company law- assignment by simon (bubt)

8/4/2019 Company Law- Assignment by Simon (BUBT)

http://slidepdf.com/reader/full/company-law-assignment-by-simon-bubt 1/22

1

Definition of Company

The word “Company” is derived from the Latin word „Com‟ and „pany‟ . „Com‟ means

„simultaneously‟ and „pany‟ means „livelihood‟. So, company is such kind of business

organization where a group of people provides capital for earning profit and by this profit they

maintain their livelihood.

“Company means a company formed and registered under this Act or any existing company.” -Sec 2(1), Company Act, 1994.

“A company is an association of many persons who contribute money or money‟s worth to

common stock and employs it in Some trade or business and who share the profit or losses

arising there form .” -James Stephenson.

“A company is an artificial being, invi sible, intangible and existing only in contemplation of

law.” -Justice John Marshal.

“A company is an artificial person created by law, having a separate legal entity, with a

perpetual succession and a common seal”. -L.H. Haney.

“A corporation by nature an artificial person created or authorized by the legal statute for

some specific purpose.” -Kimball and Kimball.

“Company means an association of person united for a common object.” -James.

“A company is an association of many persons who contribute money or money‟s worth to

common stock and employs it for some common purpose.” -Lord Lindley.

“Corporation is a business that is a legal entity separate from its owner.” -New York Corporation Act-1860.

By analyzing above definitions we have got that company is:

An artificial entity created by law.

Has a perpetual succession.

Has a common seal.

So, the term Company is used to describe an association of a number of persons, formed for

some common purpose and registered according to the law relating to companies.



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Characteristics/Essential elements of a company

Company is such kind of business organization where a group of people provides capital for

earning profit and by this profit they maintain their livelihood. It has some legal and general

characteristics which separate it from other organizations. The characteristics of a company can

be summarized as follows:

Like other organizations, company also has some common

features:

1. Formation procedure : There are some formalities in the formation of a company.

Company is formats by following such an Act. Company Act, 1994 is followed in our

country to format a company.

2.

Voluntary Association: A group of people format company for earning profit.Shareholders can retake their capital at any time by selling their shares.

3. Distinct objectives: Company is formatted for some distinct objectives which are

mentioned in the Memorandum of Association. Company won‟t be able to do any kind of

activities for out of these activities.

4. Attainment of membership: Any qualified person may become a member of a company

by purchasing its share.

5. Amount of capital: Because of providing capital by a lot of people, comparatively the

amount of capital becomes huger.

6. Large scale organization: Company is a large scaled organization for huge capital,

limited liabilities, huge number of members etc.

7. Transferability of shares: A company‟s share is freely transferable. Any shareholder

may transfer his shares to others in that method which is mentioned in the Articles of

Association.

8. Democratic management: The management and responsibilities of a company is given to

the Board of Directors who are elected by the shareholders.

“The company is managed on the principle of democracy”

- J.K. Mitra.

General Characteristics



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9. Distribution of profit: The distributable portion of obtained profit of a company will be

distributed among the shareholders by that ratio which is fixed in the AGM.

10. Auditing accounts: The annual profit-loss account and balance sheet are audited by the

auditor for the interest of shareholders.

11. Taxation: In most cases the amount of charged tax on a company is comparatively more

than other organizations. Here, the tax is charged both on the obtained profit and the

shareholder‟s profit.

12. Growth & expansion: Company expands and develops its scope with the development of

management and by collecting huge amount of capital.

Company has some legal characteristics too according to the

law of relevant countries. The features are:

1. Created by law: Company is a business organization which is formatted with theprevalent Company Act of a country. “Company means a company formed and registered under this Act or any existing company.”

-Sec 2(1), Company Act, 1994.

2. Artificial legal personality: Company is an artificial entity which is created by law andhas its own name and common seal to deal a contract or case with the third party.

3. Separate legal entity: According to law, company‟s entity is distinct from the owner‟s

entity. For this distinction, it is not possible to blame the owners personally for

company‟s liabilities.

4. Registration: Registration is compulsory for a company. After registration under the

applicable Act, company can start its activities.

5. Perpetual succession: A company‟s succession doesn‟t depend on the shareholders‟succession for having separate entity. There is a proverb, “Members may go, members

may come but the company remains forever.”

