the citizens of the enemy country. (Daimler Co. Ltd V. Continental Tyre & enemy country. (Daimler Co. Ltd V. Continental Tyre & Rubber Co. Ltd)Rubber Co. Ltd)

Page 12: Company law ppt

Other circumstancesOther circumstances► Where a company is used to avoid welfare Where a company is used to avoid welfare

legislation-legislation- If a company is formed in order to If a company is formed in order to avoid the benefits to the workers like bonus, or avoid the benefits to the workers like bonus, or other statutory benefits..other statutory benefits..

► For determining the technical competence of the For determining the technical competence of the company- company- To look into the competency of the To look into the competency of the company or the shareholders or promoters company or the shareholders or promoters

(New Horizon’s Ltd and Another V. Union of India (New Horizon’s Ltd and Another V. Union of India (1994)(1994)

Page 13: Company law ppt

Types of CompaniesTypes of Companies

►Limited Company ( Limited by share or by Limited Company ( Limited by share or by guarantee)guarantee)

►Unlimited companyUnlimited company►Government CompanyGovernment Company►Foreign CompanyForeign Company►Private CompanyPrivate Company►Public CompanyPublic Company

Page 14: Company law ppt

Limited CompanyLimited Company► Limited by Shares-Limited by Shares- In such companies, the In such companies, the

liability is only the amount which remains liability is only the amount which remains unpaid on the shares.unpaid on the shares.

► Limited by Guarantee not having share Limited by Guarantee not having share capital-capital-In this type of companies the In this type of companies the memorandum of Association limits the memorandum of Association limits the members’ liability. It will be based on the members’ liability. It will be based on the undertaking that has been given in MOA undertaking that has been given in MOA for their contribution in case of a winding for their contribution in case of a winding up.up.

► Limited by guarantee having share capital-Limited by guarantee having share capital- In such cases , the liability would be based In such cases , the liability would be based on the MOA towards the guaranteed on the MOA towards the guaranteed amount and the remaining would be from amount and the remaining would be from the unpaid sums of the shares held by the the unpaid sums of the shares held by the person concerned.person concerned.

Page 15: Company law ppt

Unlimited Company Unlimited Company ► There is There is no limit on the liability of the members.no limit on the liability of the members. The liability The liability

in such cases would extend to the whole amount of the in such cases would extend to the whole amount of the company’s debts and liabilities.company’s debts and liabilities.

► Here the Here the members cannot be directly sued by the creditorsmembers cannot be directly sued by the creditors..► When the company is wound up, the official liquidator will When the company is wound up, the official liquidator will

call upon the members to discharge the liability.call upon the members to discharge the liability.► The details of the number of members with which the The details of the number of members with which the

company is registered and the amount of share capital has company is registered and the amount of share capital has to be stated in the Articles of Association (AOA).to be stated in the Articles of Association (AOA).

Page 16: Company law ppt

Government CompanyGovernment Company► When When 51%51% of the paid up share of the paid up share

capital is held by the government.capital is held by the government.► The share can be held by the The share can be held by the central central

government or state governmentgovernment or state government. . Partly by central and partly by two or Partly by central and partly by two or more governments.more governments.

► As the legal status of the company As the legal status of the company does not change by being a does not change by being a government company, there are no government company, there are no special privileges given to them.special privileges given to them.

Page 17: Company law ppt

Foreign CompanyForeign Company►A company incorporated A company incorporated

outside India, but outside India, but having a place having a place of business in Indiaof business in India..

► If it does not have a place of If it does not have a place of business in India but only has business in India but only has agents in India it cannot be agents in India it cannot be considered to be foreign considered to be foreign company. company.

Page 18: Company law ppt

Private CompanyPrivate Company► A company which has a A company which has a minimum of minimum of

two personstwo persons. They have to subscribe . They have to subscribe to the MOA and AOAto the MOA and AOA

► It should be have a It should be have a minimum paid up minimum paid up capital of 1 lakh or morecapital of 1 lakh or more as prescribed as prescribed by the article.by the article.

► The maximum number of members to The maximum number of members to be fiftybe fifty ( it does not include members ( it does not include members who are employed in the company, who are employed in the company, persons who were formerly employed)persons who were formerly employed)

► The The rights to transfer the shares are rights to transfer the shares are restrictedrestricted in the Private companies in the Private companies

continued….continued….

Page 19: Company law ppt

► Prohibits any invitation to the public Prohibits any invitation to the public to subscribeto subscribe and therefore it cannot and therefore it cannot issue a prospectus inviting the public issue a prospectus inviting the public to subscribe for any shares in, or to subscribe for any shares in, or debentures of the companydebentures of the company

► It It prohibits acceptance of depositsprohibits acceptance of deposits from persons other than its from persons other than its members, directors or their relatives.members, directors or their relatives.

► If If two or more are holding one or two or more are holding one or more sharesmore shares in a company in a company jointly,jointly, they shall for the purpose of this they shall for the purpose of this definition, be treated as definition, be treated as a single a single member.member.

► As there is As there is no public accountabilityno public accountability like a public company, there is like a public company, there is no no rigorous surveillance.rigorous surveillance.

Page 20: Company law ppt

Exemption and Privileges of a Exemption and Privileges of a Private companyPrivate company

► It can have a It can have a minimum of two members.minimum of two members.► It can It can commence business immediatelycommence business immediately after after

obtaining certificate of incorporation.obtaining certificate of incorporation.► It need It need not issue prospectusnot issue prospectus or statement in lieu of or statement in lieu of

prospectus.prospectus.► It can have a It can have a minimum of 2 directors.minimum of 2 directors.► It It need not hold statutory meetingneed not hold statutory meeting or file statutory or file statutory

report with the ROC.report with the ROC.

