Thursday, March 24, 2011


1 (1). Definition of company law?
Company Definition:
A legal entity, allowed by legislation, which permits a group of people, as shareholders, to apply to the government for an independent organization to be created, which can then focus on pursuing set objectives, and empowered with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money.
As Under Sec 2 (1) (d) The Company Act, 1994: “Company means a company formed and registered under this Act or an existing company.”
1 (2) What are the characteristics of company?
Characteristics of Company:
Any Company Private or Public formed and registered according to The Company Act of 1994 has the following salient features:
1. A separate legal entity
2. An artificial legal body or person
3. An organized and incorporated body
4. Perpetual succession
5. Limited range of liabilities
6. Common seal
7. Right to enter in contracts
8. Right to own property
9. Right to sue
10. Flexibility of investment

2. (1) Define Public & Private Company?
A. Private Company- A private company is one which, by its articles, a) restricts the right of the members to transfer their shares, if any; b) limits the number of its members to 50; and c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company- Sec. 2(1) (k).
B. Public Company- Means a company incorporated under this act or under any law at any time in force before the commencement of this act and which is not a private company.– Sec. 2 (1)(j)
2 (2). Distinguish between private and public company?
There are more clear difference between private and public company. Those are given below:
Name of objects Private Company Public Company
Number of member sec-5 Not less than 2 nor more than 50 members. Not less than 7 members’ maximum been unfixed.
Commencement of Business. Sec- 150 (2)(6) A private company can commence business immediately on in corporation. A public company wait until if obtain a certificate for commencement business.
Transfer of Share Sec- 2(1)(k)(a) There are restrictions to transfer share in private company. There is no restriction to transfer share in public company.
Sell of shares Sec- 2(1)(k)(b) Invitation is not allowed in a private company for sell of shares and debentures. Invitation is allowed in a private company for sell of shares and debentures.
Prospectus Sec 141(1) Prospectus and alternative are essential in a private company. If submitted to the registered. Prospectus and alternative are not essential in a public company. If submitted to the registered.
Minimum Capital Sec- 148(1) A private company must collect minimum capital which is essential for its purpose, all of, share and business is mandatory. Sec-148 (13) To all of, share business are not mandatory.
Numbers of Directors. Sec-90 A private company must have at least 2 directors Sec- 90(21)(2) A public company must have at least 3 directors.
Managerial Remuneration. This rule does not apply to a private company. In this case of public company there is certain limit of remuneration. Schedule 1 (170.)
Index of members of company. Sec-35 (1) A private company need index not mandatory. A public company need index mandatory.
Appointment of Directors Sec- 91(1)(b) This rule does not apply in private company. Company shall be appointed directors by the members among their members in general meting.
Company own share In a private company a person can get financially assistance for processing the own share. This rule is not using this company.
Issue of share warrant. Sec- 46 (1) This rule does not apply in private company. A public company is its authorized by it articles may, with respect to any full paid up shares or stock under a common seal, it can issue shares warrant.

2 (3). State the procedure for the conversation of a public company into a private company?
Section 232. Amendment of Articles for conversion of a public company into private company:
1. A public company, having not more than fifty members at the time of conversion, may be converted into a private one by passing a special resolution altering its articles so as to exclude provisions, if any, in the articles of association applicable to public company and include therein provisions applicable to a private company.
2. If the company has secured creditors, their written consent shall have to be obtained before passing a resolution as per provision of sun-section (1) and the shares enlisted with the Stock Exchange shall have be delisted.

According to Section 87 (2) of the Companies Act 1994, “A resolution shall be a special resolution when it has been passed by such a majority as is required for the passing of an extraordinary resolution and at a general meeting of which not less than twenty-one days’ notice specifying the intention to propose the resolution as a special resolution has duly been given: provided that if all the members entitled to attend and vote at any such meeting so agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days’ notice has been given.” Again Section 87 (1) suggests that “An extraordinary resolution has to be passed by a majority of not less than three-fourths of such members entitled to vote as are present in person or by proxy.” That means a special resolution requires two criteria: (i) twenty-one days’ notice for the general meeting specifying the intention to propose the resolution as a special resolution (ii) resolution has to be passed at the general meeting by a majority of not less than three-fourths of such members who are entitled to vote as are present in person or by proxy

3 (1). Define memorandum of association and article?

