CHAPTER 1:

THEORY OF JOINT STOCK COMPANY

INTRODUCTION:

The increased needs of modern industry and commerce could not met by

Sole proprietorship or Partnership firms. They were favourable till the trading and

industry could be run small scale and high capital was not needed. Some other

form of organization was, therefore needed to deliver the goods. After industrial

revolution, use of machines increased, production was undertaken on a large scale,

and production was undertaken with the expectation of high demand. Capital

investment was needed much as unit became bigger, resultantly, risk element

increased; in these circumstances forms having unlimited liability did not remain

favorable. Need for establishing a type of business organization arose which could

sustain high risk. JOINT STOCK COMPANY emerged from this.

It was the joint stock type of organization which facilitated the full

utilization of technical and other innovations brought in by the industrial

revolution. The joint stock organization was already known when the industrial

revolution took place, but it was considered less efficient then the partnership form

of organization. Economist like Adam Smith thought that a joint stock company

was suitable only for such occupations as could be reduced to a routine or for those

fields where monopoly existed. For ordinary business requiring initiative and

prompt decisions the joint stock company was not considered suitable. The

misgiving has, however, been belied by recent developments. In fact, it can be said

that the industrial revolution could not have been succeeded so well, had it not

been for the company type of organization. The joint stock company was the

chariot on which the forces of Industrial Revolution came riding and

conquering.

Thus, the company organization grew out of the failings and limitations

of the earlier forms of organizations like the proprietorship or the partnership

on the one hand, and the highly increased needs of large scale industry in the

era following the Industrial Revolution on the other.

MEANING:

According to Indian Company Act 1956, Joint Stock Company is such a

form of business organization which is established on the principle of having

permanent paid or authorized capital divided into shares of specific amount

and only its shareholders can be its members.

CHARECTERISTICS:

a) Compulsory registration: Registration of a company is compulsory under

Company Act. Company does not get separate identity without registration.

Legal provisions of Company Act have been imposed upon it, which are to

be implemented. To secure incorporation, the promoter prepares and file

with the Registrar of Joint Stock Company as the necessary documents have

been compiled with.

b) Separate and perpetual existence: Company separate existence from its

members, which leads it to undertake all types of business activities like a

person. The company has a continuous existence which is not interrupted by

death, insolvency or retirement of any shareholder or director.this is a

characteristic which lends stability and long life to a company as compared

to other forms of organization.

c) Voluntary membership: Company is a voluntary association of persons

who gather with a purpose to earn profit. Members may resign voluntarily.

d) Limited liability: since the company has a separate legal existence and is

recognized a s an artificial person existing in the eye of law, its debts are its

own and the shareholders cannot be held liable for them under ordinary

circumstances. A shareholder is liable to pay only his share in the company.

If he has paid Rs. 50 towards share of Rs. 100 his liability extends only up to

further Rs. 50

e) Transfer of shares: As the capital of the company is divided into small

divisions i.e. shares, any member i.e. shareholder can transfer the ownership

of his shares easily. Share holder can sell his shares in a stock exchange and

any person can purchase them.

f) Common seal: As a company is an artificial person its existence is

expressed through its common seal. This seal exhibits the identity of a

company. By stamping the seal on important contracts, documents, and

certificates and in day-to-day transactions of company documents and

transactions become official.

g) Management by representatives: As a company has no physical existence

it is managed by the representatives elected by the share holders. This board

of directors handles the management of company on behalf of shareholder. It

means that ownership and management are separate.

h) Voting per share: Members of company are holding right to vote on the

basis of the number of shares that they own.

TYPES OF COMPANY:

CLASSIFICATION FROM INCORPORATION VIEWPOINT:

1) Chartered company: Company incorporated under the special order of

ruler or by charter is known as chartered company. E.g. East India Company.

This type of company cannot be incorporated in India.

2) Registered company: Companies incorporated by registering under

company law are known as registered companies.

3) Company created under special law: Companies incorporated through

special law of Parliament or legislative assembly, e.g. State Trading

Corporation.

