What is a Company
Content
WHAT IS A COMPANY
Company is a voluntary association of persons formed for the purpose of doing business having a distinct name and limited liability. It is a juristic person having a separate legal entity distinct from the members who constitute it, capable of rights and duties of its own and endowed with the potential of perpetual succession. The Companies Act, 1956, states that 'company' includes company formed and registered under the Act or an existing company i.e. a company formed or registered under any of the previous company However, company is not a citizen so as to claim fundamental rights granted to citizens. laws.
Company is a 'juristic person' and it can file a suit as an 'indigent person'
An Expression 'person' includes not merely a natural person but also other juridical persons. A company being a juristic person would be represented before a Court of law or any other place by a person competent to represent it. It is enough that the person competent to represent a company presents the application on behalf of the company. Minors, lunatics or person under any disability are also entitled to file a suit either through guardian or the next friend. In such a case it is the guardian or next friend who is competent to represent the petitioner.
Company is a separate legal entity
Company is separate legal entity distinct from its shareholders. The major constituents of a company are its members, who are the ultimate owners and its directors. It is an important feature of the company form of business, that there is a gap between the ownership and control over the affairs of the company. In real sense the members are the owners of a company, but it is being managed by the directors who are elected representatives of its members, because it is absolutely necessary for it to have a human agency called as the Company's board of directors. The Board of Directors comprises the directors.
CHARACTERISTICS OF A COMPANY
A company registered under the Companies Act has the following features:1. 2. 3. 4. 5. 6. 7. 8. 9. Separate legal entity; Incorporated body ; Artificial legal person; Perpetual succession; Limited liability; Common seal; Right to own property; Right to sue; Right to enter in to contracts;
10. Flexibility of investment; 11. Separation of control from the ownership.
PRIVATE LIMITED COMPANY
Section 3(1) (iii) defines a private company as one which:(a) has a minimum paid-up share capital of Rs.1 Lakh or such higher capital as may be prescribed;and (b) by its Articles Association: 1. restricts the right of transfer of its share; 2. limits the number of its members to 50 which will not include:A. members who are employees of the company; and B. members who are ex-employees of the company and were members while in such employment and who have continued to be members after ceasing to be employees; 3. prohibits any invitation to the public to subscribe for any shares or debentures of the company; and 4. Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
This goes to say that a private company, in addition to the earlier conditions, shall have a minimum paid-up share capital of Rupees One Lakh or such higher capital as may be prescribed and its Articles shall prohibit invitation or acceptance of deposits from persons other than its members, directors or their relatives. In case of such companies, public interest is not involved.
The basic characteristics of a private company in terms of section 3(1)(iii) of the Act do not get altered just because it is a subsidiary of a public company in view of the fiction in terms of section 3(1)(iv)(c) of the Act that it is a public company. May be it is a public company in relation to other provisions of the Act but not with reference to its basic characteristics. In terms of that section, a company is a private company when its articles restrict the right of transfer of shares, restrict its membership to 50 (other than employees shareholders) and prohibits invitation to public to subscribe to its shares. Therefore, all the provisions in the articles to maintain the basic characteristics of a private company in terms of that section is restriction on the right to transfer and the same will apply even if a private company is a subsidiary of a public company.
PUBLIC LIMITED COMPANY
Definition of 'Public Limited Company - PLC'
The standard legal designation of a company which has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares. It is a legal form more commonly used in the U.K. Two or more people are required to form such a company, assuming it has a lawful purpose. Read more: http://www.investopedia.com/terms/p/plc.asp#ixzz1wzIaGeBK The Company defined under section 3(1)(iv) of the Companies Act, 1956 is a public company which1. is not a private company; 2. has a minimum paid-up capital of Rs. 5 lakhs or such higher capital as may be prescribed; 3. is a private company but subsidiary of a public company. Private Companies deemed to be Public Companies Certain private companies are deemed to be public companies by virtue of section 43 A, viz.1. when 25% or more of its paid-up share capital is held by one or more body corporate; 2. when its average annual turnover (during the last 3 years) exceeds Rs. 25 crores; 3. when it holds 25% or more of the paid-up share capital of Public Company; or 4. when it accepts or renews deposits from the public after making an invitation by an advertisement. However, as per the Companies (Amendment) Act, 2000 effective from 13th December 2000 such deemed public limited companies are required to intimate to the Registrar to revert back to their original status as a private limited company.