Memorandum of Association:
The memorandum of association of a company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside

Article of Association Definition:
The Articles of Association or just Articles are the rules, regulations and bye-laws for the internal management of the affairs of a company. They are framed with the object of carrying out the aims and objects as set in the memorandum of Association.
3 (2). State the contents of Memorandum and Article of association?

Contents of Memorandum:
The Memorandum of every company shall contain the following clauses-

1. The name clause:
a. Undesirable name to be avoided.
b. Injunction if identical name adopted.
c. ‘Limited’ or ‘Private Limited’ as the word or words of the name.
d. Prohibition of use of certain names.
e. Use of some key words according to authorized capital.
2. The registered office clause.
3. The objects clause. .
4. The capital clause..
5. The liability clause.
6. The association clause.

Contents of Article:
Articles usually contain provisions relating to the following matters:
1. Share capital, rights of shareholders, variation of these rights, payment of commissions, share certificates.
2. Lien on shares.
3. Calls on shares.
4. Transfer of shares.
5. Transmission of shares.
6. Forfeiture of shares.
7. Conversion of shares into stock.
8. Share warrants.
9. Alteration of capital.
10. General meetings and proceedings thereat.
11. Voting rights of members, voting and poll, proxies.
12. Directors, their appointment, remuneration, qualifications, powers and proceedings of Board of directors.
13. Manager.
14. Secretary.
15. Dividends and reserves.
16. Accounts, audit and borrowing powers.
17. Capitalization of profits.
18. Winding up.

Distinction of Memorandum and Article:

1.It is the charter of the company indicating the nature of its business, its nationality, and its capital. It also defines the company’s relationship with outside world.

2. It defines the scope of the activities of the company, or the area beyond which the actions of the company cannot go.

3. It, being the charter of the company, is
the supreme document.

4. Every company must have its own Memorandum.

5. There are strict restrictions on its alteration. Some of the conditions of incorporation contained in it cannot be altered except with the sanction of the NCLT.

6. Any Act of the company which is ultra vires the Memorandum is wholly void and cannot be ratified even by the whole body of shareholders.

1. They are the regulations for the internal management of the company and are subsidiary to the Memorandum.

2. They are the rules for carrying out the objects of the company as set out in the Memorandum.

3. They are subordinate to the Memorandum. If there is a conflict between the Articles and the Memorandum, the latter prevails.

4. A company limited by shares need not
have articles of its own.

5. They can be altered by a special resolution, to any extent, provided they do not conflict with the Memorandum and the Companies Act.

6.Any Act of the company which is ultra vires the Articles (but is ultra vires the Memorandum) can be confirmed by the share holders.

4. Short Note:
i. Joint stock company.
ii. The doctrine of indoor management.
iii. Doctrine of ultra vireos.

5 (1). State how the memorandum can be altered?
5(2). What are the legal effects of the memorandum of association?

(1) Subject to the provisions of this Act, a company may, by special resolution, alter the provisions of its memorandum with respect to the objects of the company, so far as may be required to enable it--
a. To carry on its business more economically or more efficiently.
b. To attain its main purpose by new or improved means.
c. To carry on some business which may conveniently or advantageously be combined with the objects specified in the Memorandum.
d. To enlarge or change the local area of its operations.
e. To restrict or abandon any of the objects specified in the Memorandum.
f. To sell or dispose of the whole, or any part, of the undertaking, or of any of the undertakings, of the company; or
g. To amalgamate with any other company or body of persons.

Procedure of alteration:
i. Special resolution.
ii. Copy of special resolution to be filed.
iii. Certification of registration.

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