Types of registered company:

CHARTERED COMPANY

REGISTERED COMPANY

COMPANY CREATED UNDER SPECIAL LAW

1) Classification according to number of members viewpoint:

a) Private Company: The Company is known as private company which has minimum two and maximum fifty members, the transfer of shares of which is restricted and which has been prohibited to invite public to subscribe for its shares. ‘Private Limited’ words are inserted at the end of the name of such company.

b) Public Company: The Company which is not a private is a public

company. There are seven and limitless-unlimited-members in this company. The company is known as public company of which shares can be transferred freely and which can invite public to subscribe for shares. The (Limited) word has to be inserted at the end of its name.

2) Classification according to liability viewpoint:

Registration viewpoint Control viewpoint

Number of memeber viewpoint Liability viewpoint

Registered Company

a) Company limited by shares: The company is known as company limited

by share capital of which members’ liability is limited by the amount of

shares subscribed by shareholders.

b) Company limited by guarantee: The company is known as company

limited by guarantee of whose members’ liability remains limited by the

amount of guarantee given by them at the time of its incorporation. The

liability to pay the guarantee amount arises at the time of its liquidation.

c) Unlimited liability: The company is known as unlimited liability company

of whose members’ liability is unlimited like those of sole proprietorship

and partnership firm. If the debt of this company becomes more than its

assets the personal property of members is affected at the time of its

liquidation.

3) Classification according to control viewpoint:

a) Holding Company: Holding company means a company which holds 50%

or more shares of other company and has the right to nominate majority or

all directors.

b) Subsidiary Company: The company is a subsidiary company of which 50%

or more shares are held by other company and whose majority or all

directors’ nomination right is vested into the other company.

c) Government Company: The company is known as the government

company of which at least 51% of share are held by the state government

and/or central government or are held by more than one state government.

4) Registration place viewpoint:

a) Indian Company: Indian company is company which is registered under

the Indian Company Actor under any special Act of Indian Parliament.

b) Foreign Company: Foreign company means a company which is registered

in countries other than India.

5) Deemed public company:

This company is registered as private. It was considered automatically as

public if it fulfills conditions. The provisions for this type of company cease

to exist since 2000 A.D.

BASIC COMPANY DOCUMENTS:

The memorandum of association:

Memorandum of Association is the constitution of a company.

Memorandum of Association is a fundamental document of a company. Basic

conditions of establishment of a company are included into memorandum of

association. Memorandum of Association states the authority of the company and

it determines the boundary of authority of the company. So, third party relies on

the provisions of memorandum of association while entering in to the relation with

the company. Any work done above the preview of memorandum of association is

Ultra Vires. Thus, thirs party gets idea of company and its limitations through

memorandum of association.

It is compulsory to make following provisions in the memorandum of

association according to Act:

1) Name 2) Registered office clause 3) Object clause 4) Liability clause

5) Capital clause 6) Association clause

a) Name Clause: the name of the company is mentioned in this clause. The

company is known by the name inserted in this clause and its administration is

also run in this name

b) Registered Office Clause: The company has to register the address of its

registered office with the Registrar within the time-period stipulated by the

Act. So, the Registrar and public will get information of the company address.

The address indicated in this should be written in all the documents and

correspondence.

c) Objects Clause: Information of the objects for which the company has come

into existence and for which the business will be done b the company available

through this clause. The objects of company are to be stated very clearly in this

clause and clarification has to be made about the main and the subsidiary

objects.

d) Liability Clause: What will be the liability of the members of the company is

indicated in this clause. A company with limited liability of shares has to

clarify through this clause that he liability of the members is limited up to the

shares held by them.

e) Capital Clause: the information of the authorized capital of the company and

its division into equity and preference shares is given in this clause.

f) Association Clause: Company promoters declare through this clause that they

have established the company on the basis of the memorandum of association.

This clause states that the minimum seven persons, if the company is public

and two if it is private have established the company. These persons make this

statement under their signatures.