Page 21: Company law ppt

Public CompanyPublic Company► A Public company means a A Public company means a

company-company- > Which is > Which is not a private companynot a private company > Which has a > Which has a minimum paid-up minimum paid-up

capital of Rs 5 lakh or such higher capital of Rs 5 lakh or such higher paid-uppaid-up capital, as may be capital, as may be prescribedprescribed

> Which is > Which is a private company and is a private company and is a not a subsidiary ofa not a subsidiary of a company, a company, which is which is private company. private company.

>It includes- any company which is >It includes- any company which is a public company with a paid up a public company with a paid up capital of less than 5 lakh, then it has capital of less than 5 lakh, then it has to to enhance its paid up capital as per enhance its paid up capital as per the statutory requirementthe statutory requirement

Page 22: Company law ppt

Conversion of CompanyConversion of Company► The Act provides for The Act provides for conversion of public company conversion of public company

into a private company and vice versainto a private company and vice versa► A private company is converted into a public A private company is converted into a public

company either company either by default or by choiceby default or by choice in in compliance with the statutory requirements. compliance with the statutory requirements.

► Once the action for conversion takes place then, Once the action for conversion takes place then, a petition can be filed with the central government a petition can be filed with the central government with the necessary documents for its decision on with the necessary documents for its decision on the matter of conversionthe matter of conversion

Page 23: Company law ppt

Registration and Registration and IncorporationIncorporation► Association of persons or partnership Association of persons or partnership

or more than or more than 20 members ( 10 in case 20 members ( 10 in case of banking) can register to form a of banking) can register to form a company under the Companies Act, company under the Companies Act, 19561956

► If they do not register they can be If they do not register they can be considered to be illegal association. considered to be illegal association. The contract entered into by this illegal The contract entered into by this illegal association is association is void and cannot be void and cannot be validated. validated. Its illegality will Its illegality will not affect not affect its tax liability or its chargeabilityits tax liability or its chargeability

► The certification of incorporation is the The certification of incorporation is the conclusive evidence, that all the conclusive evidence, that all the requirements for the registration have requirements for the registration have been complied with the been complied with the

Page 24: Company law ppt

Incorporation of a Incorporation of a CompanyCompany

► The persons who The persons who conceive an ideaconceive an idea of a of a company decide and do the necessary company decide and do the necessary work for formation of a company are called work for formation of a company are called the the promoterspromoters of the Company. of the Company.

► The Promoters are the persons who decide The Promoters are the persons who decide on the on the formation of the company.formation of the company.

► The promoters of a company stand The promoters of a company stand undoubtedly in a undoubtedly in a fiduciary positionfiduciary position though though they are not the agent or a trustee of a they are not the agent or a trustee of a company. They are the ones “who create company. They are the ones “who create and mould the company”. and mould the company”.

► They may have to enter into They may have to enter into pre-pre-incorporation contractsincorporation contracts , which can be , which can be validated after the incorporation of the validated after the incorporation of the company for obtaining certificate of company for obtaining certificate of incorporation.incorporation.

Page 25: Company law ppt

PromotersPromoters► They can be They can be remunerated for their remunerated for their

services, but they have to enter into services, but they have to enter into a contract before the incorporation of a contract before the incorporation of the company through a pre the company through a pre incorporationincorporation of the company of the company

► They will usually act as They will usually act as nominees or nominees or as the first directorsas the first directors of the company of the company

► They enter into contracts after the They enter into contracts after the incorporation and before the incorporation and before the commencement of business.commencement of business.

► But they need But they need not compulsorily not compulsorily participate in the formation of the participate in the formation of the company.company.

Page 26: Company law ppt

► Sometimes , a few persons may only Sometimes , a few persons may only act as act as professionals who help the professionals who help the promoters on behalf of the promoters on behalf of the company.. like the solicitor, company.. like the solicitor, chartered accountant etc.. and get chartered accountant etc.. and get paid for their servicespaid for their services..

► The promoters in most of the cases The promoters in most of the cases decide as to …What is the type of a decide as to …What is the type of a companycompany to be formed? to be formed?

► In IndiaIn India promoters generally secure promoters generally secure the management of the company the management of the company that is formed and have a controlling that is formed and have a controlling interest in the company’s interest in the company’s managementmanagement

Page 27: Company law ppt

Legal Position of the Legal Position of the PromotersPromoters

► They They cannot make profitcannot make profit at the at the expense of the company, which they expense of the company, which they have promoted have promoted without the without the knowledge and consent of the knowledge and consent of the company.company. In case they do so , they In case they do so , they may be compelled to account for it.may be compelled to account for it.

► They They cannot sell their property to the cannot sell their property to the company at a profit unless all the company at a profit unless all the material factsmaterial facts are disclosed at the are disclosed at the independent board of directors or the independent board of directors or the shareholders of the company.shareholders of the company.

► If they do so, the company may If they do so, the company may repudiate the contract of sale or repudiate the contract of sale or confirm the sale after recovering the confirm the sale after recovering the profit made by the promoter.profit made by the promoter.

