final m. law
TRANSCRIPT
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FORMATION OF COMPANY AND
MANAGEMENT OF COMPANY
PRESENTED BY:AKSHAY AGRAWALANIKET WAMAN
BRYAN RAJAN
DHIRAJ PATEL
GAURAV MISHRA
MEKHLA KHUSHWAHSMITA THAKUR
SHRUTI JAIN
SAHILA SUMAN
RISHABH SONKARSATYADARSHI SAHA
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INTRODUCTION
Definition of a company : An individual orassociation of individuals who share common
purpose and unite in order to achieve a
common goal.Companies Act 1956 is an act of the parliament
of India enacted in 1956, which enabled
companies to be formed by registration andset out the responsibilities of a company.
It is administered by the Government of India
through Ministry of Corporate affairs
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FEATURES OF A COMPANY
Separate legal entity
Limited liability
Perpetual succession
Common seal
Transferability of shares
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Types of Companies:-
On the basis of Incorporation:
Statutory companies
Registered companies
On the basis of numbers:
Private Company
Public Company Special Privileges of a Private company
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Continued
On the basis of Liability:
Companies with Limited Liability
Unlimited Companies
On the basis of control:
Holding Company Subsidiary Company
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Requirements for a private company
Minimum 2 directors
Minimum 2 shareholders
Shareholder and director can be the same
person Minimum share capital should be 1,00,000
Director identification number(DIN) for all the
directors Digital signature certificate(DSC) for one of the
directors
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What do you mean by Formation
of a Company?
A Company comes into existence when a
group of people come together with a view of
forming an association to exploit the businessopportunities by bringing together; men,
material, money and management
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FORMATION OF COMPANY
> Definition.> Stages in formation.
DOCUMENTS OF COMPANIES
> Memorandum of Association
(MoA)
> Article of Association (AoA)
> Prospectus of Association
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STAGES OF FORMATION OF A
COMPANY
Promotion Stage
Selection of Name
Incorporation (Registration Stage).
Raising the Share Capital Stage.
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STAGES OF FORMATION OF COMPANY
Electronic Filling of Forms
Incorporation of Company
Certificate of Incorporation
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ELECTRONIC FILING OF FORMS
MCA-21 project -
Registration of new companies.
Filling of annual balance sheets.
Inspection of documents .
Memorandum of association
Name & signature of subscriber.
Electronic process
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INCORPORATION OF COMPANY
Preliminary decisions
Include private or public company
What should be the capital.?
Modes of forming company
Its a private or a public company
Documents filled by registrar
Agreement
List of directors
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CERTIFICATE OF INCORPORATION
Legal document relating to the formation of
a company or corporation.
License to form a corporation issued by state
government. Depends upon the legal system.
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Example for :
CERTIFICATE OF
COMMENCEMENT OF
BUSINESS of VISWASGOLD INFRASTRUCTURES
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Director Identification Number
It is an unique identification number issued byMinistry of Corporate Affairs(MCA) for anexisting director or an intended person to be adirector.
Documents required for DIN application:-
Address Proof
Identity proof
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Continued
Educational Qualification
Current Occupation
Affidavit to be signed by an applicant(notarized on Rs 10 stamp) vide Ministry of
company affairs.
Note:
All the documents should be self attested
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Digital Signature Certificate:
DSC is the digital equivalent (i.e electronic
format) of physical or paper certificates.
A digital certificate can be presented
electronically to prove your identity, to access
information or services on the internet or to
sign certain documents digitally
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Requirements of DSC:-
DSC application form (duly signed by an
applicant)
All the documents required in DIN application
form
Note: All the documents require self attestation
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DOCUMENTS OF COMPANIES
Memorandum of
Association(MoA)
Article of Association (AoA)
Prospectus of Association
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THE MEMORANDUM OF ASSOCIATION(MOA)
Memorandum of association is one of the documents which has to file
with the registrar of companies at the time of incorporation of a company
It is a document which sets out the constitution of the company and is really
the foundation on which the structure of the company is based
It contains the fundamental conditions upon which alone the company is
allowed to be incorporated
A company cannot depart from the provisions contained in its memorandum
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PURPOSE OF MEMORANDUM
The purpose of the memorandum is THREE fold.