Articles of Association:

Articles of Association is prepared within the boundaries framed by the

Memorandum of Association. The Articles of Association is a secondary document

of Memorandum of Association is made tangible by describing how to implement

it in the Articles of Association. Thus, Articles of Association is an internal

administrative document.

Public company can utilize Articles of Association given as model in the Act

(which is given as table A in the Act)

The provisions given in Table – A can be accepted in total or in part. The

company has to state that it has accepted provisions of Table – A in total or in part.

Information must be given with regard to the value of shares, distribution of shares,

qualification shares, installment of shares, share forfeiture, meetings, etc.

Due to Articles of Association mutual relations between shareholders and

company are established. Responsibility of members towards the company and of

the company towards the members is determined through Articles of Association.

Prospectus:

As we have seen previously, a public company has to publish prospectus or

has to register a statement in lieu of prospectus compulsorily while receiving

Certificate of Commencement of business.

A private company does not collect capital from public so private company

does not need to issue prospectus. The public company which collects the capital

will issue prospectus for the company. If the public company does not collect from

the public, it has to register statement in lieu of prospectus with the company

registrar.

The prospectus is to be registered with the registrar after receiving the

certificate of incorporation and before submitting it to the public. Whoever is a

director or would become will have to sign the prospectus. The date on which the

prospectus is registered should be stated in it.

Following information is to be contained in the prospectus according to the

Act:

Main objects of company

Number of qualification shares for directors

Names, addresses, qualification of the directors, amount and number of

shares held by them.

Name, address of the auditor of the company

Amount to be paid by the applicant while applying for shares and when

allocation of shares takes place

Details of the underwriting agreement

Information pertaining to primary expenses

Information pertaining to minimum subscription

Statement that applying for getting shares under fictitious namd is an

offence. Public invests in share capital of the company on the basis of the

prospectus. So, if any information is concealed or falsely given

intentionally, the signatories of the prospectus are liable for punishment.

ADVANTAGES OF A COMPANY:

Limited Liability: The liability of the shareholders is limited to the amount

of shares held by them even though they are its owners. The personal

property of shareholders is not at risk for paying the debts of the company at

the time of liquidation. So, more and more investors are attracted to

shareholders.

High capital: Company is capable of collecting more capital than sole

proprietorship, partnership or co-operative society. Innumerable persons can

invest who are small savers and reside in a village of a corner of a country

through small denominated shares, so business risk is distributed amongst

many persons.

Easy share transfer: Company gets separate personality from its members

through act. The existence of unit is not affected due to the death, insolvency

or lunacy of owner as well as by the entry-exit of the members. So long term

planning can be framed.

Efficient management: The ownership of the company is of shareholders

where as it is managed by elected-nominated representatives. Besides,

experts having knowledge-experience can be appointed according to the

requirements. So, its management remains efficient in comparision with

other private units.

Democratic management: Company is managed by elected directors but

important decisions are taken in Shareholders’ meeting by majority. Annual

General Meeting has the authority to remove the directors. Of, course voting

right is according to shares.

Large-scale production: Due to high capital and efficient management the

gains of large-scale production can be obtained in company form. By

purchasing and selling on large scale, using modern machines, procuring

expert services, having advantages of research company can produce more

with less expenses therefore, economic developments of the country gets

impetus.

Social benefits: company creates employment opportunities for people.

Some companies render economic help in developing schools, colleges,

dispensaries, playgrounds in local areas. It attracts small savings of society.

It helps in improving the standard of living of people. It contributes in

enhancing national income and in the economic development of the country.

Tax relief: Companies are liable to pay income-tax as separate legal entities,

at a flat rate fixed by the Finance Act from year to year. For higher incomes,

this rate is lower than that chargeable in the case of sole traders or partners

in partnership firm.

LIMITATIONS OF A COMPANY:

Long and expensive incorporation procedure: Company registration

procedure consumes more time. Some documents are to be prepared with the

help of experts. For that high fee is to be paid even to the registrar of

companies. Thus, from time and money angles, the incorporation procedure

of company is more expensive than sole proprietorship and partnership.