Page 28: Company law ppt

Promoters have the following Promoters have the following liabilities under the Companies Act, liabilities under the Companies Act,

19561956► They can be They can be liable for non complianceliable for non compliance of the provisions of of the provisions of

the Actthe Act► Severe penaltySevere penalty may be imposed may be imposed► The court may The court may suspend the promoter from taking part in suspend the promoter from taking part in

the managementthe management of the company of the company► Liable for any untrue statement in the prospectusLiable for any untrue statement in the prospectus to the to the

person who has subscribed for any shares or debentures person who has subscribed for any shares or debentures on the faith of the prospectuson the faith of the prospectus

The The liabilities areliabilities are …. …. a) to set aside the allotment of shares, a) to set aside the allotment of shares, b) sued for damages, b) sued for damages, c) sued for compensation c) sued for compensation d) criminal proceedingsd) criminal proceedings

Page 29: Company law ppt

The requirements are as followsThe requirements are as follows► Application for availability of nameApplication for availability of name ► Preparation of MOA and AOAPreparation of MOA and AOA► Selection and finalization of MOA and AOA- Its Selection and finalization of MOA and AOA- Its

printing, stamping and signingprinting, stamping and signing ► Preparation of other necessary documentsPreparation of other necessary documents ► Filling of the required documents for RegistrationFilling of the required documents for Registration

to obtain certificate of incorporation and to obtain certificate of incorporation and Certificate of commencement of businessCertificate of commencement of business

Page 30: Company law ppt

Memorandum of Memorandum of AssociationAssociation► It is the It is the chartercharter of the company of the company

► It contains the It contains the fundamental fundamental conditions upon which the company conditions upon which the company can be incorporatedcan be incorporated

► It contains the It contains the objects objects of the of the company’s formationcompany’s formation

► The company has to The company has to act within act within objects specifiedobjects specified in the MOA in the MOA

► It It defines as well as confinesdefines as well as confines the the powers of the companypowers of the company

► Any thing done beyond the objects Any thing done beyond the objects specified in the MOA will be specified in the MOA will be ultra ultra vires. Their transactions will be null vires. Their transactions will be null and voidand void

► The outsider have The outsider have to transactto transact looking looking into the MOAinto the MOA

Page 31: Company law ppt

Conditions of the MOAConditions of the MOA► It should be It should be printedprinted► Divided into Divided into paragraph and numbers paragraph and numbers

consecutivelyconsecutively► SignedSigned by at least seven persons or by at least seven persons or

two in case of public and private two in case of public and private company respectively.company respectively.

► The signature should be in the The signature should be in the presence of a witness, who will have presence of a witness, who will have to attestto attest the signature the signature

► Members have to take Members have to take shares and shares and write the number of shareswrite the number of shares taken taken with full addresswith full address

Page 32: Company law ppt

The MOA of the Limited The MOA of the Limited CompanyCompany

► The name of the company with The name of the company with ‘‘limited’limited’ as the last word as the last word

► The name of the The name of the state where the state where the registered officeregistered office of the company is to of the company is to be situatedbe situated

► The objects of the company stating The objects of the company stating the the ‘Main objects’ and the ‘other ‘Main objects’ and the ‘other objects’objects’

► The declaration about the The declaration about the liability of liability of the membersthe members is is limitedlimited ( limited by ( limited by shares or guarantee)shares or guarantee)

► The amount of the The amount of the authorized share authorized share capital, divided into shares of fixed capital, divided into shares of fixed amounts.amounts.

Page 33: Company law ppt

The Compulsory ClausesThe Compulsory Clausesin MOAin MOA

► The Name Clause – it decides on the The Name Clause – it decides on the name name of the companyof the company based on the capital based on the capital involvedinvolved

► The Registered Office Clause- where it has The Registered Office Clause- where it has registered its head officeregistered its head office and other branch and other branch office ( The registered office can be office ( The registered office can be changed with the permission of the ROC)changed with the permission of the ROC)

► The Object Clause- The Object Clause- Main object, ancillary Main object, ancillary object and the other objectsobject and the other objects of the of the company are clearly specified ( Ashbury company are clearly specified ( Ashbury Railway Carriage Co V. Riche). The Railway Carriage Co V. Riche). The applicable doctrine here is the applicable doctrine here is the “ Doctrine of “ Doctrine of Ultra Vires” beyond the powers of the Ultra Vires” beyond the powers of the company (opposed to Intra Vires)company (opposed to Intra Vires)

Page 34: Company law ppt

► The Liability Clause-The Liability Clause- What is the liability of What is the liability of its members.. limited by shares or its members.. limited by shares or guarantee or unlimited, there can be guarantee or unlimited, there can be alteration in the liability clausealteration in the liability clause

► The Capital ClauseThe Capital Clause - The amount of the - The amount of the nominal capital of the company, number of nominal capital of the company, number of shares in which it is to be divided… shares in which it is to be divided… alteration of the capital clause etcalteration of the capital clause etc

► The Association or Subscription clause- The Association or Subscription clause- Where the subscribers to the MOA declare Where the subscribers to the MOA declare that they respectively agree to take the that they respectively agree to take the number of the shares in the capital. It has number of the shares in the capital. It has to have the following:to have the following:

a) They have to sign in the presence of two a) They have to sign in the presence of two witnesses, who attest the signatures, witnesses, who attest the signatures,

b) The subscriber to take at least one b) The subscriber to take at least one share. share.

c) After the name the subscriber has to c) After the name the subscriber has to write the number of shares takenwrite the number of shares taken

Page 35: Company law ppt

““Doctrine of Ultra Vires”Doctrine of Ultra Vires”► The powers exercisable by the company The powers exercisable by the company

are to be confined to the objects are to be confined to the objects specified specified in the MOA.in the MOA.

► So it is better to define and include the So it is better to define and include the provisions regarding the provisions regarding the acquiring of acquiring of business, sharing of profits, promoting business, sharing of profits, promoting company and other financial, gifts , political company and other financial, gifts , political party funds etcparty funds etc

► If the company acts beyond the powers or If the company acts beyond the powers or the objects of the company that is specified the objects of the company that is specified in the MOA, the acts are considered to be in the MOA, the acts are considered to be of of ultra viresultra vires. Even if it is ratified by the all . Even if it is ratified by the all the members, the action is considered to the members, the action is considered to be ineffective.be ineffective.