1. The intending share holder who contemplates the investment of his capital shall
know within what field it is to be put at risk.
2. Anyone who shall deal with the company shall know without reasonable doubt
whether the contractual relation into which he contemplates entering with the
company is one relating to a matter within its corporate objects.
3. Every subscriber to the memorandum shall take at least one share and shall write
opposite to his name the number of shares taken by him.
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CONTENT OF MoA : Sec 13
THE NAME CLAUSE.
THE REGISTER OFFICE CLAUSE.
THE OBJECT CLAUSE.
THE CAPITAL CLAUSE.
THE LIABILITY CLAUSE. THE ASSOCIATION CLAUSE.
NOTE : The MoA must be signed by at least seven subscribers
in the case of public company and two in case of private
company.
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Articles of Association of a company
The Articles of Association is a document that contains thepurpose of the company as well as the duties and
responsibilities of its members defined and recorded clearly.
It is an important document which needs to be filed with the
Registrar of companies.
Alteration of AoA is done by passing a special resolution.
AoA should be printed, divided into paragraphs and seriallynumbered.
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CONTENT OF AoA
Article contain provision relating to the following matters:
1. Share capital rights of share holders variation of these rights payment of
commission share certificates.
2. Lien on shares
3. Calls on shares
4. Transfers of shares5. 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 thereat11.Voting rights of members ,voting and poll, proxies.
12.Dividends and reserves
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PROSPECTUS :
Prospectus means any document described or issued as a prospectus inviting
deposits from public or inviting offer from public for the subscription or
purchase of any shares , or debentures of the company.
CERTIFICATE OF LIEU OF PROSPECTUS is issued by a public
company, where the company doesnt invite public subscription.
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CONTENT OF PROSPECTUS:
Date of issue of prospectus.
Name and register office of the company. Consent of Central Govt. for the present issue/compliance with the SEBI
guidelines.
Voting rights ,dividend ,expenses on issue etc.
Name of the stock exchange.
Punishment for fictitious application.
Refund of issue if 90% min. subscription not received.
Names and addresses of leading managers.
Issue of allotment letter or refund within 10 weeks with interest.
Date of opening and closing of issues.
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Date of opening and closing of issues.
Credit rating fromCRISIL (CREDIT RATING INFORMATION SERVICES
OF INDIA LIMITED)
Terms of Underwriting & Risk Factors.
Capital Structure of the company
Terms and particulars of the issue.
Restriction on transfer and transmission of
shares.
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MANAGEMENT OF
COMPANY
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Definition : sec 2(13)
Director may be defined as a person having control over direction ,conduct ,
management or superintendence of the affairs of the company .
Only individuals can be directors of the company: (sec 253)
According to the companies act 2006 has introduced provisions with respect
to the director identification number , and it is been important that DIN is given
to the directors .
Number of directors :
Every public company shall have at least three directors and every other company
shall have two directorsIncrease or reductions in number of directors sec(258)
Sanction by the central government sec (259)
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APPOINTMENT OF DIRECTORS1. FIRST DIRECTORS SEC(254 and clause 64 of table A)
2. APPOINTMENT OF DIRECTORS BY THE COMPANY (SEC 255 to 257,263 and 264)
3. APPOINTMENT OF DIRECTORS BY DIRCTORS (SEC 260,262 and 313)
As additional directors (sec260)
In a casual vacancy (sec262)
As alternative director( sec313)
Appointment of directors by the third parties Appointment by proportional representation (sec265)
Appointment of directors by the central government sec(408)
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POSITION OF DIRECTORSIt is very difficult to pinpoint the exact legal position of the
directors of the company . They have been described byvarious names, some time as agent some time as truste andsometime as managing partners of the company .
we can sonsider the positin of the directors from all these
points of view Director as agent
Director as employees
Directors as officers
Directors as trustee:
directors are the trustees of the companys money andproperty
Directors are trustees of the powers entrusted to them
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RESTRICTIONS ON APPOINTMENT OF
THE DIRECTORSA person shall not be capable of being director appointed directors of acompany by thr articles and shall also not be named as a director or
proposed director in the prospectus unless before the regestration of the
articles , or the publications of the prospectus as the case may be , he or his
agent authorised .
