07-12-2012, 02:34 PM
THE COMPANY ACT 1956
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COMPANY
In a simple words a company may be defined as a “ association of persons who contribute money or money’s worth to a common stock and employ it in some trade or business , and who shares the profit or loss there from.
Section 3(1)(i) of the Companies Act, 1956 defines a company as: “a company formed and registered under this Act or an existing Company”.‘Existing Company’ means a company formed and registered under any of the earlier Company Laws.
Legal definition “ Incorporated association , which is an artificial legal person, having a separate legal entity , with a perpetual succession, a common seal, a common capital comprised of transferable shares and carrying limited liability.
NATURE OF COMPANY
1 SEPERATE LEGAL ENTITY
2.ARTIFICIAL PERSON
3.PERPETUAL EXISTENCE
4.COMMON SEAL
5.LIMITED LIABILITY
6.CAPACITY TO SUE OR TO BE SUED
7.TRANSFERABILITY OF SHARE
Separate legal entity
A company is an separate legal entity means it is different from its members. It works as a individual body.
It can make contracts, open a bank account, can sue and be sued by others.
The law has recognised that even if a person holds virtually all the shares, the right and obligations of the company shall be different from its members.
Artificial person
A company is a purely a creation of law. It is invisible, intangible and exists only in the eyes of law.
It has no soul, no body, but has a position to enter or exit into a contract, to appoint a people as its employees
In short it can do every thing just like a natural person.
Perpetual existence [sec 34(2)]
Section 34(2) of the act states that an incorporated company has perpetual life.
The life of the company is not related to the life of the members . Law create the company and law alone can dissolve it.
The existence of the company is not affected b y death, insolvency, retirement or transfer of share of members.
Limited liability
It means that the liability of a member shall be limited to the value of the share held by him, he cannot be called upon to bear the loss from his personal property.
Capacity to sue and be sued
When a company incorporated it acquire a separate and independent legal personality. As a legal person it can be sue and be sued in its own name.
Definition : Private & Public Company
A private company is one which, by its Article of association restricts the right to transfer its share, limits the maximum number of its member to fifty, prohibits any invitation to the public to subscribe for any share or debenture of the company.
A public company means a company which is not a private company. In other words, a public company, means a company which by its article does not limit the number of its member & does not prohibit any invitation to the public to subscribe for any share or debentures, of the company.
PROSPECTUS
‘Prospectus’ is the basic document for raising funds from the public.
‘Prospectus’ means any document described or issued as prospectus and includes any Notice, Circular, Advertisement inviting deposits or offers from the public for the subscription or purchasing any shares in , or debentures of the company.
Thus prospectus is a general invitation to the public to subscribe to the capital of the company on the conditions specified in the application from
MEMORENDUM OF ASSOCIATION (MOA)
The first step in the formation of the company is to prepare memorandum of association. it is one of the documents which has to be filed with registrar of the companies at the time of incorporation of a company.
MOA of a company is its character and defines the limitation of the power of the company . MOA contains the fundamental condition upon which the company is allowed to incorporated.
The purpose of MOA is to enable the Shareholders, creditors and those who deal with the company to know what is permitted range of enterprise.