► Even the charitable contributions have to Even the charitable contributions have to be based on the object clause. be based on the object clause. ( A ( A Lakshmanaswami Mudaliar V. LIC of India)Lakshmanaswami Mudaliar V. LIC of India)

Page 36: Company law ppt

The The consequences of the consequences of the ultra viresultra vires transactions are as followstransactions are as follows::

a)a) Injunction Injunction b)b) Directors’ personal liability.Directors’ personal liability.c)c) If a property has been purchased and it is an If a property has been purchased and it is an ultra ultra

viresvires act, the company can have a right over that act, the company can have a right over that property.property.

d)d) The doctrine to be used exclusively for the The doctrine to be used exclusively for the companies’ interest.companies’ interest.

e)e) But the others cannot use this doctrine as a tool to But the others cannot use this doctrine as a tool to attack the companyattack the company

Page 37: Company law ppt

Articles of AssociationArticles of Association► It is the companies It is the companies bye- laws or rules bye- laws or rules

to governto govern the management of the the management of the company for its company for its internal affairs and internal affairs and the conduct of its businessthe conduct of its business..

► AOA defines the AOA defines the powers of its powers of its officers and also establishes a officers and also establishes a contract between the company and contract between the company and the members and between the the members and between the members members inter seinter se

► It can be originally framed and It can be originally framed and altered by the company under altered by the company under previous or existing provisions of previous or existing provisions of law.law.

Page 38: Company law ppt

AOA AOA ► AOA plays a AOA plays a subsidiary partsubsidiary part to the MOA to the MOA► Any thing Any thing done beyond the AOA will be done beyond the AOA will be

considered to be irregular and may be considered to be irregular and may be ratified by the shareholdersratified by the shareholders..

► The content of the AOA may differ from The content of the AOA may differ from company to company as the Act has not company to company as the Act has not specified any specific provisionsspecified any specific provisions

► Flexibility is allowed to the persons who Flexibility is allowed to the persons who form the company to adopt the AOA within form the company to adopt the AOA within the requirements of the company lawthe requirements of the company law

► The AOA will have to be conversant with The AOA will have to be conversant with the MOA, as they are contemporaneous the MOA, as they are contemporaneous documents to be read together.documents to be read together.

► Any Any ambiguity and uncertainty in one of ambiguity and uncertainty in one of them may be removed by reference to the them may be removed by reference to the other.other.

Page 39: Company law ppt

Contents of the AOA Contents of the AOA may be as follows:may be as follows:

► Share capitalShare capital► Lien on sharesLien on shares► Calls on sharesCalls on shares► Transfer and transmission of sharesTransfer and transmission of shares► Forfeiture of the sharesForfeiture of the shares► Surrender of the sharesSurrender of the shares► General meetingsGeneral meetings► Alteration of the capitalAlteration of the capital► Directors etc..Directors etc..► Dividends and reservesDividends and reserves► Account and auditAccount and audit► Borrowing powersBorrowing powers► Winding upWinding up► Adoption of the preliminary contracts etc….Adoption of the preliminary contracts etc….

Page 40: Company law ppt

Doctrine of Constructive notice and Doctrine of Constructive notice and Indoor ManagementIndoor Management

► Persons dealing with the company have to satisfy Persons dealing with the company have to satisfy themselves. But need not know the internal themselves. But need not know the internal irregularity. Royal British Bank V. Turquand irregularity. Royal British Bank V. Turquand (Turquand Rule) Directors issuing a bond. (Turquand Rule) Directors issuing a bond.

► The doctrine of Constructive notice can be invoked The doctrine of Constructive notice can be invoked by the company to operate against the persons by the company to operate against the persons dealing with the company.dealing with the company.

► The outsider cannot embark, but only can acquaint The outsider cannot embark, but only can acquaint upon the MOA and AOA. (Official Liquidator, upon the MOA and AOA. (Official Liquidator, Manasube &Co Pvt Lid V. Commissioner of Manasube &Co Pvt Lid V. Commissioner of Police)Police)

Page 41: Company law ppt

Exceptions to the Doctrine Exceptions to the Doctrine of Where the outsider of Where the outsider

cannot claim the relief on cannot claim the relief on the grounds of the grounds of

“Indoor management”“Indoor management”►Knowledge of irregularityKnowledge of irregularity►No knowledge of articlesNo knowledge of articles►NegligenceNegligence►ForgeryForgery►Non- Existent authority of the companyNon- Existent authority of the company

Page 42: Company law ppt

Raising of Capital From PublicRaising of Capital From Public► The companies can raise money by The companies can raise money by offering offering

securitiessecurities for sale to the public. for sale to the public. ► They can invite the public to buy shares, which is They can invite the public to buy shares, which is

known as known as public issue.public issue.► For this purpose the company may issue a For this purpose the company may issue a

prospectus, which may include a notice circular, prospectus, which may include a notice circular, advertisement or other documentsadvertisement or other documents which are which are issued to invite public deposits.issued to invite public deposits.

Page 43: Company law ppt

Prospectus Prospectus ► It is an It is an invitation invitation issued to the public issued to the public to to

purchase or subscribe shares or purchase or subscribe shares or debenturesdebentures of the company. of the company.

► Every Every prospectus must be datedprospectus must be dated. The date . The date of publication and the date of issue must of publication and the date of issue must be specifically stated in the prospectus.be specifically stated in the prospectus.

► The The golden rulegolden rule of the prospectus is that of the prospectus is that every detail has to be given in strict and every detail has to be given in strict and scrupulous accuracy. The material facts scrupulous accuracy. The material facts given in the prospectus are presumed to be given in the prospectus are presumed to be true.( New Brunswick and Canada Railway. true.( New Brunswick and Canada Railway. Land & Co. Vs. Muggerridge).Land & Co. Vs. Muggerridge).

Page 44: Company law ppt

Various forms in which the Various forms in which the prospectus can be issued.prospectus can be issued.