CLASSIFICATION OF COMPANIES
Companies under the Companies Act, 1956 may be classified on various grounds as under:
I. On the basis of business activities undertaken: Companies (1) Manufacturing Activities (2) Service Activities (3) Non-Banking Finance Activities (4) Non-profit making (5) Producer (Section 581 A)
(Section-25)
II. On the basis of liabilities of the members and directors: Companies With Limited liability (1) (a) Limited By shares (b) Limited by Guarantee & having share capital (c) Limited by Guarantee With unlimited liability (2)
III. On the basis of membership pattern/size Companies (1) Public (a) Unlisted (b) Listed (a) Independent (2) Private (b) Subsidiary of Public Co. (3) Government
IV. On the basis of place of registration: Companies (1) Indian Company (Incorporated in India) (2) Foreign Company (Company incorporated outside India but having place of business in India)
V. On the basis of control over the management: Companies (1) (Holding Company) (2) (Subsidiary Company)
STEP BY STEP FORMALITIES FOR FORMATION OF A NEW COMPANY
SET UP A PUBLIC LIMITED COMPANY
Persons desirous of forming a company must adhere to the step by step procedure as discussed below:1. Selection of type of the company. 2. Selection of name for the proposed company. 3. Apply for Directors Identification Number and Digital Signatures. 4. Drafting of Memorandum and Articles of Association. 5. Stamping, digitally signing and e-filing of various documents with the Registrar. 6. Payment of Fees. 7. Obtaining Certificate of Incorporation. 8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in
case of public companies) for obtaining the certificate of commencement of business.
9. Obtaining Certificate of Commencement of business (in case of public limited companies).
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5. Filing of documents with the Registrar
Next step for the promoters is to file the following documents with the Registrar for incorporation of the company. The following documents shall be submitted to the Registrar alongwith the adequate filing fees as applicable for registration of the company online with in a period of six months from the date of intimation of availability of name:1. Memorandum of Association, duly signed by the subscribers and witnessed, showing the number of shares against their names electronically attached in PDF file. It should also be properly stamped as per the stamp duty applicable in the State, where the registered office of the company is to be situated.Simultaneously original stamped copy of the Memorandum of Association shall be submitted with the Registrar of Companies concerned. 2. Articles of Association should be duly signed by the subscribers and witnessed, showing the number of shares against their names electronically. It should be properly stamped according to the authorized share capital as per the stamp duty applicable in the state, where the registered office of the company to be situated. Simultaneously original stamped copy of the Memorandum of Association shall be submitted with the Registrar of Companies concerned. 3. Copy of the agreement, if any, which the company proposes to, enter in to with any individual for appointment as its managing or whole-time director or manager shall be attached in the PDF file. Declaration in e-Form 1 by an advocate or company secretary or chartered accountant engaged in whole time practice in India or by a person named in the Articles as a director, manager or secretary of the company, that all the requirements of the Companies Act, 1956 and the rules made thereunder have been complied with in respect of registration and matters precedent and incidental thereto, which may be accepted by the Registrar as sufficient evidence of such compliance. It
4.
