CH 2 Kinds of Companies Flashcards
How can companies be classified on the basis of incorporation?
- statutory AKA corporations - created by a special act of the legislature e.g RBI, SBI, LIC, concerned with public utlities like railways, gas/electricity. Provisions of CA56 apply if not inconsistent with provisions of their respective special acts
- registered - formed and registered under CA56, most common
how can companies be classfied on the basis of liability?
- unlimited liability - limited by shares
- unlimited liability - limited by guarantee
- unlimited liability
how can companies be classified on the basis of the number of its members?
- private company
- public company
must also consider private vs public companies; conversion of priv to pub or vice versa
classification based on control
holding
subsidiary
classification based on ownership
government
foreign
explain companies limited by shares
liability limited to amount unpaid on shares, enforceable both during existence and winding up of company
exception: section 45 - no of members is below statutory minimum (explain this whole thing including time frame and exact liability)
explain companies limited by guarantee
liability limited to fixed amount members undertake to contribute to the assets of the company upon it winding up
AoA must state number of members with which company is to be registered
these companies are formed to promote art, culture, science, sport etc instead of making profit
may or may not have share capital
explain unlimited companies
- sec 12 provides that as long as statutory minimum no of members is met (explain this for both priv and pub), company can be incorporated with or without limited liability
- every member is liable for company debt
- may or may not have share capital and if it does it may be public or private
- must have own AoA
6 characteristics of private companies - section 3
Carl Made Denise Some Pretty Queer Rope = deposits; AoA
sec 3 says priv company is one with:
- min paid up capital of 100k (if existing on commencement of companies ammendment act 2000 with less, must increase within 2 years)
- min 2 and max 200 members excluding present or past employee members (joint shareholders treated as single members, no max no. of debenture holders)
- restricts right to transfer shares
- does not invite public to subscribe for shares or debentures in company
- does not accept deposits from people other than members, directors or their relatives
- has is own AoA
public companies wrt no of members
- minimum paid up capital of 500K (if existing on commencement of C(A)A with less, must increase within 2 years)
- private company which is a subsidiary of public company
difference between public and private company
- min capital - 100k for priv, 500k for public
- min and max members - 2 and 200 for priv; 7 and N/A for public
- no. of directors - 2 for private (1 if one-person company); 3 for public
- appointment of directors - public must fire consent with registrar to act as directors or sign undertaking for their qualification shares; not for priv
- invitation to subscribe for and transferability shares and debentures - priv is restricted to do this by its Articles; public can do both freely
- special privileges - none for public
- quorum - 2 for private. for public: 5 if fewer than 1k members, 15 if fewer than 5k and 30 if more than 5k
- managerial remuneration - priv has no reg; pub can’t exceed 11% of net profits
minimum number of members required to be present at a meeting to validat
Carl Made Denise Some Pretty Queer Ropes
Capital; Members; Directors (number and appointment); Shares and debentures; Privileges; Quorom; Remuneration
special privileges of a private company
- number of members and directors
- allot shares before minimum subscription is paid
- allot shares without issuing prospectus or statement in lieu of
- when public issues new shares, after 2 years from formation or 1 year from first allotment of shares (whichever comes first), must first offer to existing SH pro rata. NOT FOR PUBLIC
- issue any kind of share cap with any voting rights
- commence business immediately after incorporating
- need not keep index of members
- statutory meetings and reports not necessary
- even one member present in person/by proxy with the right to vote may demand poll if max 7 members present in person. if more than 7, 2 are needed
- managerial remuneration limits
- less stringent rules regarding appointment directors (file consent with registrar/undertaking)
how does a private company become public?
- conversion by default - in complying with essential requirements of private company, provisions of CA apply as though it were a private company unless company law board sees default as accidental
- conversion by choice/volition - becomes public on the date it alters Articles to remove provisions that make it private. Must then file prospectus or statement with Registrar within 30 days as well as:
a) copy of resolution altering articles within 30 days
b) increase membership and directors to minimum (which is….) if below
c) alter regulations in articles inconsistent with those of public co
outline the process of conversion from a public to a private company
- pass special resolution to change articles to include conditions in section 3 that makes a company private
- alteration will only have effect when approved by central govt
- printed copy of altered articles must be filed with registrar within 1 month of date of govt approval
how can companies be classified on the basis of control?
- holding company - has control over another company that is subsidiary to it
- subsidiary company - control is exercised over it by a holding company in one of 3 ways:
a) H controls composition of all or majority of BOD of S
b) H holds more than half of nominal value of equity share capital of S
c) if S is subsidiary of H1 which is the subsidiary of H, S is also a subsidiary of H
classification based on ownership
- govt
- non-govt
- foreign company
govt company
not less than 51% of paid of share capital is held by
1) central govt
2) any state govt(s)
3) party by central and partly by state govt(s)
subsidiary of govt co is also govt co
annual reports on govt companies
- if CG is member of govt co, annual report must be prepared within 3 months of AGM and presented to both Houses of Parliament with copy of audit report
- if CG and SG are both members, SG requires copy of AR and audit report to be presented to the House or both Houses of State Legislature
- if CG is not member, SG(s) will require AR and audit to be presened to the House or both Houses of State Legislature
provisions of sec 394 and 395 apply to govt company in liquidation
appointment of auditor and audit reports
done by comptroller and auditor-general
they also direct manner in which accounts should be audited and can conduct supplementary or test audits
provisions of sec 143 apply here
provisions of the companies act to not apply to govt companies
CG may notify in the Official Gazette that certain provisions of the CA may
a) not apply to any govt co
b) apply with certain exceptions, modifications and adaptations
define foreign company
companies incorporated outside of india but have a place of business in india
if at least 50% of paid-up share capital of a foreign company, whether equity, preference or both, is held by citizen(s) of India or one or more company incorporated in India, it must comply with the provisions of the CA as though it were a company incorporated in India
documents to be delivered to registrar by foreign companies
within 30 days of establishing place of business in India
- certified copy of memorandum and articles in English or a certified translation in English
- full address of registered or principal office AND primary place of business in India
- list of directors and secretary of company
- name(s) and address(es) of people residents of India authorised to accept any documents on behalf of company
- details of opening and closing of place of business in India on earlier occassion(s)
- declaration that no director of company or the authorised rep in India has been debarred from formation of companies in India or abroad
if any alterations, must register these with Registrar within 30 days
display of name of foreign company
- company name and country of incorporation outside every place of business in India the in legible English and local language
- name of the company and country of incorporation in legible English on all business letterheads and other official notices or publications
- if limited liability company, must state this fact outside every office/place of business in english+local language and in all business letters/publications in english