► Shelf ProspectusShelf Prospectus: Prospectus is normally issued by : Prospectus is normally issued by financial institution or bank for one or more issues of the financial institution or bank for one or more issues of the securities or class of securities mentioned in the securities or class of securities mentioned in the prospectus. prospectus.

► There can be There can be deemed prospectusdeemed prospectus also if it is issued by the also if it is issued by the issue houseissue house

► ‘‘Information MemorandumInformation Memorandum’: It means a process, which is ’: It means a process, which is undertaken prior to the filing of prospectus. undertaken prior to the filing of prospectus.

► Even anEven an Advertisement Advertisement , that the shares are available is , that the shares are available is considered to be prospectusconsidered to be prospectus

Page 45: Company law ppt

Contents of the prospectus Contents of the prospectus ►General informationGeneral information►Capital structureCapital structure►Terms of present issueTerms of present issue►Management and projectsManagement and projects►Management and perception of Management and perception of

risk factorrisk factor It is compulsory to register the It is compulsory to register the

prospectus with the Registrarprospectus with the Registrar

Page 46: Company law ppt

Civil Liability for MisstatementsCivil Liability for MisstatementsIn case of any untrue statement in In case of any untrue statement in

the prospectusthe prospectus► The liability will be on the director of the company , The liability will be on the director of the company ,

whose name was written during the time of issuewhose name was written during the time of issue► The persons who have authorized their names to The persons who have authorized their names to

be theirs in the prospectus to be named as be theirs in the prospectus to be named as directorsdirectors

► PromoterPromoter► Every person including the person who is an Every person including the person who is an

expert and has authorized his name to be issued expert and has authorized his name to be issued with the prospectus with the prospectus

Page 47: Company law ppt

Remedies for misstatements in Remedies for misstatements in the prospectus the prospectus

► Relying on the prospectus if any person buys Relying on the prospectus if any person buys shares, the person mayshares, the person may

► Rescind the contract ( only when there is Rescind the contract ( only when there is misrepresentation relating to the material facts.misrepresentation relating to the material facts.

The rescission has to be done within a reasonable The rescission has to be done within a reasonable timetime

► Claim damages- it can be claimed from the Claim damages- it can be claimed from the directors, promoters or other persons who has directors, promoters or other persons who has authorized their name to be written during the authorized their name to be written during the issue of the prospectusissue of the prospectus

Page 48: Company law ppt

Share CapitalShare Capital► Share: Share: Share is defined as “an interest Share is defined as “an interest

having a money value and made up of having a money value and made up of diverse rights specified under the articles of diverse rights specified under the articles of association”. association”.

► Share capital: Share capital: Share capital means the Share capital means the capital raised by the company by issue of capital raised by the company by issue of sharesshares. .

► A share is a share in the share capital of A share is a share in the share capital of the company including the stock.the company including the stock.

► Share gives a right to participate in the Share gives a right to participate in the profits of the company, or a share in the profits of the company, or a share in the assets when the company is going to be assets when the company is going to be wound up.wound up.

Page 49: Company law ppt

Other features of a shareOther features of a share► A share is not a negotiable instrument, but A share is not a negotiable instrument, but

it is a movable property. it is a movable property. ► It is also considered to be goods under the It is also considered to be goods under the

Sale of Goods Act, 1930.Sale of Goods Act, 1930.► The company has to issue the share The company has to issue the share

certificate.certificate.► It is subject to stamp duty.It is subject to stamp duty.► The ‘Call’ on Shares is a demand made for The ‘Call’ on Shares is a demand made for

payment of price of the shares allotted to payment of price of the shares allotted to the members by the Board of Directors in the members by the Board of Directors in accordance with the Articles of Association.accordance with the Articles of Association.

► The call may be for full amount or part of it.The call may be for full amount or part of it.

Page 50: Company law ppt

Share Certificate and Share Share Certificate and Share WarrantWarrant

► Share Cert if icateShare Cert if icate :: The Share Certificate is a The Share Certificate is a document document issued by the companyissued by the company and is prima facie evidence to and is prima facie evidence to show that the person named therein is the holder ( title) of show that the person named therein is the holder ( title) of the specified number of shares stated therein.the specified number of shares stated therein.

► Share certificate is issued by the company to the ( share Share certificate is issued by the company to the ( share holder) allottee of shares.holder) allottee of shares.

► The company has to issue within 3 months from the date The company has to issue within 3 months from the date of allotment. In case of default the allottee may approach of allotment. In case of default the allottee may approach the central governmentthe central government

► Share WarrantShare Warrant : : The share warrant is a The share warrant is a bearer documentbearer document issued by the company under its common seal. As share issued by the company under its common seal. As share warrant is a negotiable instrument, it is transferred by warrant is a negotiable instrument, it is transferred by endorsement and by mere delivery like any other endorsement and by mere delivery like any other negotiable instrumentnegotiable instrument. .

Page 51: Company law ppt

Kinds of sharesKinds of shares>Preference shares->Preference shares- It can be It can be

further classified as further classified as ► Participating preferential shares.Participating preferential shares.► Cumulative preferential sharesCumulative preferential shares► Non Cumulative preferential sharesNon Cumulative preferential shares>Redeemable Shares>Redeemable Shares and and>Irredeemable Shares>Irredeemable Shares>Equity or ordinary shares>Equity or ordinary shares>Shares at premium>Shares at premium>Shares at discount>Shares at discount>Bonus shares>Bonus shares>Right shares>Right shares

Page 52: Company law ppt

Transfer and Transmission of Transfer and Transmission of sharesshares

► AOA provides for the procedure of transfer of shares. It is a AOA provides for the procedure of transfer of shares. It is a voluntary action of the shareholder.voluntary action of the shareholder.