1. signed and failed with the registor of consent in writing to act as suchdirector
2. Signed the memorandum for his qualifications shares if any ;or
3. Taken his qualifications shares if any from the company and paid or agreed to
pay for them or
4. Signed and filed with the registar an undertaking in writing to take from thecompany his qualifications share sif any and pay for them ; or
5. Made and filed with the registrar an affidavit to the effect that his
qualifications shares are registered in his name
6. This section does not apply to the private company
NUMBER OF DIRECTORSHIPS SEC
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NUMBER OF DIRECTORSHIPS SEC
275,277 TO 279No persons to be a director of more than 15 companies( sec 275)
Exclusion of certain directorships (sec 278) A private company which is neither a subsidiary nor a holding company of a
public company
An unlimited company
An associations not carrying a buiness for profit or which prohibits the
payment of a dividend
A company in which such person is only an alternate director
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DISQUALIFICATIONS OF DIRECTORS1. A person of unsound mind
2. An undischarged insolvent
3. A person whose calls in respect of share of the company held for more
than 6 months have been arrear
4. A person who is already a director of a public company
Has not filed annual accounts and annual returns for any three
continuous financial years commencing on and after the first day of april199 ; or
Has failed to repay its deposits or interest thereon on due date redeem
its debentures on the date or pay dividend and such failure continues for
one year or more
VACATIONS OF OFFICE AND REMOVAL
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VACATIONS OF OFFICE AND REMOVAL
OF DIRECTORS (SEC 283The office of the director shall become vacant if he
He fails to obtain within 2months of his appointment or at any timethereafterceases to hold the share qualification, if any , reuired of him by the
articles of the company
He is adjudged to be of unsound mind
He applies to be adjudicated an insolvent
He is adjudged an insolvent
He is convicted by a court of any offence involving moral turpitude and
sentenced in respect there of imprisonment for not less than 6 months
He fails to pay any call in respect of shares of the company held by him with
in 6 months from the last date fixed for the payment of the call . The centalgovt may by notification in the official gazette removes this disqualifications
He fails to make disclosure to the board of directors with regard to any
contract with the company in which he is directly or indirectly interested.
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REMOVAL OF DIRECTORSdirectors may be removed by the
shareholders( sec284)
Apply to the case of a director appointed by the central government under
sec408
authorise in the case of aprivate company removal of a director holding
office for life on april 1, 1952
Apply to the case of a company which has adopted the system of electing2/3 of its directors by the principle of proportional representation
1. central government (sec 388-B to 388-E)
2. Removal by company law board (sec402)
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MANAGERIAL REMUNERATIONManagerial remuneration is compensation for services provided to a
company in a managerial capacity. This can include cash payments,
along with benefits like stock options, health insurance, and
bonuses.
Over maximum managerial remuneration (sec198)
remuneration not to exceed 11 percent , under the sec 349,350,
351
If the company does not make any profit then the director will not
bee given any remuneration and will given any remuneration by
the previous approval of central government if required
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MEETINGS OF DIRECTORS
(SECTION-285)
NUMBER OF MEETINGS-ONCE IN EVERY
THREE MONTHS
NOTICE OF MEETINGS
QUOROM FOR MEETINGS
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POWERS OF DIRECTORS
GENERAL POWERS OF THE BOARD(SECS-291)
CAN NOT DO ACTS WHICH ARE TO BE DONE
BY THE COMPANY IN GENERAL MEETINGS
BOARD SHALL USE ITS POWER SUBJECT TO
THE PROVISIONS CONTAINED IN THE
COMPANIES ACT.
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POWERS USED FOR BOARD MEETINGS
(SECTION-292)
CAN CALL SHAREHOLDERS IF UNPAID SHARES
ISSUE DEBENTURES
BORROW MONEYS OTHER THAN DEBENTURES
INVEST THE FUNDS OF COMPANY
MAKE LOANS
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POWERS USED IN GENERAL MEETING
(SECTION-293)
TO SELL, LEASE,DISPOSE OR SUBSTANTIALLY OF THE
WHOLE UNDERTAKING OF THE COMPANY.
TO REMIT OR GIVE TIME FOR REPAYMENT OF ANY
DEBT DUE TO THE COMPANY TO INVEST IN COMPULSORY ACQUISITION USING
THE MOUNT OF COMPENSATION.