6. Common seal: Though company can‟t give a signature as like as an individual in case of

contracting with third party for that it uses a common seal in lieu of signature. Here, at

least 2 directors have to sign on behalf of the company.

Legal Characteristics



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7. Registered office: Company must have a registered office from where it conducts its

activities. A notice has to published to the people in case of changing office. (Section-

77).

8. Number of members: According to Company Act, in case of Public limited Co. the

minimum number of members is 7 and maximum is limited by shares. In case of Private

limited Co. the minimum number of members is 2 and maximum is 50.

9. Share capital: The total amount of the capital of a company is divided among many

equal portions; every portion of that capital is called a share. Company collects its capital

by selling these shares.

10. Liability of the members: The liabilities of the members of a company are limited by

their purchased shares. But liabilities may also be limited by assurance. (Section-5).

11. Management & Regulations: The management and ownership of a company is totally

different. The Board of Directors controls the management. The activities of a company

are mentioned in the Memorandum of Association and Articles of Association.

12. Winding up: Though a company is formatted under an Act as well as it is also wound up

under that Act.

For above characteristics, a company has obtained universally more acceptability than other

organizations.



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Classification of Company

To remove the obstacles of sole proprietorship and partnership business, the company was

implemented. After that, for the growth and expansion of business sector several types of company was created. Company is classified on the basis of ownership, liabilities, formation,

nature etc. which are described below:

Company

On the basis

of

formation

On the basis

of liability

On the basis

of

nationality

On the basis

of

ownership

On the bas

of number

members

A. Company on the basis of formation: Company is generally three (3) types on the basis of

formation. They are:

1. Chartered Company: It is the most back-dated company. The company which isformatted by the Head of the Govt. or by the special permission of the king or queen

of a country or by the power of royal registration is called a chartered company such

as East-India Co., the Chartered Bank Of England, Royal Nepal Airlines etc. This

type of company is not seen right now.

Chartered

Company

Statutory

Company

Registered

Company

Company

with

Limited

Liability

Company

with

Unlimited

Liability

Domestic

Company

Foreign

Company

Multinational

Company

Govt.

Company

Non-Govt .

Company

Priva

Limite

Compa

Publi

Limite

Compa

Miscellaneous

Company

Holding company

Subsidiary company



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2. Statutory Company: The Company which is formatted and conducted through special

Act of parliament by the govt. for the welfare of people, then it is called statutory

company.

“A statutory company is established by a special Act of Parliament”

- J.K. Mitra.

3. Registered Company: When a company is formatted and conducted under the

Company Act, then it is called registered company. Most of the companies of

Bangladesh is registered under Company Act, 1994.

There are 3 kinds of registered company, which are:

I. Company limited by shares: In these companies there is a share-capital, and

each share has a fixed nominal value which the shareholders pay at a time or

by installments. The member is not liable to pay anything more than the fixed

value of the share, whatever may be the liabilities of the company.

II. Company limited by guarantee: In these companies, each member promises

to pay a fixed sum of money in the event of liquidation of the company. This

amount is called guarantee. Sometimes the members are required to buy a

share of a fixed value and also give a guarantee for a further sum in the event

of liquidation. There is no liability to pay anything more than the value of the

share and the guarantee.

III. Unlimited Company: In these companies the liability of the shareholder is

unlimited, as in partnership firms. Such companies are permitted under the

Company Act but are not known.

B. Company on the basis of liability: On the basis of liability of members there are two

types of company(Sec. 5) which are discussed below:

1. Company with limited liability: The liabilities of members of these types of companyremain limited till a fixed area. It has also 2 types:

Company limited by shares

Company limited by guarantee.

2. Company with unlimited liability: The Company whose members‟ liabilities areunlimited indicates this type of company.

C. Company on the basis of number of members: On the basis of number of members

company can be classified into two categories:



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1. Private Limited Company: A private company is just a private affair of members and

public at large is not involved at all. The minimum number of members is 2 andmaximum is 50.

2. Public Limited Company: A public company is a company the membership of which

is open to the general public under the provisions of its Articles. Its shares aretransferable. The minimum number of members is 7 and maximum number is limited

by shares.