► It can be made even by a blank transfer –In such cases It can be made even by a blank transfer –In such cases the the transferor only signs the transfer form without making any transferor only signs the transfer form without making any other entries. other entries.

► In case it is a forged transfer, the transferor’s signature is In case it is a forged transfer, the transferor’s signature is forged on the share transfer instrument. forged on the share transfer instrument.

► Transmission of sharesTransmission of shares is by operation of law, e.g. by is by operation of law, e.g. by death, insolvency of the shareholder etc.death, insolvency of the shareholder etc.

Page 53: Company law ppt

Buy-Back of SecuritiesBuy-Back of Securities► The company may purchase its securities The company may purchase its securities

back and it is popularly known as buy back back and it is popularly known as buy back of sharesof shares

► To do so , the company has to be To do so , the company has to be authorized under the AOA.authorized under the AOA.

► The company has to comply with the The company has to comply with the provisions of the Company law to buy back provisions of the Company law to buy back its securities.its securities.

► The listed company has to seek permission The listed company has to seek permission from the SEBI (SERA 1998). Specifically from the SEBI (SERA 1998). Specifically for the private company etc, the Buy Back for the private company etc, the Buy Back Securities Rules1999 will be applicable.Securities Rules1999 will be applicable.

Page 54: Company law ppt

DividendsDividends► The The sharing of profitssharing of profits in the going concerns in the going concerns

and the distribution of the assets after the and the distribution of the assets after the winding up can be called as dividendswinding up can be called as dividends

► It will be distributed among the shares It will be distributed among the shares holdersholders

► The dividends can be The dividends can be declared and paid declared and paid out of:out of:

Current profitsCurrent profits ReservesReserves Monies provided by the government and Monies provided by the government and

the depreciation as provided by the the depreciation as provided by the companies.companies.

It can be paid after presenting the balance It can be paid after presenting the balance sheet and profit and loss account in the sheet and profit and loss account in the AGMAGM

Page 55: Company law ppt

DividendDividend► Other than the equity shareholders, Other than the equity shareholders,

even the preferential shareholders even the preferential shareholders can get the dividends. Rather they can get the dividends. Rather they are the first ones to get the are the first ones to get the dividends.dividends.

► Dividends are to be only in cash, if Dividends are to be only in cash, if otherwise specified in the AOA.otherwise specified in the AOA.

► In exceptional cases, even the In exceptional cases, even the central government may permit the central government may permit the payment of interest to shareholders , payment of interest to shareholders , even though there is no profit.even though there is no profit.

Page 56: Company law ppt

DirectorsDirectorsThe Legal Status of the directorThe director occupies the position of a:► As a Trustee- In relation to the company► As Agents- When they act o n behalf of

the company► As Managing Partner-As they are

entrusted with the responsibility of the company

Qualification Shares In case there is requirement as per the

AOA for the director is bound to buy qualification shares

If acts are done by the director prior to he or she being disqualified, the acts are considered to be valid.

Page 57: Company law ppt

DisqualificationsDisqualificationsAs per the company law, the followingAs per the company law, the followingpersons are persons are disqualified disqualified from been appointedfrom been appointedas a director:as a director:► Unsound mindUnsound mind► An undischarged insolventAn undischarged insolvent► A person who is convicted by the courtA person who is convicted by the court► Who has applied for being adjudged Who has applied for being adjudged

insolventinsolvent► Not paid for the call on sharesNot paid for the call on shares► Persons who are already directors in Persons who are already directors in

maximum number of companies as per the maximum number of companies as per the provisions of the Act orprovisions of the Act or

► Any other person who has been Any other person who has been disqualified by the court for any other disqualified by the court for any other reasonreason

Page 58: Company law ppt

Appointment of DirectorsAppointment of Directors

The appointment can sometimes be by based on the proportional representation like minority shareholders.

There can be alternate directors, additional directors, casual directors.

The third parties can appoint the directors Other than the shareholders and the first directors ,the central government and NCLT may also appoint directors.

Page 59: Company law ppt

Duties and Liabilities of Duties and Liabilities of the Directorsthe Directors

Fiduciary Duties► To act honestly and with good faith► Not to use confidential information of the

company for their own purpose► Duty of Care and to act reasonably while

acting for the companyStatutory Duties► Not to contract with company, where

he/she or his relative has an interest in the contract

► where he/she has a interest, they need to inform the board or seek prior approval while entering into contract, otherwise the contract is voidable

► Duty to attend and convene meetings► Duty not to delegate

Page 60: Company law ppt

The directors liabilitiesThe directors liabilities► The liability of the directors can be either The liability of the directors can be either

civil or criminal. civil or criminal. ► If provided in the MOA, the liability may be If provided in the MOA, the liability may be

unlimited, for a limited company, otherwise unlimited, for a limited company, otherwise it may be altered. it may be altered.

► Liability may be for breach of fiduciary Liability may be for breach of fiduciary dutiesduties

► The directors are personally liable for the The directors are personally liable for the following:following:

a) Ultra vires actsa) Ultra vires acts b) malafide actsb) malafide acts c) negligent actsc) negligent acts d) liability for the acts of third parties d) liability for the acts of third parties

Page 61: Company law ppt

Criminal LiabilityCriminal Liability► Liability of the director for any untrue Liability of the director for any untrue

statement in the prospectusstatement in the prospectus► Inviting any deposits in contravention Inviting any deposits in contravention

of the lawof the law► Liability for false advertisementLiability for false advertisement► Failure to repay the application Failure to repay the application

money, which was excessmoney, which was excess► Concealing the names of the Concealing the names of the

creditorscreditors► Failure to lay the balance sheet.Failure to lay the balance sheet.► Failure to provide information to the Failure to provide information to the

auditor etcauditor etc

Page 62: Company law ppt

Company MeetingsCompany Meetings► A meeting may be convened by the A meeting may be convened by the

director, requisitionist, or the NCLTdirector, requisitionist, or the NCLT► Notice to be given by the secretary Notice to be given by the secretary

after the time and place have been after the time and place have been fixed by the directorsfixed by the directors

