8/8/2019 Epson Stylus Sx100_tx100 Manual
1/42
PRESENTATION ON : -
Introduction to Companies Act,1956;
Structural Break-up of C.A. 1956;
Preparation of the MOA;
Regstr. Procedure & Change of Name;
Preparation of AOA;
Membership of the Co. Contracts, Deeds,
Investments & Service of Docs.
Legal provisions for Holding Companies, Private
Companies & Unlimited Companies.
August, 9, 2010 PGDM -SEM III CORP. LAW 1
8/8/2019 Epson Stylus Sx100_tx100 Manual
2/42
Some Basic facts of the Companies Act, 1956
Most voluminous Legislation in the world;
The Act has 658 Sections, XV Schedules;
The entire Act is split into XIII Parts with eachPart further being split into Chapters;
The Rules and Forms are further stated in the
Guidelines / Rules, 1957;
There are many other Rules / Guidelines for
supporting the provisions of the Sections.
August, 9, 2010 PGDM -SEM III CORP. LAW 2
8/8/2019 Epson Stylus Sx100_tx100 Manual
3/42
Functional Division of the Act
Part I - Definitions, CLB, National Company Law
Tribunal(NCLT);
Part II Incorporation of a Co. & matters incidental thereto;
Part III Prospectus & Allotment relating to issue of shares
& Debentures;
Part IV- Share Capital & Debentures;
Part V Registration of Charges;
Part VI Management & Administration;
Part VII Winding Up;
Part VIII Companies formed under Previous Co, Law;
August, 9, 2010 PGDM -SEM III CORP. LAW 3
8/8/2019 Epson Stylus Sx100_tx100 Manual
4/42
Functional Division of the Act (contd..)
Part IX Cos. Authorised to Register under this
Act;
Part X Winding up of Unregistered Companies;Part XI- Cos. Incorporated outside India;
Part XII- Registration Offices,& Officers & Fees;
Part XIII- General- collection of Info. & statistics;
The XV SCHEDULES follows thereafter.
August, 9, 2010 PGDM -SEM III CORP. LAW 4
8/8/2019 Epson Stylus Sx100_tx100 Manual
5/42
Some Basic facts of the Companies Act, 1956
For the interpretation of each Section, there are
innumerable Case Laws from the various Courts
that have pronounced judgment supporting or
contradicting an earlier decision;
Company Law is the source from which the
subject of Auditing gets its identity, importance
and procedures to initiate Corporate Audit; The Act is heavily based on interpretation and
justification, which decides the case.
August, 9, 2010 PGDM -SEM III CORP. LAW 5
8/8/2019 Epson Stylus Sx100_tx100 Manual
6/42
Some Basic facts of the Companies Act, 1956
The Administrative Machinery to monitor the
affairs is vested with the Ministry of Company
Affairs(MCA), the Company Law Board(CLB);
The routine functions are managed by the
Registrar of Companies(ROC), having Regional
Directors (RD), located in various states, where
the companies are required to file documents andReturns, and the public is authorised to inspect
the same according to the provisions of law.
August, 9, 2010 PGDM -SEM III CORP. LAW 6
8/8/2019 Epson Stylus Sx100_tx100 Manual
7/42
Some Basic facts of the Companies Act, 1956
The other Regulatory Authority is the Securities
& Exchange Board of India (SEBI). Section 55A
of CA, 1956, gives exclusive powers to SEBI to
administer the issue and transfer of securities and
the non-payment of dividends as is stated in
various Sections of the Act.
In the 2006 Amendment, MCA introduced e-Governance ( known as MCA-21), u/s 610
B,C,D for filing of Returns & payments.
August, 9, 2010 PGDM -SEM III CORP. LAW 7
8/8/2019 Epson Stylus Sx100_tx100 Manual
8/42
Some Basic facts of the Companies Act, 1956
u/s 266A to G, Director Identification Number
(DIN) in 2006, to ease in the correspondence
with the ROCs and quick identification in e-Filing;
August, 9, 2010 PGDM -SEM III CORP. LAW 8
8/8/2019 Epson Stylus Sx100_tx100 Manual
9/42
A Company, its Nature and Kind
Section 3(1)(i) defines a Company as A
Company formed and registered under the Act or
an existing Company. or
A company is an incorporated Association,
which is an artificial juridical person, having a
separate legal entity, with a perpetual succession
and a common seal, a common capital comprisedof transferrable shares, and carrying limited
liability. ( Saloman vs Saloman & Co. Ltd.)
