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15 views

Unit 4 BE

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tathagat17april
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© © All Rights Reserved
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Unit 4

MBA/BBA/B.com /M.Com /UGC Net

By
Dr. Anand Vyas
Companies Act Definition,

• The Companies Act 2013 is an Act of the Parliament of India on Indian


company law which regulates incorporation of a company,
responsibilities of a company, directors, dissolution of a company.

• According to Sec. 2(20) of the Companies Act, 2013, “Company”


means a company incorporated under this Act or under any previous
company law. This definition does not throw any light on the
characteristics of company form of organization
characteristics of companies
• Voluntary association.
• Company is an artificial person created by law.
• Company is not a citizen.
• Separate legal entity.
• Company has limited liability.
• Company has a perpetual succession.
• Transferability of shares.
• Separate property.
kinds of company
• The three basic types of companies incorporated under the
Companies Act, 2013 are Private Company, Public Company and One
Person Company.
steps in formation of company.
Memorandum of Association,
• Memorandum of Association (MOA) is a legal document that specifies
the scope of business activities of the company and information
about the shareholding of the company. The MoA is a document
prepared for the Company registration procedure.
Articles of Association, prospectus
• Articles of association form a document that specifies the regulations
for a company's operations and defines the company's purpose. The
document lays out how tasks are to be accomplished within the
organization, including the process for appointing directors and the
handling of financial records.
• A prospectus is a legal document through which the Public Company
raises funds after its incorporation. Promoters play an important role
in the making of the prospectus. The prospectus is a notice,
document, circular, advertisement through which a public company
appeals for a fund from the public
Directors: appointment, power, duties and
liabilities,
• Director is a term given to the senior most management staff responsible
for handling all key activities of organization. He is an individu
• Appointment of a director in a company is made as per the provisions of
Section 152 to 159 of Companies act, 2013. Companies Act 2013 prescribes

• that only a real person can be appointed as a member of Board of


directors. Director’s appointment is generally done by the shareholders of
company. Appointment of about two-third directors in both public and
private company is done by shareholders. Rest one-third of members of
board of directors are appointed in accordance with article of
association.al who is responsible for framing a corporate policy.
• STATUTORY POWERS OF DIRECTORS
• These powers are exercised by passing a special resolution in a general meeting
of company by Board of directors. These are listed below: –

• Directors has a power to make call for unpaid amount in respect of shares issued.
• They can issue debentures both inside and outside of India.
• Directors can make investment of company funds.
• They can borrow funds from market through distinct sources other than
debentures.
• Directors can approve the merger, amalgamation and reconstruction of company.
• They can take decisions to diversify the business line of company.
• Directors possess power to approve board report and financial statement.
• They decide whether to take over or acquire a substantial stake in some another
company.
• Directors gives guarantee with regard to loans and create loans.
• GENERAL DUTIES OF DIRECTOR
• Director is responsible for formulating policies and setting objectives of company.
• They can issue guidelines to subordinates regarding implementation of policy for
reviewing the progress of company.
• All the duties must be performed with utmost care and diligence by Director.
• To look after the appointment of subordinate officer, Manager, secretary,
Managing director and other employees of company.
• To perform all activities as per the provisions of Articles of company.
• Director should not attempt to attain any undue advantage for himself or for his
relatives.
• They should always act in good faith for promoting the company objectives.
• SPECIFIC DUTIES OF DIRECTOR
• Director must clearly reveal his shareholdings and interest in company’s contract.
• Director must disclose his name, occupation and address.
• They must fairly decide the amount of minimum subscription and issue
prospectus.
• Liabilities of a Director
• Liabilities Against The Company
• Directors are responsible for any losses of company in case of
following conditions: –
• Any loss arising out of negligence or misconduct of duties by
directors.
• Violation of breach of trust in order to generate secret profit from
business.
• Committing any dishonest act for creating personal profits.
• Loss arising out of co-director’s activities.
• Loss arising due to ultra vires act where contract is entered beyond
their power by directors.
• LIABILITIES TOWARDS THIRD PARTY
• Any liability arising out at the time of winding up of company.
• In case the liability is made unlimited through Memorandum.
• In case a director acts in his name only without mentioning the company’s
name.
• Application money is not re-paid due to non-receipt of minimum
subscription.
• CRIMINAL LIABILITY OF DIRECTORS
• If share certificate and debenture certificate is not issued by Director.
• Directors failed to provide Balance sheet and Annual accounts.
• Filing of return on allotment with registrar is not done by Director.
• Notice is not given regarding conversion of share into stock to registrar.
• Any mis-statement in prospectus.
meeting and resolutions:
• A resolution is an agreement made by the members of the company
in a meeting. It is a document in writing dealing with significant
decisions. The Companies Act, 2013 discusses about two types of
resolution ordinary, and special resolution
Types of meetings.
1. Statutory meeting,
2. Annual general meeting,
3. Extraordinary general meeting,
4. Class meetings.
Auditor: appointment, rights and liabilities
• The appointment is done by the members for a Maximum term of 5/10
consecutive years. The appointment is done by the Comptroller and
Auditor General of India within 180 days from the 1st of April. The
appointment is by the members within 3 months of the recommendations
of Board and he will hold office till the next AGM.
• Right to visit branches of the company to audit the accounts if no other
auditor has been appointed to audit branch accounts. Right to take legal
and technical advice wherever necessary. Right to receive for the work
done by him. Right to sign the report
• The auditor's liability represents the legal liability that is assumed when the
auditor is performing professional duties. The auditor is liable for client
accounting misstatements in the financial statements. There is always the
risk of fraud and material misstatement in financial statements.
modes of winding up of a company.
• A company can be wound up in three ways : Compulsory winding up
by the Court; Voluntary winding up : (i) Members' voluntary winding
up; (ii) Creditors' voluntary winding up; Voluntary winding up subject
to the supervision of the Court

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