► Even the shareholders can call a Even the shareholders can call a meeting as an extraordinary general meeting as an extraordinary general meeting (EGM)meeting (EGM)

► The NCLT can call an Annual The NCLT can call an Annual General Meeting (AGM)General Meeting (AGM)

Page 63: Company law ppt

Classification of MeetingsClassification of Meetings► Shareholders meetingsShareholders meetings a) a) Statutory meetingsStatutory meetings ( which ( which

happens only once in the lifetime of happens only once in the lifetime of the company)the company)

b)b) EGM EGM- Convened to transact some - Convened to transact some special or important decision to be special or important decision to be takentaken

c) c) Class meetings-Class meetings- This is the This is the meeting of the shareholders- which meeting of the shareholders- which is convened by the class of is convened by the class of shareholders based on the kind of shareholders based on the kind of shares they hold. shares they hold.

continued…..continued…..

Page 64: Company law ppt

Other meetingsOther meetings► AGMAGM-it can be conducted based on the provisions -it can be conducted based on the provisions

given in the Articles or by passing a resolution in given in the Articles or by passing a resolution in one AGM for the subsequent AGM’sone AGM for the subsequent AGM’s

► Board Meetings-Board Meetings- This is conducted for the smooth This is conducted for the smooth running of the company and for collectively taking running of the company and for collectively taking the decisions. The meetings may be conducted to the decisions. The meetings may be conducted to call on shares, issue debentures, borrow money, call on shares, issue debentures, borrow money, to make loans, To invest the fundsto make loans, To invest the funds etc etc

Page 65: Company law ppt

How to conduct meeting?How to conduct meeting?►Written notice to be givenWritten notice to be given►Notice to be issued under the Notice to be issued under the

authority of the companyauthority of the company► In case of failure to give a In case of failure to give a

notice, the persons concerned notice, the persons concerned may be punished with fine and may be punished with fine and the proceedings of the meeting the proceedings of the meeting will be rendered invalid.will be rendered invalid.

Page 66: Company law ppt

ResolutionResolution► A motion when passed is called a A motion when passed is called a

resolution.resolution.► The resolution in the General body The resolution in the General body

meetings can be an meetings can be an ordinary ordinary resolution resolution

( Simple majority) ( Simple majority) andand special special resolution.resolution.

► Special resolution- ( notice of 21 Special resolution- ( notice of 21 days to be given) the notice has to days to be given) the notice has to specify the purpose. specify the purpose. The number of The number of votes to be cast in favour of thevotes to be cast in favour of the resolution is to beresolution is to be three times three times the the number vote cast against. number vote cast against.

Page 67: Company law ppt

Quorum and proxy Quorum and proxy ► The minimum members to be present must The minimum members to be present must

be according to the provisions of the law.be according to the provisions of the law.► Public company ( minimum Five) and Public company ( minimum Five) and

private company (minimum of 2)private company (minimum of 2)► The quorum must be those members who The quorum must be those members who

are eligible to vote in respect of the agenda are eligible to vote in respect of the agenda of the meeting.of the meeting.

► If the quorum is not present within half an If the quorum is not present within half an hour from the appointed time, either the hour from the appointed time, either the meeting stands dissolved or may be meeting stands dissolved or may be adjourned in the same day next week or adjourned in the same day next week or any other as may be determined by the any other as may be determined by the directorsdirectors

► A person in case of being incapable to A person in case of being incapable to attend a meeting and who is eligible to vote attend a meeting and who is eligible to vote may appoint a proxy in writing to attend the may appoint a proxy in writing to attend the meeting of the member and vote on his or meeting of the member and vote on his or her behalf. The proxy can only vote and her behalf. The proxy can only vote and cannot participate in the discussions.cannot participate in the discussions.

Page 68: Company law ppt

Compromise, Reconstruction and

Arrangement ► Reconstruction includes Reconstruction includes reorganization, reorganization, arrangement and amalgamationarrangement and amalgamation..

► Arrangement includes all forms of Arrangement includes all forms of reconstructing.reconstructing.

► It has been broadly defined as all It has been broadly defined as all forms of forms of capital reorganizations either by capital reorganizations either by consolidation of shares or division of consolidation of shares or division of shares or bothshares or both

► Reorganization and arrangement are done Reorganization and arrangement are done when there is only one company is involvedwhen there is only one company is involved

continuedcontinued….….

Page 69: Company law ppt

► Reconstruction can be effectively done Reconstruction can be effectively done through a compromise or arrangement.through a compromise or arrangement.

► To do so the meeting or the members or To do so the meeting or the members or the separate class of the shareholders has the separate class of the shareholders has to be conducted or in case of winding up to be conducted or in case of winding up the meeting to be called by the liquidatorthe meeting to be called by the liquidator

► Even a banking company (sick bank) may Even a banking company (sick bank) may be reconstructed or amalgamated by the be reconstructed or amalgamated by the central government on the basis of the central government on the basis of the Reserve Bank’s application for a fixed Reserve Bank’s application for a fixed period of time.period of time.

► The reconstruction or amalgamation can be The reconstruction or amalgamation can be done with any other banking institution.done with any other banking institution.

Page 70: Company law ppt

Scheme to be approvedScheme to be approved► Any kind of scheme to be accepted, Any kind of scheme to be accepted,

it has to get approval from the it has to get approval from the members or the members may reject members or the members may reject the scheme.the scheme.