D. Company on the basis of Ownership: Company is classified into two categories on thebasis of ownership:

1. Government Company: If the 51% or more shares are owned by the govt. of a

company, then it will be called Government Company. It is also called Public Sector

Company. Though it is formatted under the Company Act, but the conduction and

management is directly controlled by the govt. Example: DESA, WASA etc.

2. Non-government Company: The Company in which there is no interfering of govt. in

management and conduction, and then it is called Non-government Company. It is

also called Private Sector Company. Example: BEXIMCO pharmaceutical ltd.,

Singer Bangladesh ltd. etc.

E. Company on the basis of Nationality: There are three kinds of company on the basis of

nationality:

1. Domestic Company: The Company which is formatted under the Company Act of its

state, then it is called the domestic company. This type of company can conduct itsbusiness in the country or abroad.

2. Foreign Company: If a company formatted and registered in a company but runs its

business by establishing office and registering in another country, then it is called

foreign company. Example: Pan Pacific, Unicall etc.

3. Multinational Company: The Company which is formatted and registered under the

ownership of one or more people of different countries is known as multinational

company. Example: Coca cola, HSBC, Unilever Bangladesh ltd. etc.

F. Miscellaneous Company: There are some other companies except above:

1. Holding Company: The Company which owns more than 50% shares of another

company or control the management of another company, then that company will

be called holding Company.



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2. Subsidiary Company: Any company owned or controlled by another to the extent

that it is a mere instrument to carry out the orders of the owing Company, iscalled a subsidiary.

There are also some other company except the above such as non-business company, special

company etc.

Private Ltd. Company VS Public Ltd. Company

Public Ltd. Co. and Private Ltd. Co. both are the companies which are limited by their shares.

Though both have perpetual succession and created under the Company Act but there are somedifferences in their formation process and activities. The differences between them are shown

below:

No. Topic Public Ltd. Company Private Ltd. Company01. Formation

Procedure

The formation procedure is

complex due to the excessive legal

activities.

Comparatively its formation

procedure is easy.

02. Number of

members

Minimum 7 and maximum is

limited by shares.

Minimum 2 and maximum 50.

03. Scope &

nature of

ownership

The owners live in a vast area and

different kind of people may be its

member.

Owners may be limited between

family and friends.

04. Size Normally it is a large sizedbusiness.

It is a middle sized business.

05. Secrecy Here maintaining secrecy isn‟tpossible.

Maintaining secrecy of businessinformation is possible here.

06. Expansionfacility

Because of low risk, there is agood opportunity of expansion.

Though risk is high so that there isless scope of expansion.

07. Decision

making

For bureaucratic problem the

decision making process is time-

costing.

Here it is possible to take decision

and implement it fast.

08. Legal

restriction

Here it is need to be followed more

legal restriction.

Here the legal restriction is less

than the Public Ltd. co.

09. Safety of

members

For lawful control the safety of

members are more here.

Here the safety of members is less

than the Public Ltd. Co.

10. Use of the

word

„Limited‟

The word „Limited‟ is only writtenafter this company.

The word „Pvt. Ltd.‟ is written after this company.

11. Preparationof Articles

It can use „Table A‟ instead of Articles of Association.

It is compulsory for this companyto prepare Articles of Association.

12. IssuingProspectus

Issuing prospectus is compulsoryhere.

No need to issue prospectus.



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No. Topics Public Ltd. Co. Private Ltd. Co.

13. Minimum

subscription

Public ltd. co. needs to collect

minimum subscription beforedistributing shares.

Private ltd. co. can distribute shares

without minimum subscription.

14. Capital

collection

It can collect shares by addressing

people for purchasing shares.

It can collect shares only from the

members.15. Share transfer Its shares are transferable. Its shares are not transferable.

16. Share warrant It can issue share warrant with thefull value.

It can‟t issue share warrant.

17. Issuingdebenture

It can issue debentures to thepublic.

It can‟t issue debentures to thepeople.

18. Member‟s list It is compulsory to make list if thenumber of members exceed over

50.

There is no need of keeping the

member‟s list.

19. Number of

Directors

Minimum number of directors is 3. Minimum number of directors is 2.

20. Director‟sAppointment

Directors are elected by the

shareholders through an election.

There is no exact rule to choose the

directors.

21. Remuneration

of directors

Here the directors get the

remuneration at a fixed rate.

Here the directors get the

remuneration as they wish.