TO CONTRIBUTE TO CHARITABLE AND OTHER FUNDS
NOT DIRECTLY RELATING TO BUSINESS OF THE
COMPANY WELFARE.
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POLITICAL CONTRIBUTION
(SECTION-293-A)
Amount contributed in on financial year
should not exceed 5% of its average net profit
Resolution authorizing the making of the
contribution should be passed in board
meeting.
Amount of contribution should be shown in
the P/L A/C during the financial year.
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DUTIES OF DIRECTORS
FIDUCIARY DUTIES
1)EXERCISE THEIR POWERS HONESTLY AND
BONA FIDE FOR THE BENEFIT OF THE
COMPANY AS A WHOLE
2)SHOULD NOT HAVE A CONFLICT BETWEEN
THEIR DUTIES TO THE COMPANY AND
PERSONAL INTEREST
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DUTIES OF CARE, SKILL AND DILIGENCE
DIRECTORS SHOULD CARRY OUT THEIR DUTIES WITHREASONABLE CARE AND EXERCISE DEGREEE OF SKILL
AND DILIGENCE.
STANDARD OF CARE
a)The type of nature of work
b)Division of powers between directors and other
directors
c) General usages and customs in that type of business
d)Whether directors work remuneratively
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OTHER DUTIES OF DIRECTORS
TO ATTEND BOARD MEETINGS
NOT TO DELEGATE FUNCTIONS EXCEPT FEW
TO DISCLOSE HIS INTEREST
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CONTRACTS IN WHICH DIRECTORS ARE
INTERESTED
BOARDS SANCTION REQUIRED(SECTION 297) DISCLOSURE OF INTEREST BY DIRECTORS (SECTION-299)
INTERESTED DIRECTOR NOT TO PARTICIPATE OR VOTE INBOARDS PROCEEDINGS.
REGISTER OF CONTRACTSThe date of contract or arrangement
The names of the parties thereto
The principal terms r condition thereof
The name of directors voting for and against the contract andthe names of those remaining neutral
INSPECTION OF REGISTER
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LIABILITIES OF DIRECTORS
LIABILITIES OF THIRD PARTIESUNDER THE ACT
INDEPENDENTLY OF THE ACT
LIABILITY TO THE COMPANYULTRA VIRES ACT
NEGLIGENCE
BREACH OF TRUST
MISFEASANCE
LIABILITY FOR BREACH OF STATUTORY DUTIES
LIABILITY FOR ACTS OF HIS CO-DIRECTORS
VALIDITY OF ACTS OF DIRECTORS
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VALIDITY OF ACTS OF DIRECTORS
(SECTION-290)
De facto and de jure directors
A director who is not duly appointed but acts as
a director is called De facto (director) and is as
much as liable as a de jure (properly
appointed).
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DISABILITIES OF DIRECTORS
Avoidance of provisions relieving directors of
liability (sec-201)
Undischarged insolvent disqualified from
being appointed directors (sec-274)
No person to be a director of more than
20companies (sec-275)
Restrictions on powers of Board (sec-293)
Loans to directors (sec-295)
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Boards sanction for certain contracts in which
particular directors are interested (sec-297) Prohibition of assignment of office by director
(sec-312)
Directors not to hold office or place of profit(sec-314)
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MANAGING DIRECTOR
A director who is entrusted with substantial
powers of management which would not
otherwise be exercisable by him.
APPOINTMENT
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APPOINTMENT(SECTION-269)
COMPULSORY APPOINTMENT OF MANAGING ORWHOLE-TIME DIRECTOR OR MANAGER
PRIOR APPROVAL OF THE CENTRALGOVERNMENT UNLESS APPOINTMENT IS IN
ACCORDANCE WITH THE CONDITIONS SPECIFIEDIN SCHEDULE 13
PROVISIONS RELATING TO APPOINTMENT WHEREIT REQUIRES APPROVAL OF THE CENTRALGOVERNMENT
APPOINTMENT IN CONTRVENTION OF THEREQUIREMENTS OF SCHEDULE 13.
DISQUALIFICATION OF MANAGING
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DISQUALIFICATION OF MANAGING
DIRECTOR (SEC. 267)
Suspends
Undischarged insolvents
Has at anytime been
convicted by a Tribunal
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THANK YOU!