Unit 1.pdf

Unit 1
Introduction of
company

A company is a body corporate or an
incorporated business organization
registered under the companies act.
It can be a limited or an unlimited company,
private or a public company, company
limited by guarantee or a company having a
share capital, or a community interest
company.
Meaning

The Companies Act 2013 of India defines a
company as-
A registered association which is an artificial
legal person, having an independent legal,
entity with a perpetual succession, a
common seal for its signatures, a common
capital comprised of transferable shares and
carrying limited liability.
Definition

Incorporated association.
Artificial Legal Person.
Separate Legal Entity.
Perpetual Existence.
Common Seal.
Limited Liability.
Features & Characteristics Of
A Company

Classification of Companies by Mode of
Incorporation
Chartered Companies : These companies are
formed under a special charter by the monarch
or by a special order of a king or a queen. Few
examples of royal chartered companies are BBC,
East India Company, Bank Of England, etc.
Statutory Companies: These companies are
incorporated by a special act passed by the
central or state legislature. These companies are
intended to carry out some business of national
importance. For example, The Reserve Bank of
India was formed under RBI act 1934.
Types of Companies

Registered or Incorporated Companies:
These companies are formed/incorporated
under the companies act passed by the
government. These companies come into
existence only after these are registered
under the act and the certificate of
incorporation is passed by the Registrar of
companies.

Classification of
Companies based on the
liability of the members
Companies Limited By Shares
Companies Limited By
Guarantee
Unlimited Companies

Public Company :
A public company is a corporation whose
ownership is open to the public. In other
words, anyone can buy the shares of a public
company. There are no restrictions to the
number of members of a public company.
A public company should have at least 7
members and 3 directors, and issue a
prospectus.
Classification of Companies
based on The Number of
Members

Private Company
A private company cannot be owned by the
public; it restricts the number of members.
A private company is a separate legal entity
with a suitable company name, an address,
at least 2 members and at most 200
members.
One Person Company
A one-person company is an Indian private
limited company which has only one founder/
promoter.

The meaning of corporate personality is the
idea that a corporation is its own entity.
Corporations, can be taxed, buy and sell
property, and take part in lawsuits.
Not only are corporations considered their
own business entities, but they can own
property.
Corporate Personality

Promotion of a Company.
Incorporation of a Company.
Floatation or raising of Capital.
Commencement of Business.
Promotion and Incorporation
of Companies

Definition: The Memorandum of
Association or MOA is the legal document
that has to be filed with the registrar of
companies at the time of incorporation of
the company.
It is often called as a memorandum and is
comprised of fundamental conditions on the
basis of which a company operates.
Memorandum of
Association

Name Clause: The name of the company that
must end with the term “limited” . Also, it must
be ensured that the name selected for the
company should not resemble with the name of
any existing company.
Registered Office Clause: This clause requires
to mention the registered office address of the
company.
Objective Clause: The objective clause requires
to mention clearly the objective behind the
incorporation of the company, i.e. the purpose
for which the company is being established.
Clauses of Memorandum of
Association:

Liability Clause: This clause requires to
mention the extent to which the shareholders
are liable to pay off the debt obligations in the
event of the dissolution of the company.
Capital Clause: Company’s authorized capital
along with the nominal value of all kinds of
shares need to be disclosed here. Also, the
company is required to state the list of its assets
over here.
Association Clause: As per this clause, the
willingness of shareholders is required with
respect to their association with the company.
For a public limited company minimum, seven
members are required to sign the memorandum,
whereas in a case of a private limited company
minimum two members are required to do the
same.

Definition: The Articles of Association or
AOA are the legal document that along with
the memorandum of association serves as
the constitution of the company.
It is comprised of rules and regulations that
govern the company’s internal affairs.
Articles of Association

It is mandatory for the following types of
companies to have their own articles:
Unlimited Companies: The article must state
the number of members with which the company
is to be registered along with the amount of
share capital, if any.
Companies Limited by Guarantee: The article
must define the number of members with which
the company is to be registered.
Private Companies Limited by Shares: The
private company having the share capital, then
the article must contain the provision that,
restricts the right to transfer shares, limit the
number of members to 200, prohibits the
invitation to the public for the further
subscription of shares in the form of shares or
debentures.

Note: In the case of a public company
limited by shares, the articles may be
framed by the company itself or in case
company does not register articles then
it might adopt all of any of the
regulations as contained in Table A in
the Companies Act.

Unit 1.pdf

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