August, 9, 2010 PGDM -SEM III CORP. LAW 9
8/8/2019 Epson Stylus Sx100_tx100 Manual
10/42
A Company, its Nature and Kind( contd.)
Section 11 defines an Illegal Association which
states that No Company, Association or
Partnership consisting of more than 20 persons
( 10 in the case of Banking Business) be formed
to carry on any business for gain unless it is
registered under the Companies Act or under any
other law. Here the Liability is unlimited andpersonal.
August, 9, 2010 PGDM -SEM III CORP. LAW 10
8/8/2019 Epson Stylus Sx100_tx100 Manual
11/42
8/8/2019 Epson Stylus Sx100_tx100 Manual
12/42
Types of Companies (contd.)
PUBLIC COMPANY Sec 3(1)(iv):- It means a
company which :-
1) Which is not a Private Co.;
2) Has a min PUC of Rs. 5 lacs or such higher PUC, as
may be prescribed;
3) Can invite the public to subscribe to its shares & debs;
4) Does not limit the max. number of members;
5) Can invite or accept deposits from the public; and
6) Is a Pvt. Co. but subsidiary of a Public Co.
August, 9, 2010 PGDM -SEM III CORP. LAW 12
8/8/2019 Epson Stylus Sx100_tx100 Manual
13/42
Types of Companies (contd.)
STATUTORY CO. :- It is incorporated by a
special Act passed either by the Central or the
State Legislature;
GOVERNMENT CO. :- Section 617 defines a
GC as any Company in which not less than 51%
of the PUC is held by the Central / State Govt.
FOREIGN CO. :- Section 591 to 596 discussesabout such companies.
August, 9, 2010 PGDM -SEM III CORP. LAW 13
8/8/2019 Epson Stylus Sx100_tx100 Manual
14/42
Types of Companies (contd.)
Section 25 CO. :- These are Companies having
obtained the prior permission of the CG not to
include the words Ltd or Pvt. Ltd. behind
their names since they have been formed to
promote commerce, art, science, religion or any
other charitable purposes and not to distribute the
profits as dividends but to plough them back for
the aforesaid activities.
August, 9, 2010 PGDM -SEM III CORP. LAW 14
8/8/2019 Epson Stylus Sx100_tx100 Manual
15/42
Types of Companies (contd.)
Types of Companies based on Liability of Members:-
Companies limited by shares;
Companies limited by Guarantee Sec 12(2)(b); and
Unlimited Companies - Sec 12(2)(c).
Holding and Subsidiary Company Section 4(4) states
that a company shall be deemed to be the Holding
Company of another, if the other is its Subsidiary.
August, 9, 2010 PGDM -SEM III CORP. LAW 15
8/8/2019 Epson Stylus Sx100_tx100 Manual
16/42
Exemptions & Privileges of Pvt. Co
a) Only 2 Members can start a Co. which is 7 for Pub. Ltd.
Co. Sec 12;
b) It can commence business immediately on incorporation
as it need not wait to obtain the Certificate forcommencement of business
Sec 149(7);
c) Can function with 2 Directors while three are required
otherwise Sec 252(2);d) For General Meetings, the Quorum is 2 persons
personally present which is five for pub Co Sec174(1);
August, 9, 2010 PGDM -SEM III CORP. LAW 16
8/8/2019 Epson Stylus Sx100_tx100 Manual
17/42
Formation of a Company
It is a lengthy process involving:
Promotion
Incorporation or Registration;
Capital Subscription; and
Commencement of Business.
August, 9, 2010 PGDM -SEM III CORP. LAW 17
8/8/2019 Epson Stylus Sx100_tx100 Manual
18/42
Memorandum Of Association (MOA)
MOA can be defined as the Charter which
defines the limitation of the powers of the
company. The MOA contains the fundamental
conditions upon which alone the company is
allowed to be incorporated.
The contents of the MOA NAME clause,REGISTERED OFFICE clause, OBJECTS
clause, LIABILITY clause, CAPITAL clause &
August, 9, 2010 PGDM -SEM III CORP. LAW 18
8/8/2019 Epson Stylus Sx100_tx100 Manual
19/42
Memorandum Of Association (MOA)
ASSOCIATION/SUBSCRIPTION clause.
Under the Objects Clause, the MAIN and OTHER
objects shall be separately stated.Alteration of the NAME Clause:
A company may, by passing a Special Resolution,
and with the approval of the C/G, in writing,
change its name ( Sec 21). However, no suchpermission is required for dropping/addition of
August, 9, 2010 PGDM -SEM III CORP. LAW 19
8/8/2019 Epson Stylus Sx100_tx100 Manual
20/42
MOA ( contd..)
the words Limited or Pvt. Ltd. to the
Companys name.
