Company Law and Companies Act Notes and Study Materials
Company Law and Companies Act
1. Introduction to Company Law
Company Law governs the formation, operation, and dissolution of companies.
It is designed to regulate corporate behavior, protect shareholders, creditors, employees, and other stakeholders.
The primary statute in most countries is the Companies Act (e.g., Companies Act, 2013 in India).
2. Definition of a Company
A Company is a legal entity formed by a group of individuals to carry out a business.
It has a separate legal entity distinct from its members.
Key features:
Perpetual succession
Limited liability of members
Transferability of shares
Common seal (in some jurisdictions)
3. Types of Companies
Private Company
Restriction on the transfer of shares
Maximum 200 members
Cannot invite the public to subscribe to shares
Public Company
No restriction on share transfer
Minimum 7 members, no limit on max members
Can invite public to subscribe to shares
One Person Company (OPC)
Single member company
Limited liability
Section 8 Company
Non-profit organization with charitable objects
4. Incorporation of a Company
Steps:
Name Reservation (through Registrar of Companies)
Preparation of Memorandum of Association (MOA) and Articles of Association (AOA)
Filing of incorporation documents with Registrar of Companies (ROC)
Payment of registration fees
Certificate of Incorporation (COI) issued by ROC
Memorandum of Association (MOA):
Defines the company’s scope of operations
Contains:
Name Clause
Registered Office Clause
Object Clause
Liability Clause
Capital Clause
Subscription Clause
Articles of Association (AOA):
Governs internal management of the company
Rules about meetings, voting, appointment of directors, etc.
5. Corporate Personality and Limited Liability
Separate Legal Entity: Company has its own legal identity separate from shareholders.
Limited Liability: Shareholders are liable only up to the amount unpaid on their shares.
6. Share Capital and Shares
Share Capital: The amount raised by a company by issuing shares.
Types of Shares:
Equity Shares (ordinary shares)
Preference Shares (fixed dividend priority)
Issue of Shares:
IPO, Private Placement, Rights Issue, Bonus Shares, Sweat Equity
7. Directors and Management
Board of Directors: Responsible for the management and policy decisions.
Types of Directors:
Executive, Non-executive, Independent
Appointment, Removal, and Powers: Governed by the Companies Act and company’s AOA.
Meetings: Board meetings, Annual General Meeting (AGM), Extraordinary General Meeting (EGM)
8. Meetings and Resolutions
AGM: Annual meeting to discuss financial statements, dividend, appointment of auditors, directors.
EGM: Called for urgent matters.
Resolutions:
Ordinary Resolution (simple majority)
Special Resolution (at least 75% majority)
9. Accounts, Audit, and Dividends
Books of Accounts: Must be maintained properly.
Audit: Statutory audit by a qualified auditor.
Dividends: Distribution of profits to shareholders, subject to legal conditions.
10. Winding Up and Dissolution
Winding up: Process of closing down the company.
Types:
Voluntary winding up
Compulsory winding up (by court order)
Assets distributed after paying debts and liabilities.
11. Key Provisions of Companies Act (Example: India Companies Act 2013)
Section 2: Definitions of key terms
Section 3: Formation of a company
Section 8: Non-profit companies
Section 42: Private placement of shares
Section 62: Rights issue and preferential allotment
Section 149: Board of directors
Section 173: Board meetings
Section 248: Strike off by Registrar
Section 271: Penalties for non-compliance
12. Important Concepts
Ultra Vires Doctrine: Acts beyond MOA are void.
Doctrine of Indoor Management: Outsiders are entitled to assume internal rules have been complied with.
KYC Norms: Know your customer requirements for shareholders and directors.
Corporate Social Responsibility (CSR): Certain companies required to spend a percentage of profits on social causes.
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