22. Director‟s

retirement

Here the directors have to take

compulsory retirement for 1/3portion of a year.

Here there is no regulation like this.

23. Statutory

meeting &reporting

Here it is compulsory to call a

meeting and reporting to theregistrar within the determined

time.

Here it is not mandatory to call

meeting and reporting.

24. Audit &

submission of

Account

It has to audit the annual accounts

and submit one copy to the

registrar and shareholders.

No need to do these.

25. Changeability Public Ltd. Co. can‟t be changed tothe other forms.

But this type of company can bechanged to Public Ltd. Co.

By above discussion we have discussed about the differences between Public ltd. Co. and Private

ltd. Co.



10

Memorandum of Association – Meaning

The Memorandum of Association is a document which contains the fundamental rules regarding

the constitution and activities of a company. It is the basic document which lays down how thecompany is to be constituted and what work it shall undertake. The purpose of the memorandum

is to enable the members of the company, its creditors, and the public to know what its powersare and what is the range of its activities.

“The Memorandum of Association of the company is its charter and defines the limitation of

the power of the company established under Act.” - Lord Cairns.

“Memorandum of Association is a document which contains the fundamental rules regarding

the constitution and activities of a company.” - J.K. Mitra.

Its objective is to inform the shareholders, creditors and customers about the scope of authorizedfield of operation of company.

Memorandum of Association – Contents

The Memorandum of Association is a document which contains the fundamental rules regarding

the constitution and activities of a company. It is prepared by following the Company Act. The

contents of the Memorandum of Association are discussed in the Company Act, 1994(SECTION-6, 7, 8). They are discussed below:

1. Name Clause: The name of the company with the word „Limited‟ at the end of the name

of a public company and the words “Pvt. Ltd.” at the end of the name of a privatecompany. But it is not necessary to add the word „ltd.‟ with the name of the company

which is made for charity. (Sec-28)

There are some rules to determine the name of a company at SECTION-11:

It is not allowed to keep the name of an existing company.

It is banned to keep the name which is banned in the Govt. gazette (Sec-11;4) .

2. Situation Clause: The name of the State in which the registered office of the company is

to be situated.

3. Objects Clause: The objects of the company. The companies (Amendment) Act,1956,

provides that in the case of a company formed after the same amending Act, the Memomust state separately

The main objects and objects incidental and ancillary to the main objects.

Other objects not included in the previous condition.



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4. Area of operation clause: Except in the case of trading corporations, the State or states to

whose territories the objects extend.

5. Liability clause: The nature of the liability of the members, i.e. whether limited by shares

or by guarantee or unlimited.

6. Capital clause: In the case of a company having share capital – unless the company is an

unlimited company, the memorandum shall state the amount of share capital and the

division thereof into shares of a fixed amount.

7. Consent Clause: This is the last clause of Memorandum of Association. Here the

directors in case of Public ltd. Co. minimum 7 and Private ltd. co. minimum 2 put theirsigns to give their consent to state that-

Everybody has collected the minimum subscription

They have mentioned their share numbers They sign with their addresses and ID in front of two witnesses.

By above discussion, it is discussed about the contents of Memorandum of Association.

Articles of Association- Definition

The Articles of Association contain rules, regulations and bye-laws regarding the internal

management of companies.

“ Articles are the internal laws of a company. Articles devise ways for the internal managementof the company.”

- Lord Brobene.

“The document containing the rules and regulations for the internal management of the

company‟s called „Articles of Association‟.” - Yogendra Prasad Verma.

A public company may or may not file articles. If it does not, the regulations contained in Table

A will apply to it.

The Articles shall: Be printed;

Be divided into paragraphs numbered consecutively;

Be signed by each subscriber of the memorandum of association.



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Articles of Association- Contents

Articles usually contain provisions in respect of the following matters:

Name and address of the company.

Rules of daily activities of the company. Rules about shares:

Number of shares.

Process of issuing shares.

Collection process of share value. Issuing process of share certificate and share warrant.

Procedure of share transfer

Process of transferring stocks from shares.

Re-issuing process of share certificate etc.

Rules about shareholders:

Shareholders‟ rights and liabilities. Voting power of shareholders etc.

Rules about capital: Changing process of capital increase and decrease.

Changing process of share value.

Distributing process of new shares.

Amount of minimum subscription.

