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THE COMPANY AMENDMENT ACT 2015 FEATURES
1)the figure of minimum paid-up capital deleted 2) the requirment of common seal is made optional 3) sec 11 of the companies act 2013 is omitted 4)arringent penalty for company inviting or acceptance deposit 5) divident cannot be declared by company running at losses
COMPANY DEFiNITION : the word company is used to denote an association of persons who have associated together to conduct or to carry on a business for gain. The person associating together will contribute some money for the conduct of the business and the total amount is know as share capital of the company. This share capital will be used by the company to carry owns business. A company is a corporation aggregate. It will be known separate name. The liability of the company will be its own . the membres liability will be only to the extent of the value of the shares they hold in he company. The company may have a common seal . it is the signature of the company. Before the amendment in requirement of commen seal was mandatory. Now it is optional.
ESSENTIAL ChARACHTERISTCS OF A REGISTERED COMPANY(advantages of incorporation)
1)separate legal entity : when company is incorporated under the companies act , a new legal person will be born and there after , the company will be regarded as an entity separate from its members this separate legal personaliity confers upon the company somme rights and liabilities a part from those of its members
2) perpetual succession: a company is a legal person with perprtual succession . perpetual succession means that the membership of company may change from time to time but that will not affect the continuity of the company .
3) limited liabilitty : the liability ma be limited by shares or by guarentee. If acompony is registerd with limited liability , the liability of the members will be only to extenent of face value of the shares which are held by them or the amount guarenteed by them
4) separate property ) it can acqure, own,enjoy or dispose of properties in its own name
5)transferability of shares : the shares of public company are freely transferable
6)common seal:the name of the company had to beengraved
7)capacity to sue: a company can sue and be sued in its on name
8) winding up ; the company will cease to be in existance only by its copliance
DOCTRINE OF LIFTING THE CORPORATE VEIL or DISADVANTAGES OF INCORPORATION:
A company is a seperate legal persons apart from its members.the seperate legal entity of the company is well established in the decision of case salamon vs salomon and company ltd.this principle is may be called as the ‘veil of incorporation’the effect of the this principle is that there will be a fictional vein between the company and its members.after the incoporation,the company can acquire prperties in its own name,it can sue and be sued in its own name.
The seperate legal entity of company has its own advantages.
Life insurance corporation of india vs escorts ltd(1986).
The circumstances under which the corporate veil may be lifted are following;-
1)PROTECTION OF REVENUE : If the corporate is used for tax evasion the courts may ignore the corporate entity of the company.
The supreme court in juggilal vs commision of income tax 1969,held that corporate entity of the company will be disregarded when the name of the company is used to circumvent tax obligation.
2)PREVENTION OF FRAUD OR IMPROPER CONDUCT : THE LEGAL PERSONALITY OF A COMPANY MAY BE DISREGARDED BY THE COURT in the interest of justice.if the machinery of incorporation is used for some fraudulent purpose like defrauding creditors or avoiding specific performance of contract or defeating law,the court may be disregard the legal personality of the company.
Jones vs lipman 1962
3)COMPANY IS A SHAM :the cort will lift the corporate veil of the company if it is a mere clock or sham.if the name of an incorporated company is used to avoid contractual obligation or to defraud the members or creditors of the company,the court may be disregard the legal personality of the company.
Gilford motor company vs horne 1933
4)DETERMINATION OF THE CHARACTER OF THE COMPANY : inorder to determine character of the company ie,whether it is enemy or not,the court may lift corporate veil.
Daimler company ltd vs continental tyre and rubber co 1916
PUBLIC COMPANY ,PRIVATE COMPANY AND ONE PERSON COMPANY OR FORMATION OF A COMPANY :
Sec 3 of companies act 2013 deals with formation of the company.
By sec 3(1) a company may be formed for any lawful purpose by,
a) seven or more persons, where the company to be formed is to be a public company
b) 2 or more persons,where the company to be formed is to be a private company
c) 1 person,where the company to be formed is to the “one person company”that is to sy ,a private company.
Based on liabilty of members the companies formed may be classified into 3
A company by limited shares
A company limited by guarentees
An unlimited company.
PUBLIC COMPANY : SEC 2(71) DEFINES PUBLIC COMPANY
Means A company in which a) is not a private company b)has a minimum paid-up capital as may be prescribed.
Thus now a public company need to have a minimum paid up share capital as may be prescribed by central govt. The central govt has not yet prescribed the amount of minimum paid up share capital that which apublic company ought to have
Conditions ; a) should not have a private company
b)along with the name of company, as shown in the memorendum the word”limited” should be used as the last word.
c)a minimum of 7 persons should have subscribed to the memorandum of company
It should have a minimum paid up share capital as may be prescribed by central govt.
PRIVATE COMPANY : SEC 2 (68) DEFINES IT
Conditions : a) a minimum of 2 person should have subscribed to its memrandum
b)along with the name of comnpany as shown in the memorandum,the words private ltd should be used as last words.
c)it should have a minimum paid up capital as may be prescribed.
Thus now A private company need to have a minimum paid up share capital as may be prescribed by central govt.
Minimum no.of members required to form a private company is 2 and maximum is 200.
ONE PERSON COMPANY : sec 2(62) of company act defines it. A one person company is trated as a private company for all purpose.thus the provisions applicable to a private company are applicable to a one person company.it can be formed any lawful purpose.the memorandum
Of the company should be subscribed by the person who intends to form one person comapny.
Inorder to register a one person company, as in the case of a private company,it should have a paid up share capital as may be prescribed by central govt .the articles of the one person company should- a) prohibit any invitation to the public to subscribe for any secuirities for any secuirities of the company.
b)restrict the right to transfer its shares.
RULES : a)only a natural person who is an indian citizen and resident in india shall be eligible to incorporate a one person company.
b)only a natural person who is an indian citizen and resident in india shall ba a nominee for sole member of one person company.
CONVERSION OF COMPANIES
Sec 18 of the companies Act 2013 permits coversion of a company from one class to another. Thus a private company can be converted in to public company . so a public company can be converted in to a private company .
One person company in to a public company or a private company volunterly: a one person company can convert itself into a public company or a private company. The conversion is to be effected by alteration of memorandum and articles of the company . sec 13 provides for alteration of memorandum and articles of the company. In order to convert it in to a private company the numbers of members andand directors is to be increased in to two. It can be converted in to a public company by increasing in the minimum numbers of members to sevean and numbers of directors to a minimum of three. It cannot convert volunterly in to any kind of company unless two year have expired from the date of in corporation of one one person company. It has to make an application to the register for effecting conversion
Conversion of one person company by operation of law : by rule six of the rules if the paid up share capital of a one person company exceeds 50 lack rupees or its avearage annual turn over during the realevent periods exceeds 2crore rupees it shall cease to be entiteled to company as a one person company . the one person company shall whith in a period of sixty dayas from the date on which it ceased to be a one person company. The conversion of the new registration of a company shall not affects any debts , liabilities obligation or contracts incurred or enterd in to by or on behalf of the company before conversion and such debts , liabilities may be enforced in the matter as such registration had not been done