Spl Res requires 21 days notice and with 75% of
the Members present ( or through Proxy ) and
voting are in favour of the Resolution.
August, 9, 2010 PGDM -SEM III CORP. LAW 20
8/8/2019 Epson Stylus Sx100_tx100 Manual
21/42
MOA ( contd..)
The Doctrine of Ultra Vires:-
According to this Doctrine, all such acts or
transactions of a Company which are ultra vires( beyond the powers of) the objects clause of its
MOA, SHAL BE WHOLLY NULL & VOID,
and can never be subsequently ratified and
validated, even though all the shareholdersconsent or purport to ratify such transaction.
August, 9, 2010 PGDM -SEM III CORP. LAW 21
8/8/2019 Epson Stylus Sx100_tx100 Manual
22/42
Articles of Association (AOA)
The AOA contains regulations for the internal
administration of the Companys Affairs. It
prescribes the Rules and Bye-Laws for the
General Management of the Company and for the
attainment of its objects as given in its MOA.
Being subordinate to the MOA, the AOA cannot
extend the objects as defined in the MOA.
August, 9, 2010 PGDM -SEM III CORP. LAW 22
8/8/2019 Epson Stylus Sx100_tx100 Manual
23/42
Contents of the AOA
The extent to which TABLE A is applicable;( Table A-Regulations for management of a company limited by shares)
Different classes of shares and their rights;
Borrowing powers of Directors;
Maintainance of Books of Accts and their Audit;
Matters relating to Board Meetings;
Winding Up; and many other Issues.
August, 9, 2010 PGDM -SEM III CORP. LAW 23
8/8/2019 Epson Stylus Sx100_tx100 Manual
24/42
The Actual Reality
Facts, as such, never settled anything.
They are working tools only. It is the
implications that can be drawn from factsthat count, and to evaluate these requires
wisdom and judgment that are unrelated
to the computer approach to life.
CLARENCE B. RANDALL
August, 9, 2010 PGDM -SEM III CORP. LAW 24
8/8/2019 Epson Stylus Sx100_tx100 Manual
25/42
August, 9, 2010 PGDM -SEM III CORP. LAW 25
8/8/2019 Epson Stylus Sx100_tx100 Manual
26/42
Registration of the MOA
August, 9, 2010 PGDM -SEM III CORP. LAW 26
8/8/2019 Epson Stylus Sx100_tx100 Manual
27/42
Preparation of AOA
August, 9, 2010 PGDM -SEM III CORP. LAW 27
8/8/2019 Epson Stylus Sx100_tx100 Manual
28/42
Concepts in Accounting
ACCRUAL BASIS VS CASH BASIS In
Accrual basis, accounting is done as and when
they accrue. This can relate to deferrals,
allocation, depreciation and amortisation.
Tangible Fixed Assets are those assets
August, 9, 2010 PGDM -SEM III CORP. LAW 28
8/8/2019 Epson Stylus Sx100_tx100 Manual
29/42
BASIC ASSUMPTIONS OF ACCOUNTING
ACCOUNTING ENTITY CONCEPT:- the company and
its Promoters are distinct persons;
MONETARY UNIT CONCEPT:- Transactions that can
be expressed in monetary terms are to be included inAccounting records;
ACCOUNTING PERIOD CONCEPT:- this is also
known Periodicity or Time-Period Assumption. Here the
commercial life of the Co. is split into INCOMESTAT. & POSITION STATEMENT.
GOING CONCERN CONCEPT:- A Co. is supposed
August, 9, 2010 PGDM -SEM III CORP. LAW 29
8/8/2019 Epson Stylus Sx100_tx100 Manual
30/42
BASIC ASSUMPTIONS OF ACCOUNTING
to be operating in the forseeable future. It is on
this basis that the Assets and Liabilities are
further classified.
GOLDEN RULE OF ACCOUNTANCY
1. Debit what comes in, credit what goes out;
2. Debit the Receiver, credit the Giver;
3. Debit all expenses and losses, credit all incomesand gains.
August, 9, 2010 PGDM -SEM III CORP. LAW 30
8/8/2019 Epson Stylus Sx100_tx100 Manual
31/42
8/8/2019 Epson Stylus Sx100_tx100 Manual
32/42
August, 9, 2010 PGDM -SEM III CORP. LAW
Compliance Matters
(Under the Security Laws)
SCRA SEBI Depositories Act Other Laws
Compl of Rules & Reg.
Insp & Investigation
Appearing before SAT
Issue Mgnt.