Rules about meeting: Process of calling meeting.

Process of election. Process of conducting meeting etc.

Rules about Directors: Number of directors.

Power, duties and rights of directors.

Conditions about the remuneration of directors.

Number of qualification shares of directors.

Disqualification of directors.

Retirement and replacement process of directors.

Rules about profit and reserve: Process of profit declaration.

Process of profit determination.

Process of profit distribution.

Process of reserving and investing profit etc.



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Rules about Accounts: Maintaining accounts book.

Inspecting accounts.

Auditing accounts.

Appointing auditor.

Process of company‟s profit-loss etc.

Other rules: Appointing managing directors, secretary, underwriter and auditors and

determining their remuneration.

Use of the seal of the company.

Process of notice of company‟s members. Dissolution process of company etc.

By above discussion the contents of Articles of Association are described.

The Doctrine of Indoor Management

When the Articles of association of a company prescribed a particular procedure for doing a

thing, the duty of carrying out the provisions lies on the person in charge of the management of the company. Outsiders are entitled to assume that the rules have been complied with. This is

known as the doctrine of Indoor Management.

Example: The articles of a company provided that the directors can give a bond if authorized by

a resolution of the company. The directors gave a bond to T although no resolution was passed.

Held, T was entitled to assume that the resolution was passed (because it was a matter of

internal procedure) and the company was bound by the bond.

The Doctrine of indoor management does not apply in certain cases:

a) Void Acts: Where the act is void ab initio, the company is not bound, e.g. forgery.

Example: An act ultra vires the memo or articles can‟t bind a company.

b) Knowledge of irregularity: Where the person dealing with the company has notice,

actual or constructive, that the prescribed procedure has not been complied with the

company is not bound.

Example: X Company lends money to Y Company on a mortgage of its asset. The

procedure laid down in the articles for such transaction was not complied with. The

directors of the two companies were the same. Here it may be presumed that the lender

had notice of the irregularity. Hence the mortgage is not binding.



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c) Lack of authority: If an agent of a company makes a contract with a third party and if the

act of the agent falls outside the ordinary authority of the agent, the company is notbound.

Example: A branch manager of a company drew bills of exchange and also endorsed

bills on behalf of the company, although they had no authority for these acts from thecompany. Held, the company was not bound.

Directors-Number

The number of directors to be appointed to the Board of directors of a Company is determined by

the articles.

Tha Act provides that there must be at least 3 directors in a Public Company (Other than a publiccompany which has become such by virtue of sec. 43A) and at least 2 directors in other

Companies. – Sec.252.

Subject to the minimum stated above and the maximum fixed by the articles the Company can,

by ordinary resolution, increase or decrease the number of directors. It can also appoint

additional directors for one year. – Sec. 258.

The Company can increase the number of directors beyond the maximum fixed by the articles

provided previous sanction of the Central Government is obtained. Where the maximum fixedby

articles is 12 or less, the number can be increased to 12 without Government approval. – Sec. 259

Directors – Qualification

A director is an important role for a company. He needs not have any academic qualification: he

need not have any degree from the university; he need not have been to school. From the

Contract Act and the Companies Act, it can be said that the director must have the followingqualifications:

1. A director must be capable of entering into a contract, i.e.

He must have attained the age of majority.

He must have sound mind.

He must not be disqualified from contracting by any law to which he issubject – Sec. 11.

2. A director must be a natural person, i.e. not an artificial person.

3. A director must have the requisite qualification shares. The qualification shares are notrequired in nomination by the Central Government or in certain Statutory Corporations.

4. A director must not be disqualified under the circumstances enumerated in Sec. 274, e.g.

if he is an undischarged insolvent or a person convicted by the Court.



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Directors – Disqualification

A person shall not be capable of being appointed director of a company, if –

1. He has been found to be of unsound mind by a Court of component

jurisdiction and the finding is in force;

2. He is an undischarged insolvent;

3. He has applied to be adjudicated as an insolvent and his application is

pending;

4. He has been convicted by a Court of any offense involving moral turpitudeand sentenced in respect thereof to imprisonment for not less than six months

and a period of five years has not elapsed from the last date of expiry of thesentence;

5. He has not paid any call in respect of shares of the Company held by him,

whether alone or jointly with others, and six months have elapsed from the

last day fixed for the payment of the call;

6. An order disqualifying him for appointment as director has been passed by aCourt in pursuance of Section 203 and is in force, unless the leave of the

Court has been obtained for his appointment in pursuance of that Section.