Autocratic management: The authority of shareholders is on paper only.

Certain persons are taking control over management and sustain it by

groupism and then manage the company high-handedly. Small investors are

careless in attending general meeting. Sometimes, managers use assets

finance of the company for personal benefits.

Observance of law: Company is a creation of law. During and after

incorporation many documents are to be submitted to the registrar. Accounts

are to be published. If any mistake occurs in them, penalty is to be imposed,

due to this management loses dynamism.

Delay in decision making: Company cannot take prompt decisions as in

case of sole proprietorship or partnership. Policy decisions in general

meeting and important decisions in board of directors meeting are to be

taken by majority. Time is wasted in calling the meetings and in discussions,

so decisions are taken belatedly.

Difficulty in keeping secrets in tact: The accounts of the company, the

proceedings of the meeting and auxiliary information are to be published

according to the law. So, it becomes difficult to maintain business secrets,

possibility of misusing this information by the competitors is always there.

Absence of personal interest: Even though the shareholders of the

company are owners they do not manage it. Directors and other experts,

administrative officers are managing the company, so it is natural that that

do not have as much personal interest as the owners.

Conclusion: From the above discussion of the merits and drawbacks of the

corporate form of organization, it may be concluded that the advantages of this

form of organization outnumber its weaknesses. Most of the evils enumerated

above arise either from management or from the misuse of this otherwise desirable

form of organization. It is also clear that despite its weaknesses the company form

of organization is best suited to those lines of business entity which require huge

capital outlay and maximum stability. For those lines of business that call for

prompt decisions, personal interest and initiative on the part of the proprietor or

proprietors and do not require very large investment for long periods, individual

proprietorship and partnership will generally be more suitable. In fact it is this

which accounts for the fact that these forms of organizations co – exist with the

company organization even though the latter is undoubtedly superior to them.

CHAPTER 2:

ABOUT THE COMPANY

NAME OF THE COMPANY:

ADANI ENTERPRISES LTD .

COMPANY HISTORY:

1993:

The Company was incorporated on 2nd March; by conversion of

Partnership firm namely M/s. Adani Exports into a limited company. The

Company was promoted by Shri Gautam S. Adani and Rajesh S. Adani. It was

engaged in the business of exporting frozen foods, dyes and intermediates, plastic

products, agricultural products etc. to about 28 countries all over the world.

1994:

Adani Management Consultancy Services Pvt. Ltd. was amalgamated with

the company.

1995:

AMCPL entered into Amalgamation with AEL, a group company of Adani

Group in order to achieve higher economies of scale.

1997:

Eastern Generation, has signed a memorandum of understanding (MoU)

with Adani Exports Limited to jointly develop, own and operate coal-fired power

projects in the country.

The Rs 1,600 crore Adani Exports Limited has decided to enter into a joint

venture with the Gujarat government to build a mega port at Mundra in Kutch

district.

In mid-October, Adani signed a letter of intent with the Gujarat

government to develop a port and set up a 3,000 hectare industrial park.

Adani Global Limited was incorporated as a Company's wholly owned

subsidiary in Mauritius upon receipt of necessary approvals from the Reserve Bank

of India and Government of India for the purpose of Direct Investment.

1998:

Adani Exports Ltd, the Rs. 1,700-crore trading house, has incorporated

Adani Eastern Generation Company Ltd (AEGCL), a 50:50 joint venture company

with the UK power maintenance giant - Eastern Generation.

The Rs.340 crore project is promoted by Adani Exports Ltd on the basis of

the build-own-operate-transfer (BOOT) format. The concession pact has been

signed for 30 years from the date of commissioning.

The Adani port will be the second private sector port in the country

after Gujarat Pipapav Port Ltd.

1999:

Adani Exports and Wilmar Trading Pte signed a memorandum to form a

50:50 joint venture company. The equity base of the company named Adani

Wilmar is million.