Demat Procedures
Corporate Activity
Securities Recon. Certf.
Companies Act 1956,
FEMA
Stamp Act
Income tax Act
Competition Act
32
8/8/2019 Epson Stylus Sx100_tx100 Manual
33/42
Some concepts
Reserves can be of two types CAPITAL &
REVENUE.
CR are not created out of Profits but arise due tosale of capital assets.
RR are created out of Profits and can be a
General Reserve for general purposes and
contingencies; and
Revenue Reserves Div Equal Res / Deb Redmp.
August, 9, 2010PGDM -SEM III CORP. LAW
33
8/8/2019 Epson Stylus Sx100_tx100 Manual
34/42
Some concepts
For Fixed Assets, Fixed Tangible Assets are
depreciated, while Intangible assets are
amortised.
Contingent Assets have been defined by Kohler as
an asset, the existence, value and ownership of
which depend upon the occurance/non-occurance
of a specific event or upon the performance ornon-performance of a specific act for eg.
Disputed Property coming in Cos favour.
August, 9, 2010 PGDM -SEM III CORP. LAW 34
8/8/2019 Epson Stylus Sx100_tx100 Manual
35/42
AS -1 Contents Summary
Areas of different Accounting Policies:-
Methods of Depreciation / Amortisation;
Conversion & Translation of Foreign currency;Recognition of Profit on long-term contracts;
Treatment of Expenditure during constr. period,
Goodwill, Retirement benefits, & Contingent
liabilities;
Valuation of Inventories, investments & Fixed
Assets;August, 9, 2010 PGDM -SEM III CORP. LAW 35
8/8/2019 Epson Stylus Sx100_tx100 Manual
36/42
8/8/2019 Epson Stylus Sx100_tx100 Manual
37/42
Practical Examples
Balance Sheets of Public Limited Companies.
Auditors Certificate;
Notes to the Accounts; Qualified / Clean Report;
Management Discussion & Analysis;
Directors Report; and
Chairmans Speech.
August, 9, 2010 PGDM -SEM III CORP. LAW 37
8/8/2019 Epson Stylus Sx100_tx100 Manual
38/42
8/8/2019 Epson Stylus Sx100_tx100 Manual
39/42
GAAP
RELEVANCE:- the information has to be
useful
for Accounting;
OBJECTIVITY:- this denotes the reliability of
of the transaction;
FEASIBILITY:- that which can be implemented
without much complexity or cost.
August, 9, 2010 PGDM -SEM III CORP. LAW 39
8/8/2019 Epson Stylus Sx100_tx100 Manual
40/42
INDIAN AS, IAS / IFRS & US GAAP
A COMPARISON
Basis Indian AS IAS / IFRS US GAAP
Principal vs Rule Rule based
Standard
Principle based
Standardswith
Limited
Applicationguidance
More Rule
based Standard
with specific
applicationguidance
Historical
Cost or
valuation
Revaluation is
permitted, subject
to certain
conditions
Generally uses
Historical Costs, but
Intangible assets,
plant & equp. and
Investment Property
may be revalued tofair value.
No Revaluations
except for certain
types of Financial
Instruments.
August, 9, 2010 PGDM -SEM III CORP. LAW 40
8/8/2019 Epson Stylus Sx100_tx100 Manual
41/42
INDIAN AS, IAS / IFRS & US GAAP
A COMPARISON
Basis Indian AS IAS / IFRS US GAAP
Principal vs Rule Rule based
Standard
Principle based
Standardswith
Limited
Applicationguidance
More Rule based
Standard with
specific
applicationguidance
Derivatives,
certain other
Financial
Instruments are
revalued to FairValue.
First time
Adoption
No specific std.
Principles as per
General Principle
is full retrospec-
General Practice
is full retrospec-
August, 9, 2010 PGDM -SEM III CORP. LAW 41
8/8/2019 Epson Stylus Sx100_tx100 Manual
42/42
INDIAN AS, IAS / IFRS & US GAAP
A COMPARISON
Basis Indian AS IAS / IFRS US GAAP
Principal vs Rule Rule based
Standard
Principle based
Standardswith
Limited
Applicationguidance
More Rule based
Standard with
specific
applicationguidance
Transitional prov.
in the relevant std.
should be adhered
to.
tive application of
IFRS,in force at the
time of adoption, unless
the specific exceptions
& exemptions in IFRS -1 permit or require
otherwise.
tive application
unless the
transitional
provisions in aspecific standard
require otherwie.
August, 9, 2010 PGDM -SEM III CORP. LAW 42