INTRODUCTION TO COMPANY ACT,1956
||INTRODUCTION TO COMPANY ACT,1956
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The Companies Act 1956 is an Act of the Parliament of India, enacted in 1956, which enabled companies to be formed by registration, and set out the responsibilities of companies, their directors and secretaries.
The Companies Act 1956 is administered by the Federal Government of India through the Ministry of Corporate Affairs and the Offices of Registrar of Companies,Official Liquidators, Public Trustee, Company Law Board, Director of Inspection, etc. The Registrar of Companies (ROC) handles incorporation of new companies and the administration of running companies.
In common paralance company means an association of persons formed for some common object such as the economic gain of its members .however ,in law any association of persons for any common object can be registered as a company .the main object need not to be the economic gain of its members ,e.g.,a company cab formed for purposes such as charity ,research,advancement ,of knowledge, etc.
In the words of justice lindley “A company is an association of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose .The common stock so contributed is denoted in money and is the capital of the company .The persons who contribute to it Belongs are its members .The proportion of capital to which each member is his share .”
Accordind to section 3(1), of the company Act defines a company “a company formed and registered under this Act or an existing company .” ‘An existing company’ means a company formed and registerdunder any of the former companies act.
PUBLIC AND PRIVATE COMPANIES
Generally speaking, public companies are ones which can raise money byinviting the public to purchase their shares. This is a considerable advantage for public companies but not every public company will be able to make the fullest use of it, since they will not necessarily have access to a market. A company’s shares will be much more attractive to investors if they can be traded on a properly regulated market because, not only will they be easily and safely purchased, but, also, they will be easily disposed of. The major market place for shares in the UK is the Stock Exchange 5 but by no means all public companies have access to this market. Companies can only gain admission to it by complying with certain conditions , and notably by demonstrating a satisfactory trading record. The distinction between public and private companies first appeared in the Companies Act 1907. A ‘private company’ was defined as one which, by the company’s constitution, restricted the right to transfer its shares, limited the number of its members to 50 and prohibited any invitation to the public to subscribe for any shares or debentures of the company. The 1907 Act was concerned with increasing the protection for investors who were considering subscribing for shares in a company by requiring it to provide relevant information when offering shares for sale to the public. This was to be done either through the established practice of issuing a prospectus or, in lieu of that , by r enquiring the company to furnish the Registrar of Joint Stock Companies with a statement containing the same information as would have been included in the prospectus.
COMPANIES AND PARTNERSHIPS
In contrast to the company, the other main type of business association is the partnership. This is an unincorporated association, where two or more persons associate for the purposes of business. No other separate legal personality is brought into existence on the formation of the partnership, and the business and all its assets remain the property of the partners. The Partnership Act 1890 defines a partnership as ‘[t]he relation which subsists between persons carrying on a business in common with a view of profit’ and it specifically excludes the relationship which exists between the members of a company. But, while companies can never be considered as partnerships, companies themselves can be the partners in a partnership, for example, as part of a joint venture with other companies. Each partner is an agent for the others and, hence, can affect the legal rights and obligations or matters connected with the business. Partnerships can be formed by deed or quite informally and, in contrast to companies, can be formed simply in writing, orally or even by conduct. It is normal, however, to have a partnership agreement which sets out the terms on which the partners are associated. In the absence of any agreement to the contrary, when one partner wishes to leave or retire, the partnership has to be dissolved and then perhaps re-formed among remaining partners. Furthermore, when a new partner wishes to join, there has to be unanimous consent of the existing partners. Again, as we shall see, this is in contrast to the registered company.
Memorandum Of Association Of A Company :
Is the constitution or charter of the company and contains the powers of the company. No company can be registered under the Companies Act, 1956 without the memorandum of association. Under Section 2(28) of the Companies Act, 1956 the memorandum means the memorandum of association of the company as originally framed or as altered from time to time in pursuance with any of the previous companies law or the Companies Act, 1956.
The memorandum of association should be in any of the one form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956. Form in Table B is applicable in case of companies limited by the shares , form in Table C is applicable to the companies limited by guarantee and not having share capital, form in Table D is applicable to company limited by guarantee and having a share capital whereas form in table E is applicable to unlimited companies.
Contents of memorandum :
The memorandum of association of every company must contain the following clauses :-
Name clause :
The name of the company is mentioned in the name clause. A public limited company must end with the word 'Limited' and a private limited company must end with the words 'Private Limited'. The company cannot have a name which in the opinion of the Central Government is undesirable. A name which is identical with or the nearly resembles the name of another company in existence will not be allowed. A company cannot use a name which is prohibited under the Names and Emblems (Prevntion of Misuse Act, 1950 or use a name suggestive of connection to government or State patronage.
Domicile Clause :
The state in which the registered office of company is to be situated is mentioned in this clause. If it is not possible to state the exact location of the registered office, the company must state it provide the exact address either on the day on which commences to carry on its business or within 30 days from the date of incorporation of the company, whichever is earlier. Notice in form no 18 must be given to the Registrar of Comapnies within 30 days of the date of incorporation of the company. Similarly, any change in the registered office must also be intimated in form no 18 to the Registrar of Companies within 30 days. The registered office of the company is the official address of the company where the statutory books and records must be normally be kept. Every company must affix or paint its name and address of its registered office on the outside of the every office or place at which its activities are carried on in.