► After the scheme is approved by After the scheme is approved by voting, the court has to sanction the voting, the court has to sanction the scheme or reject, if it is against the scheme or reject, if it is against the public interest or if it feels that the public interest or if it feels that the scheme is not beneficial.scheme is not beneficial.

► The legal provisions vary based the The legal provisions vary based the mode of scheme adopted by the mode of scheme adopted by the company.company.

Page 71: Company law ppt

Modes of Reconstruction Modes of Reconstruction or Amalgamationor Amalgamation

► By sale of undertaking- it can be the whole By sale of undertaking- it can be the whole or part of sale ( the court will decide)or part of sale ( the court will decide)

► By sale of shares ( Maximum number of By sale of shares ( Maximum number of companies adopt this scheme- In such companies adopt this scheme- In such schemes the shares are sold and schemes the shares are sold and registered in the name of the purchasing registered in the name of the purchasing company or on its behalf. The shareholders company or on its behalf. The shareholders selling the shares are compensated either selling the shares are compensated either by cash or with the shares of the acquiring by cash or with the shares of the acquiring company.company.

► Amalgamation can take place even for the Amalgamation can take place even for the sake of Public interest by the central sake of Public interest by the central government. In such cases, it will be government. In such cases, it will be notified in the official gazette.notified in the official gazette.

Page 72: Company law ppt

Mergers, Acquisitions and Take Mergers, Acquisitions and Take over of companiesover of companies

► Merger connotes union of two or more commercial Merger connotes union of two or more commercial interests, corporations, undertakings, bodies or interests, corporations, undertakings, bodies or any other entities.any other entities.

► Fusion of two or more corporations by the transfer Fusion of two or more corporations by the transfer of all property to a single corporation. It is used as of all property to a single corporation. It is used as a synonym for amalgamation. Even the Act makes a synonym for amalgamation. Even the Act makes no distinction between merger and amalgamation.no distinction between merger and amalgamation.

Page 73: Company law ppt

The changing of legal entity after The changing of legal entity after mergers and acquisitionsmergers and acquisitions

► In a merger- one of the company loses its In a merger- one of the company loses its corporate existence and the survivor company corporate existence and the survivor company acquires the assets as well as the liabilities of the acquires the assets as well as the liabilities of the merger company.merger company.

► In acquisition, it is acquiring the ownership in the In acquisition, it is acquiring the ownership in the property is the purchase of a controlling interest in property is the purchase of a controlling interest in the share capital of another existing company. It the share capital of another existing company. It is an act of acquiring asset and management of is an act of acquiring asset and management of the company.the company.

Page 74: Company law ppt

Winding upWinding up► It is the process whereby the life of the It is the process whereby the life of the

company is ended and its property is company is ended and its property is administered for the benefit of its creditors administered for the benefit of its creditors and members.and members.

► During this process a liquidator is During this process a liquidator is appointed to take control of the company. appointed to take control of the company. The liquidator will be responsible for the The liquidator will be responsible for the assets, debts and final distribution of the assets, debts and final distribution of the surplus to the members.surplus to the members.

► It is the process for discharge of liabilities It is the process for discharge of liabilities and returning the surplus to those who are and returning the surplus to those who are entitled for it.entitled for it.

► But even a company which is making profit But even a company which is making profit can be wound up is the special feature of can be wound up is the special feature of winding up , which is different from that of winding up , which is different from that of the process of insolvency.the process of insolvency.

Page 75: Company law ppt

How can be company be wound How can be company be wound up?up?

► By passing a special resolutionBy passing a special resolution► If there is a default in holding the statutory meetingIf there is a default in holding the statutory meeting► Failure to commence the business Failure to commence the business ► If there is reduction in the membership of the If there is reduction in the membership of the

minimum number of members as per the statutory minimum number of members as per the statutory requirementrequirement

► If it not able to pay its debtsIf it not able to pay its debts

Page 76: Company law ppt

Modes of winding upModes of winding up► Compulsory winding up under the Compulsory winding up under the

supervision of the courtsupervision of the court (Reasons as stated in the previous slide)(Reasons as stated in the previous slide) Compulsory windingCompulsory winding up may happen for up may happen for

just and equitablejust and equitable reasons also. reasons also. The just and equitable grounds can be like The just and equitable grounds can be like

loss of substratum , where there is dead loss of substratum , where there is dead lock in the management, etclock in the management, etc

► Voluntary winding upVoluntary winding up ( Members voluntary ( Members voluntary winding up and creditors voluntary winding winding up and creditors voluntary winding up)up)

► Voluntary winding up subject to the Voluntary winding up subject to the supervision of the court.supervision of the court.

Page 77: Company law ppt

Winding up procedureWinding up procedure► A petition for winding up has to be filed by the A petition for winding up has to be filed by the

concerned person to the prescribed authorityconcerned person to the prescribed authority► Liquidator to be appointed to safeguard the Liquidator to be appointed to safeguard the

property of the companyproperty of the company► Then the court will hear the matter and pass Then the court will hear the matter and pass

necessary orders. It can dismiss the petition or necessary orders. It can dismiss the petition or pass an order of winding up pass an order of winding up

Page 78: Company law ppt

Dissolution of the companyDissolution of the company► When the company ceases to exist When the company ceases to exist

as a corporate entity for all practical as a corporate entity for all practical purposes it is said to have been purposes it is said to have been dissolved. dissolved.

► Dissolution has to be declared by the Dissolution has to be declared by the court.court.

► It will not be extinct and will be kept It will not be extinct and will be kept under suspension for 2 Years.under suspension for 2 Years.

► The order has to be forwarded by the The order has to be forwarded by the liquidator to the Registrar of the liquidator to the Registrar of the Companies within 30 days from the Companies within 30 days from the date of the order of dissolution.date of the order of dissolution.