law

1. .
Meaning and Definition of Company
In common parlance, a company refers to an assemblage of people who have come
together for some specific purpose; economic, or otherwise; and who have
incorporated themselves into a distinct legal entity in the form of a corporation for
that purpose.
Definition as per Companies Act, 2013
Sec 2(20) merely reads, ‘a company means a company formed and registered
under this Act or under any previous company law’.
Lord Justice Lindley definition
A Company is an association of many persons who contribute money or monies
worth to a common stock and employ in some trade or business and who share the
profit and loss arising therefrom. The common stock so contributed is denoted in
money and is the capital of the company. The persons who contributed to it or
whom it pertains are members. The proportion of capital to which each member is
entitled is his share. The shares are always transferable albeit the right to transfer
is often more or less restricted.
A company is an artificial person created by law, having a separate entity, with a
perpetual succession and common seal. Prof. Haney

2. Nature / Features of Company
An artificial person created by law, having a separate entity, with a
perpetual succession and common seal.
1. Independent legal entity
2. Limited liability
3. Everlasting existence/Perpetual succession
4. Separate property of company
5. Flexibility of investment
6. Capacity to sue
7. Separation of ownership &
Management
8. Proportionate representation
9. Right to own property

3. Kinds of Companies
1. Classification on the basis of Incorporation
a) Statutory companies : These are the companies which are created by a special act of
the Legislature, e.g. Reserve Bank of India, the State Bank of India, LIC.
b) Registered Companies: These are the companies which are formed and registered
under the Companies Act.
2. Classification on the basis of Liability
1. Companies with limited liability
a) Companies Limited by Shares: Where the liability of the members of a company is
limited to the amount unpaid on the shares, such a companies is known as a company
limited by shares.
b) Companies limited by guarantee: Where the liability of the members of a company is
limited to a fixed amount which the members undertake to contribute to the assets of
the company in the event of its being wound up, the company is called a company
limited by guarantee.
2. Unlimited companies: A company without limited liability is called unlimited company.

4. 3. Classification on the basis of number of members
a) Private company: which has a minimum paid-up capital of Rs.1,00,000 and which by
Articles:
1. Restricts the right to transfer its shares, if any.
2. Limits the number of its members to 200
3. Prohibits any invitation or acceptance of deposits from persons other than its
members
4. Prohibits any invitation or acceptance of deposits from persons other than its
members, directors or their relatives.
b) Public company : a company to which the above restrictions does not apply. The
minimum paid up capital is Rs.5,00,000. A private company, which is a subsidiary of a
public company, shall be deemed to be a public company.
Minimum number of members
Public company – 7
Private company – 2
Maximum number of members
Public company – unlimited
Private company – 200

5. 4. On the basis of Control
1. Holding company: A company which has control over other company.
2. Subsidiary company: A company which is being controlled by holding company.
Other types
1. Small company: A company (other than public company) whose paid up capital does
not exceed Rs.50 lacs and turnover as per last profit and loss account does not exceed
Rs.2 crore.
2. One Person Company
3. Government company: where Central/State/Partly Central and State governments
share in the company is not less than 51 percent.
4. Dormant company: A company that does not trade and has no significant business
transactions.
5. Foreign company: A company which is incorporated under the laws of a different
nation but conducts any of its business activities in India.

6. For the incorporation or registration of a company two important documents are required
to be prepared and filed with the Registrar of Companies namely:
1. Memorandum of Association
2. Article of Association
Contents of Memorandum
1. The name of the company, with the last word ‘Limited’ in the case of a public limited
company, or the last words ‘Private Limited’ in the case of a private limited
company.(Name Clause)
2. The State in which the registered office of the company is to be situated (Registered
office Clause)
3. The objects for which the company is proposed to be incorporated and any matter
considered necessary in furtherance thereof. (Objects clause)
4. Limited liability (Liability Clause)
5. Share capital (Capital Clause)
6. The memorandum shall conclude with an ‘Association clause’ which states that the
subscribers desire to form a company and agree to share in it.

7. Articles of Association or just Articles are the rules, regulations and bye-laws for the
internal management of the affairs of a company. They are framed with the object of
carrying out the aims and objects as set out in the Memorandum of Association.
Contents of Articles
1. Share capital and variation of rights
2. Lien
3. Calls on shares
4. Transfer of shares
5. Transmission of shares
6. Forfeiture of shares
7. Alteration of capital
8. Capitalization of profits
9. Buy-back of shares
10. General meetings
11. Proceedings at general meetings
12. Adjournment of meeting
13. Voting rights
14. Proxy
15. Board of Directors
16. Proceedings of the Board

8. Doctrine of Corporate veil (Disregarding the Corporate entity) implies that :
•A company has a separate personality distinct from its members or shareholders.
•This signifies that the company has a life and existence of its own
•Can possess a property and deal with it the way it desires
•Can sue and be sued in its personal capacity.
•Moreover, no shareholder can either individually or jointly claim any ownership
rights in the assets of the company during its continuance of business or on its
winding up.
Doctrine of Ultra Vires – Ultra means beyond and Vires means the powers.
The Latin term ultra vires, means to describe an act which is beyond the powers.
Any transaction (or act) which is not set out in the object clause of the company’s
memorandum, and is not necessarily or reasonably incidental to the attainment of
the object(s), is ultra vires the company, and therefore, void, i.e of no legal effect
and does not bind the company.

9. Doctrine of Constructive notice: Every outsider deal with a company is deemed
to have notice of the contents of the Memorandum and the Articles of Association.
These documents, on registration with the Registrar assume the character of public
documents. This is known as “Constructive notice of Memorandum and Articles’.
The Memorandum and the Articles are open and accessible to all. It is the duty of
every person dealing with the company to inspect these documents and see that it
is within the powers of the company to enter into the proposed contract.
Doctrine of Indoor management: The outsiders dealing with the company are
entitled to assume that as far as the internal proceedings of the company are
concerned, everything has been regularly done. They are presumed to have read
these documents and to see that the proposed dealing is not inconsistent therewith,
but they are not bound to do more; they need not inquire into the regularity of the
internal proceedings as required by the Memorandum and the Articles.