A joint venture between Gujarat Port Infrastructure Development

Corporation and Adani Port is operational at Mundra in Gujarat since October

Company received GCC (Gujarat Chamber of Commerce and

Industry) Export Appreciation Award for the year 1997-98 in recognition of

commendable performance in merchandise exports from Honorable Union

Commerce Minister Shri Ramakrishna Hegde in June.

2000:

Adani Exports, one of India's largest trading houses, has entered the

packaged edible oil market with the launch of its new brand `Fortune' in Jaipur.

The Company received Texprocil Silver Trophy for outstanding

export performance in Fabrics amongst top exporters (Merchant) for the year

1998-99.

The Company has entered into an agreement with both National

Securities Depository Limited (NSDL) and Central Depository Services

(India) Limited (CDSL) to facilitate the shareholders of the Company to avail

demat facility.

2003:

Shanxi Corporation ties up with Adani Exports Ltd for providing 1-1.5m

tonnes of coal in India.

THE ADANI GROUP:

Founded in 1988 the Adani Group has grown from being a trading house to a

diversified and dynamic business group with interests from infrastructural

development to FMCGs.

A leader in international trading and infrastructure development, the Adani Group

is engaged in a continuous Endeavour to maximize potentialities by

synergizing the multiple businesses of the Group creating optimum business

model.

The Group has made foray into high growth sector like Power, Infrastructure,

Global Trading, Logistics, and Energy and is recognized for creating benchmarks

for others to follow… We are the operator of largest private port in India, We are

the developer of largest multiproduct SEZ in India, We have the largest edible oil

refining capacity in India, and we are one of the largest trading houses in India.

The Adani Group, despite a humble beginning in 1988, is one of the fastest

growing professionally owned enterprises in India and in the global arena. The

flagship company, Adani Enterprises Ltd. (formerly known as Adani Exports Ltd.),

was established by Mr. Gautam S Adani in 1988 as a partnership firm with a seed

capital of Rs. 5 lacs. An entrepreneurial vision coupled with lofty ambitions and

hard work set the pace for the growth of the company. Adherence to world-class

quality standards and a customer centric approach has helped the Adani Group

touch revenues of INR 180 billion (as on March 31, 2007.)

The journey from a being a India’s most trusted trading house to a diversified

conglomerate is fast, yet memorable. Today, the Adani business portfolio is a

diverse, yet profitable assortment of Edible Oil, Logistics, Power Generation, Coal,

Oil and Gas Exploration, Gas distribution, Real Estate, Ports, Special Economic

Zones and IT enabled services. Its growth has been organic leading to a synergy

among its business units, making them more productive and competitive together.

The group is committed to constantly deliver good returns to its stakeholders and

convert partnerships into winning combination.

BUSINESS DESCRIPTION:

The Group's principal activity is to export agricultural commodities,

textiles, gems and jewellery and fertilizer and raw materials. The Group operates in

two segments namely Trading and Others. Agricultural commodities like wheat,

rice, soya bean meal, castor oil, sugar and pulses are exported to Middle East and

South East Asia. Textiles include products like cotton grey, knitted fabrics, bed

sheets and raw silk. The markets for these products include China, Israel, Slovenia

and Africa. The Group exports cut and polished diamonds to Dubai and European

countries. Fertilizer and Raw Materials include export of Sulphur and Ammonium

Nitrate. The Group also trades in coal, power, petroleum products trading and city

gas distribution.

MANAGEMENT – ADANI ENTERPRISE:

KEY EXECUTIVES – ADANI ENTERPRIS LTD.:

Name Title

Rajesh S. Adani Managing Director

Gautam S.Adani Chairman/Chair Person

Devang Desai Chief Financial Officer

Parthiv Parikh Assistant Company Secretary

BOARD OF DIRECTORS:

Rajesh S. Adani

Gautam S. Adani

Vasant Adani

Jay shah

Pravin shah

Shah

Yoshihiro Miwa

Anil Ahuja

Tatsuo Fuke

EXECUTIVE COMMITTEE:

COMMITTEE NAME CHAIR PERSON

Audit committee Jay H. Shah

Compensation committee Pravin P. Shah

Corporate governance committee Jay H. Shah

COMPANIES OF ADANI ENTERPRIS:

ADANI ENTERPRIS: COMPANRISION WITH

COMPETITORS

Adani enterprise(Rs. Cr.)