should be carefully noted that details of all the companies in which directors are also director should be given and the names, addresses and other particulars of directors and promoters should be matched with the information provided in the DIN application Form. [ Section 33(2)] (Appendix 2). 5. Power of Attorney for should be furnished by all the subscribers in favour of any one subscriber or any other person authorising him to file these documents and to with the Registrar and to obtain certificate of incorporation. The power of attorney should be given on Non-Judicial stamp paper of appropriate value and shall be submitted to the Registrar. (Appendix 3). 6. Other agreement if any, which has been stated in the Memorandum or Articles of Association shall also be filed in the PDF file with the Registrar because in such cases the agreement will form part of this basic document. 7. E-Form 18 is to be filed with the Registrar electronically with the digital signatures in regard to location of the registered office. E-Form 18 shall also be certified by the company secretary or chartered accountant or cost accountant in whole –time practice. [ Section 146 (2)] (Appendix 4) 8. E-Form 32 is required to be filed with the Registrar electronically for filing particulars of directors. The personal details should match with the information provided in the DIN. Following additional details are also required to given in e-Form 32: (a) Name and CIN of all the companies in which they are directors; (b) Names of partnership concerns in which they are partner; (c) Names of proprietorship concerns in which they are proprietor; In case if the field provided in the e-From 32 is not sufficient, an annexure may also be enclosed for the required details. As an e- Form 32 provides fields for three directors only, e-Form 32AD i.e. Addendum to e-Form 32 shall be submitted for additional appointments. E-Form 32 AD, if any is also required to be certified by the company secretary or chartered accountant or cost accountant in practice digitally before filing with the Registrar. Consent to act as director on plain paper and authorization to submit e-Form 32 from all the director should be attached with the e-Form 32. E-form 32 is required to be digitally signed by the director or managing director or manager or secretary of the company. E-Form 32 shall be filed along with the adequate filing fee as prescribed under Schedule XIII of the Companies Act, 1956, However, no separate filing fee is required to be paid on the addendum of e-Form 32.( Appendix 5).
6. Payment of registration fees for a new company
The fees payable to the Registrar at the time of registration of a new company varies according to the authorized capital of a company proposed to be registered as per Schedule X to the Act. Fees can be calculated by the MCA portal.
7. Certificate of Incorporation (section 33 and 34)
On the satisfaction of the Registrar that the requirements specified in sections 33(1) and 33(2) have been complied with by the company, he shall retain the documents and register the MOA, AOA and other documents. Section 34(1) cast an obligation on the Registrar to issue a Certificate of Incorporation, normally within 7 days of the receipt of documents.
8. Commencement of Business
A Private limited company and a company not having share capital may commence its business activities from the date of its incorporation. However, a public Limited Company having share capital is required to take certificate of commencement of business before it can commence business.
Company is a voluntary association of persons formed for the purpose of doing business having a distinct name and limited liability. It is a juristic person having a separate legal entity distinct from the members who constitute it, capable of rights and duties of its own and endowed with the potential of perpetual succession. The Companies Act, 1956, states that 'company' includes company formed and registered under the Act or an existing company i.e. a company formed or registered under any of the previous company However, company is not a citizen so as to claim fundamental rights granted to citizens. laws.
Company is a 'juristic person' and it can file a suit as an 'indigent person'
An Expression 'person' includes not merely a natural person but also other juridical persons. A company being a juristic person would be represented before a Court of law or any other place by a person competent to represent it. It is enough that the person competent to represent a company presents the application on behalf of the company. Minors, lunatics or person under any disability are also entitled to file a suit either through guardian or the next friend. In such a case it is the guardian or next friend who is competent to represent the petitioner.
Company is a separate legal entity
Company is separate legal entity distinct from its shareholders. The major constituents of a company are its members, who are the ultimate owners and its directors. It is an important feature of the company form of business, that there is a gap between the ownership and control over the affairs of the company. In real sense the members are the owners of a company, but it is being managed by the directors who are elected representatives of its members, because it is absolutely necessary for it to have a human agency called as the Company's board of directors. The Board of Directors comprises the directors.
CHARACTERISTICS OF A COMPANY
A company registered under the Companies Act has the following features:1. 2. 3. 4. 5. 6. 7. 8. 9. Separate legal entity; Incorporated body ; Artificial legal person; Perpetual succession; Limited liability; Common seal; Right to own property; Right to sue; Right to enter in to contracts;
10. Flexibility of investment; 11. Separation of control from the ownership.
PRIVATE LIMITED COMPANY
Section 3(1) (iii) defines a private company as one which:(a) has a minimum paid-up share capital of Rs.1 Lakh or such higher capital as may be prescribed;and (b) by its Articles Association: 1. restricts the right of transfer of its share; 2. limits the number of its members to 50 which will not include:A. members who are employees of the company; and B. members who are ex-employees of the company and were members while in such employment and who have continued to be members after ceasing to be employees; 3. prohibits any invitation to the public to subscribe for any shares or debentures of the company; and 4. Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
This goes to say that a private company, in addition to the earlier conditions, shall have a minimum paid-up share capital of Rupees One Lakh or such higher capital as may be prescribed and its Articles shall prohibit invitation or acceptance of deposits from persons other than its members, directors or their relatives. In case of such companies, public interest is not involved.