The Central Government may, by notification in the Official Gazette, remove the

disqualifications under Clauses (d) and (e) above, as regards any individual.

A private company, which is not a subsidiary of a public company, may provide by its articles

that a person shall be disqualified from being appointed to those specified in 1 to 6 above.



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Company VS Partnership

Company and Partnership both are the form of business organization. Though both are businessorganization but there are some differences in their formation process and activities. The

differences between them are shown below:

No. Topic Company Partnership

01. Formation

Procedure

The formation procedure is

complex due to the excessive legalactivities.

Comparatively its formation

procedure is easy.

02. Number of

members

Minimum 7 and maximum is

limited by shares for Public ltd.Co. and Minimum 2 and maximum

50 for Private ltd. Co.

More than 2 may conduct

partnership business.

03. Scope &nature of

ownership

The owners live in a vast area anddifferent kind of people may be its

member.

Owners may be limited betweenfamily and friends.

04. Size Normally it is a large sized

business.

It is a small or middle-sized

business.

05. Secrecy Here maintaining secrecy isn‟tpossible.

Maintaining secrecy of businessinformation is possible here.

06. Expansionfacility

Because of low risk, there is agood opportunity of expansion.

Though risk is high so that there isless scope of expansion.

07. Decisionmaking

For bureaucratic problem thedecision making process is time-

costing.

Here it is possible to take decisionand implement it fast.

08. Legal

restriction

Here it is need to be followed more

legal restriction.

Here the legal restriction is less.

09. Safety of

members

For lawful control the safety of

members are more here.

Here the safety of members is less.

10. Use of the

word

„Limited‟

The word „Limited‟ is only writtenafter Public ltd. Co. and The word

„Pvt. Ltd.‟ is written after Privateltd. Co.

No need to write this kind of

words.

11. Preparation

of Articles

Public company can use „Table A‟instead of Articles of Association

and It is compulsory for privatecompany to prepare Articles of Association.

No need to prepare this.

12. IssuingProspectus

Issuing prospectus is compulsoryfor public company.

No need to issue prospectus.

13. Minimumsubscription

Public ltd. co. needs to collectminimum subscription beforedistributing shares.

Private ltd. co. can distribute shareswithout minimum subscription.



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No. Topic Company Partnership

14. Capital

collection

It can collect shares by addressing

people for purchasing shares orfrom the members.

It can collect shares only from the

members.

15. Share transfer Its shares are transferable. There is no procedure of shares.

16. Share warrant It can issue share warrant with thefull value.

There is no procedure of sharewarrant.

17. Issuingdebenture

It can issue debentures to thepublic.

There is no procedure of issuingdebenture.

18. Member‟s list It is compulsory to make list if thenumber of members exceed over

50.

There is no need of keeping the

member‟s list.

19. Number of

Directors

Minimum number of directors is 3

for public company and minimum

number of directors is 2 for private

company.

It is fixed by the partners.

20. Director‟sAppointment

Directors are elected by theshareholders through an election

for public company.

There is no exact rule to choose thedirectors.

21. Remunerationof directors

Here the directors get theremuneration at a fixed rate.

Here the directors get theremuneration as they wish.

22. Director‟sretirement

Here the directors have to take

compulsory retirement for 1/3

portion of a year.

Here there is no regulation like this.

23. Statutory

meeting &

reporting

Here it is compulsory to call a

meeting and reporting to the

registrar within the determinedtime.

Here it is not mandatory to call

meeting and reporting.

24. Audit &

submission of

Account

It has to audit the annual accounts

and submit one copy to the

registrar and shareholders.

No need to do these.

25. Changeability Public Ltd. Co. can‟t be changed to

the other forms but privatecompany can be changed to Public

Ltd. Co.

It may not be transferred to another

form of organization.

By above discussion we have discussed about the differences between Company and partnership.



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Meeting – Classification

The corporate system of business organization is essentially democratic in structure. Thebusiness of the Company is carried on by officials acting under the orders of the Board of

Directors, which is the executive head of the Company. But the directors are elected to the Board

by the shareholders of the company and must abide by the wishes of the shareholders asexpressed in resolutions passed in meetings convened for the purpose.