PTC India (Rs. Cr.)

STC India (Rs. Cr.)

UB holdings (Rs. Cr.)

Sical logistics (Rs. Cr.)

Surana corp (Rs. Cr.)

Vishal retail (Rs. Cr.)

JIK industries (Rs. Cr.)

Last price

710.00 101.85 312.50 219.95 61.45 35.50 60.35 20.00

Market

capital

17560.73 2995.2

5

1875.00 1469.67 242.86 77.60 135.18 57.47

Sales turnover

11575.05 6532.7

9

18786.65 325.63 474.52 2285.3

4

1323.23 0.55

Net profit

326.42 90.80 81.34 43.84 5.46 25.44 -94.49 26.22

Total assets

4849.82 1536.5

3

2947.61 2350.57 949.82 348.38 927.49 36.76

Source: www.adanigroup.in

SUBSIDIARY COMPANIES OF ADANI:

To drive its business globally, your Company has 29 subsidiary companies

across the globe as per details given here in below:

- Real Estate: 1. Adani Infrastructure and Developers Pvt. Ltd.

2. Adani Estates Pvt. Ltd. 3. Swayam Realtors and Traders Ltd. 4. Columbia Chrome (India) Pvt. Ltd. 5. Shantigram Estate Management Pvt. Ltd. 6. Adani Land Developers Pvt. Ltd. 7. Adani Developers Pvt. Ltd. 8. Adani Landscapes Pvt. Ltd. (Became subsidiary w.e.f. 27th September, 2007) 9. Adani Mundra SEZ Infrastructure Pvt. Ltd. (Became subsidiary w.e.f. 1st February, 2008) 10. Miraj Impex Pvt. Ltd. (Became subsidiary w.e.f. 15th October, 2007)

- Agro: 11. Adani Agri Logistics Ltd. 12. Adani Agri Fresh Ltd.

- Energy: - Power: 13. Adani Power Ltd. 14. Adani Power Maharashtra Ltd. (Became subsidiary w.e.f. 23d July, 2007) 15. Adani Power Rajasthan Ltd. (Became subsidiary w.e.f. 10th March, 2008) 16. Adani Power Dahej Ltd. (Became subsidiary w.e.f. 15th December, 2007)

- Coal: 17. Adani Global Pte. Ltd., Singapore. (Subsidiary of Adani Global Ltd., Mauritius) 18. PT Adani Global, Indonesia (Subsidiary of Adani Global Pte. Ltd., Singapore) 19. Parsa Kente Collieries Ltd. (Became subsidiary w.e.f. 16th October, 2007) 20. Adani Mining Pvt Ltd. (Became subsidiary w.e.f. 31st August, 2007)

- Oil and Gas: 21. Adani Energy Ltd. (Became subsidiary w.e.f. 21st June, 2007) 22. Adani Welspun Exploration Ltd. (Became subsidiary w.e.f. 4th August, 2007)

- Metals, Minerals and Scrap: 23. Vyom Tradelinks Pvt. Ltd. 24. Adani Global FZE, Dubai (Subsidiary of Adani Global Ltd., Mauritius) 25. Adani Virginia Inc, USA (Subsidiary of Adani Global FZE, Dubai)

- Ship Owning and Chartering 26. Adani Shipping Pte. Ltd, Singapore. (Subsidiary of Adani Global Ltd., Mauritius)

27. Libra Shipping Pte Ltd, Singapore. (Subsidiary of Adani Global Ltd., Mauritius)

- Others - Holding Companies 28. Adani Habitats Pvt. Ltd. 29. Adani Global Ltd., Mauritius