The basic characteristics of a private company in terms of section 3(1)(iii) of the Act do not get altered just because it is a subsidiary of a public company in view of the fiction in terms of section 3(1)(iv)(c) of the Act that it is a public company. May be it is a public company in relation to other provisions of the Act but not with reference to its basic characteristics. In terms of that section, a company is a private company when its articles restrict the right of transfer of shares, restrict its membership to 50 (other than employees shareholders) and prohibits invitation to public to subscribe to its shares. Therefore, all the provisions in the articles to maintain the basic characteristics of a private company in terms of that section is restriction on the right to transfer and the same will apply even if a private company is a subsidiary of a public company.
PUBLIC LIMITED COMPANY
Definition of 'Public Limited Company - PLC'
The standard legal designation of a company which has offered shares to the general public and has limited liability. A Public Limited Company's stock can be acquired by anyone and holders are only limited to potentially lose the amount paid for the shares. It is a legal form more commonly used in the U.K. Two or more people are required to form such a company, assuming it has a lawful purpose. Read more: http://www.investopedia.com/terms/p/plc.asp#ixzz1wzIaGeBK The Company defined under section 3(1)(iv) of the Companies Act, 1956 is a public company which1. is not a private company; 2. has a minimum paid-up capital of Rs. 5 lakhs or such higher capital as may be prescribed; 3. is a private company but subsidiary of a public company. Private Companies deemed to be Public Companies Certain private companies are deemed to be public companies by virtue of section 43 A, viz.1. when 25% or more of its paid-up share capital is held by one or more body corporate; 2. when its average annual turnover (during the last 3 years) exceeds Rs. 25 crores; 3. when it holds 25% or more of the paid-up share capital of Public Company; or 4. when it accepts or renews deposits from the public after making an invitation by an advertisement. However, as per the Companies (Amendment) Act, 2000 effective from 13th December 2000 such deemed public limited companies are required to intimate to the Registrar to revert back to their original status as a private limited company.
CLASSIFICATION OF COMPANIES
Companies under the Companies Act, 1956 may be classified on various grounds as under:
I. On the basis of business activities undertaken: Companies (1) Manufacturing Activities (2) Service Activities (3) Non-Banking Finance Activities (4) Non-profit making (5) Producer (Section 581 A)
(Section-25)
II. On the basis of liabilities of the members and directors: Companies With Limited liability (1) (a) Limited By shares (b) Limited by Guarantee & having share capital (c) Limited by Guarantee With unlimited liability (2)
III. On the basis of membership pattern/size Companies (1) Public (a) Unlisted (b) Listed (a) Independent (2) Private (b) Subsidiary of Public Co. (3) Government
IV. On the basis of place of registration: Companies (1) Indian Company (Incorporated in India) (2) Foreign Company (Company incorporated outside India but having place of business in India)
V. On the basis of control over the management: Companies (1) (Holding Company) (2) (Subsidiary Company)
STEP BY STEP FORMALITIES FOR FORMATION OF A NEW COMPANY
SET UP A PUBLIC LIMITED COMPANY
Persons desirous of forming a company must adhere to the step by step procedure as discussed below:1. Selection of type of the company. 2. Selection of name for the proposed company. 3. Apply for Directors Identification Number and Digital Signatures. 4. Drafting of Memorandum and Articles of Association. 5. Stamping, digitally signing and e-filing of various documents with the Registrar. 6. Payment of Fees. 7. Obtaining Certificate of Incorporation. 8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form 19/20 (in
case of public companies) for obtaining the certificate of commencement of business.