The Companies Act provides for the following types of meetings:

A. Meetings of the shareholders:

1. Statutory Meeting: Every public company ltd by shares capital, must within a period

of not less than one month and not more than six months from the date at which the

company is entitled to commence business, hold a general meeting of members which

is to be called, the statutory meeting. In this meeting the members are to discuss a

report by directors, known as the Statutory Report, which contains particulars

relating to the formation of the Company. – Sec. 165(1).

Meetings

Meetings of the

shareholders

Statutory Meeting

Meetings Of

directors

Other meetings

General meeting

Extra-ordinary

general meeting

Class meetings

Meetings of the

creditors

Meetings of the

debenture holders



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2. Annual General Meeting: General meeting of a company means a meeting of its

members for specified purposes. There are two kinds of General Meetings.

The Annual General Meeting.

Other general meetings.

The statutory provisions regarding the Annual General Meeting are:

Section 166, 167, 168, 171.

The court has no power to direct the calling of the annual general meeting.

3. Extra ordinary General Meeting: The Board of Directors can be compelled to hold a

General Meeting upon request or requisition made for it, under the following

conditions. – Sec. 169.

B. Other General Meetings:

1. Meetings of Directors: The Board of directors can call a general meeting of the

members any time by giving not less than 21 days‟ notice. A general meeting may be

called with a shorter notice under certain circumstances.

2. Meeting of Company Law Board: The Company Law Board can call such a meeting

of its own motion or on the application of any director of the company or any member

of the company who would be entitled to vote in the meeting.

Resolutions of A Company – Classification

The Act of 1956 classifies resolutions into the following types:

Resolution

Special

resolution

Ordinary

resolution

Resolution

requiring

special notice



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A. Special resolution: A special resolution is necessary for deciding important matters. The

Act specifies what these matters are. (Example: Reduction of Capital; Winding up etc.).

Procedure for passing a special resolution

A special resolution may be passed in a general meeting of members called in the usual way withthe usual notice. But the following conditions must be satisfied. – Sec. 189.

1. The notice calling the general meeting must specify that a special resolution will be

moved.

2. The number of votes cast in favor of the resolution whether by show of hands or by poll,

must be at least three times the number cast against it.

Special resolution is required for the following issues:

Alteration of Memorandum for changing the place of registered office from one

state to another or alteration of objects with the leave of the Company Law Board.

Change of name of the company with the consent of the Central Government.

Alteration of the Articles of the company.

Conversion of any portion of the uncalled capital into reserve capital.

Reduction of share capital.

Variation of shareholders‟ rights.

Payment of interest out of capital.

B. Ordinary resolution: All matters not required to be decided by a special resolution, may

be decided by a ordinary resolution. An ordinary resolution is passed, when the number

of votes cast in its favor exceeds those cast against it.

C. Resolution By Special Notice: Where by any provision contained in the Act or in the

Articles, special notice is required of any resolution, the intention to move the resolution

shall be given to the Company not less than 14 days before the date of meeting where the

resolution is to be moved, exclusive of the day on which the notice is served or deemed to

be served and the day of the meeting. – Sec. 190(1).



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Shares Definition:

A „share‟ may be defined as an interest in the company entitling the owner thereof to receive

proportionate part of the profits, if any, and of a proportionate part of the company upon

liquidation.

“A Company‟s „owned capital‟ is split up into a large number of equal parts, each such part

being called a share.”

- Y.k. Bhushan.

“A share is not a sum of money, but is an interest measured in the sum of money and made up

of various rights contained in the contract.”

- Justice Forwell.

Classification

Redeemable

Non-cumulative

Cumulative

Non Par value sha

Bonus share

Right share

Deferred sharesPreference shares Equity shares

Shares

Other shares

Participating

Irredeemable

Non-participating

Convertible

Non-convertible



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Winding Up

The winding up or liquidation of a company means the termination of the legal existence of a

Company by stopping its business, collecting its assets and distributing the assets among

creditors and shareholders.

There are three methods of winding up of a company:

Winding up of a company

Voluntary winding up

Compulsory winding up

Voluntary winding up under the supervision of court

By members

By creditors

company law- assignment by simon (bubt)

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