9. Obtaining Certificate of Commencement of business (in case of public limited companies).
...Back
5. Filing of documents with the Registrar
Next step for the promoters is to file the following documents with the Registrar for incorporation of the company. The following documents shall be submitted to the Registrar alongwith the adequate filing fees as applicable for registration of the company online with in a period of six months from the date of intimation of availability of name:1. Memorandum of Association, duly signed by the subscribers and witnessed, showing the number of shares against their names electronically attached in PDF file. It should also be properly stamped as per the stamp duty applicable in the State, where the registered office of the company is to be situated.Simultaneously original stamped copy of the Memorandum of Association shall be submitted with the Registrar of Companies concerned. 2. Articles of Association should be duly signed by the subscribers and witnessed, showing the number of shares against their names electronically. It should be properly stamped according to the authorized share capital as per the stamp duty applicable in the state, where the registered office of the company to be situated. Simultaneously original stamped copy of the Memorandum of Association shall be submitted with the Registrar of Companies concerned. 3. Copy of the agreement, if any, which the company proposes to, enter in to with any individual for appointment as its managing or whole-time director or manager shall be attached in the PDF file. Declaration in e-Form 1 by an advocate or company secretary or chartered accountant engaged in whole time practice in India or by a person named in the Articles as a director, manager or secretary of the company, that all the requirements of the Companies Act, 1956 and the rules made thereunder have been complied with in respect of registration and matters precedent and incidental thereto, which may be accepted by the Registrar as sufficient evidence of such compliance. It
4.
should be carefully noted that details of all the companies in which directors are also director should be given and the names, addresses and other particulars of directors and promoters should be matched with the information provided in the DIN application Form. [ Section 33(2)] (Appendix 2). 5. Power of Attorney for should be furnished by all the subscribers in favour of any one subscriber or any other person authorising him to file these documents and to with the Registrar and to obtain certificate of incorporation. The power of attorney should be given on Non-Judicial stamp paper of appropriate value and shall be submitted to the Registrar. (Appendix 3). 6. Other agreement if any, which has been stated in the Memorandum or Articles of Association shall also be filed in the PDF file with the Registrar because in such cases the agreement will form part of this basic document. 7. E-Form 18 is to be filed with the Registrar electronically with the digital signatures in regard to location of the registered office. E-Form 18 shall also be certified by the company secretary or chartered accountant or cost accountant in whole –time practice. [ Section 146 (2)] (Appendix 4) 8. E-Form 32 is required to be filed with the Registrar electronically for filing particulars of directors. The personal details should match with the information provided in the DIN. Following additional details are also required to given in e-Form 32: (a) Name and CIN of all the companies in which they are directors; (b) Names of partnership concerns in which they are partner; (c) Names of proprietorship concerns in which they are proprietor; In case if the field provided in the e-From 32 is not sufficient, an annexure may also be enclosed for the required details. As an e- Form 32 provides fields for three directors only, e-Form 32AD i.e. Addendum to e-Form 32 shall be submitted for additional appointments. E-Form 32 AD, if any is also required to be certified by the company secretary or chartered accountant or cost accountant in practice digitally before filing with the Registrar. Consent to act as director on plain paper and authorization to submit e-Form 32 from all the director should be attached with the e-Form 32. E-form 32 is required to be digitally signed by the director or managing director or manager or secretary of the company. E-Form 32 shall be filed along with the adequate filing fee as prescribed under Schedule XIII of the Companies Act, 1956, However, no separate filing fee is required to be paid on the addendum of e-Form 32.( Appendix 5).
6. Payment of registration fees for a new company
The fees payable to the Registrar at the time of registration of a new company varies according to the authorized capital of a company proposed to be registered as per Schedule X to the Act. Fees can be calculated by the MCA portal.
7. Certificate of Incorporation (section 33 and 34)
On the satisfaction of the Registrar that the requirements specified in sections 33(1) and 33(2) have been complied with by the company, he shall retain the documents and register the MOA, AOA and other documents. Section 34(1) cast an obligation on the Registrar to issue a Certificate of Incorporation, normally within 7 days of the receipt of documents.
8. Commencement of Business
A Private limited company and a company not having share capital may commence its business activities from the date of its incorporation. However, a public Limited Company having share capital is required to take certificate of commencement of business before it can commence business.
