This is a project of the companies act 1956 that explain the act in detail

1. THE COMPANIES ACT,1956
BY JAI
RANE

2. INTRODUCTION
 The Indian companies act, like most of our laws has been farmed on the lines of the common law. In the year 1850,
the joint company act was passed. This was first Indian legislation. Following this the Indian companies act,1913 was
passed. The act aimed at improvising the earlier law to meet the requirement of the then prevailing world. This act was
replaced by the act of 1956
 Sachar Committee
 Eradi Committee
 Naresh Chander Committee &
 Dr.j.j. Irani Committee.

3. MEANING OF MEMORANDUM OF ASSOCIATION
 It is the document which contains the rules regarding constitution and activities or objects of the
company.
 It is a fundamental charter of the company.
 The company is governed by it.
 The company is allowed to work within the framework of it. By it outside world knows the state of
affairs.
 It defines the extent and powers of the company.
 If the acts of the company are beyond the limits of the MoA, such acts would be void and ultra vires.
 Directors are personally liable to make good the Company’s loss if company’s money is spent on an
unauthorized object.

4. DEFINITION OF MEMORANDUM OF ASSOCIATION
,
 “Memorandum means memorandum of association of the a company originally formed or as altered from
time in pursuance of any companies law or of this Act.”

5. CONTENTS OF MOA : SEC 13
 THE NAME CLAUSE.
 THE REGISTER OFFICE CLAUSE.
 THE OBJECT CLAUSE.
 THE CAPITAL CLAUSE.
 THE LIABILITY CLAUSE.
 THE ASSOCIATION CLAUSE.

6. NAME CLAUSE
 Every company must have a name of its own. The name gives the company a personal existence. The
promoters who select the name of the company, are required to take name is not an undesirable one.
 The name and emblems of UNO, WHO, Indian National Flag, the official seal and embled of central
and State Government or the name and pictorial representation of political leaders have been
prohibited.
 Further in case of public company with limited liability must add the word ‘Limited’ at the end of its
name, and the private company the word ‘private Limited’ must be added at the end.
 [Act 2013: In case of one person company, the same should be includes within bracket. Example:
Rahul Dravid (One Person Company ).
 Also under S.4(4) & 4(5) a newly incorporate provision to apply to reserve a name for a proposed
company which has to be in corporate within six month.]

7.  The Department of company Affairs, has held that if the company uses any of the
following key word in the name, it must have minimum authorized capital as stated below:-
Sr.no Key Word Required authorized
capital ( Rupees)
1 Corporation 5 Crores
2 International, Global, Universal, Continental, Inter-continental.
Asia, Asiatic (Being The First Name)
1 Crores
3 If any of the words mentioned in (ii) is used within the name
(with or without brackets)
50 Lakhs
4 Hindustan, India, Bharat being the first word of the name 50 Lakhs
5 If any of the words mentioned in (iv) is used within the name
(with or without brackets)
5 Lakhs
6 Industries/Udyog 1 Crores
7 Enterprises, Products, Business, Manufacturing 10 Lakhs
.

8. REGISTERED OFFICE CLAUSE (SITUATION CLAUSE)
 As the name indicates it describes the different situations. This clauses a company must have a
registered office at which all the communication and noticed are to be addressed. The memorandum
will only state the name of the province where office is situated.
 Every company must have a registered office. At the time of registration, the memorandum must
contain the name of the state, in which the registered office of the company shall be situated.
However, the company shall, from the date on which it commences its business or within thirty days
of incorporation, whichever is earlier, have a registered office. The registrar shall be intimated within
30 days of incorporation.
 [Act 2014, S.12:The Registrar to be intimated with 15 days of incorporation. Failing to apply
for verification will invoke penalty on the company and every offices who is responsible of
Rs.1,000 for every day of default but not exceeding Rs.1,00,000.]

9. OBJECT CLAUSE
 This is the most important clause in the memorandum. It clearly defines the sphere of the company’s activities.
 The object clause was divided into
 This clause cannot be changed without the approval of Central government and shareholder.

10. LIABILITY CLAUSE
 This clause states, the nature of liability of the member. In case of a company in with
limited liability, it must state that the liability of members is limited whether it is by
shares or by guarantee. In the absence of the causes in the memorandum means, that the
liability of its members is unlimited

11. CAPITAL CLAUSE
 This clause is required to specify the amount of share capital with which the company
proposes to be registered and secondly the division of that capital into shares of a fixed
amount.
 With the companies (Amendment) Act,2000, the Minimum paid up capital of a public
company must be rupees five lakhs or more and for a private company rupees one lakhs
or more.

12. ASSOCIATION CLAUSE (SUBSCRIPTION CLAUSE)
 This clause contain a statement by the subscribers that they are eager of forming
themselves into company and agree to have a number of shares written against their
respective names. Anonymous

13. THE DOCTRINE OF ULTRA VIRES
 It means ‘beyond powers’. That is, any act done by the
company beyond its legal powers and authority.
 Any act done by the company which is neither
authorized by its objects nor by the Act, that act is ultra
vires the powers and authority of the company.
 Such an act is void and cannot bind the company. And
since it is void, it cannot be ratified by shareholders
either.

14.  An act ultra vires the powers of Directors but not ultra
vires the company can be ratified by the shareholders.
 Similarly and act ultra vires the Articles of the company
but within the powers of the Memorandum can be
ratified by altering the articles.
 Essentially, an act ultra vires the company is void and
cannot be ratified.
 Any act ultra vires but intra vires the Memorandum can be
ratified, as such an act is irregular.

15. ARTICLES OF ASSOCIATION
 Regulations of the company are prescribed by the Articles of
Association.
 It can be altered at any time according to the wishes of the
members.
 It is subordinate to the MoA and is under full control of the
members.
 Members can make their regulations through AoA subject to
Companies Act.
 It contains rules & regulations for the internal management of the
company subject to provisions of the Companies Act.

16. PROSPECTUS
 Prospectus means any document described or issued as a prospectus inviting deposits from public or
inviting offer from public for the subscription or purchase of any shares , or debentures of the company.
is issued by a public company, where the
company doesn’t invite public subscription.

17. DEFINITION
“Prospectus means any document described or issued as a
prospectus and includes any notice, circular, advertisement or other
document inviting deposits from the public or inviting offers from the
public for the subscription or purchase of any shares in, or debentures of
of a boady corporate.”
 An “abridged prospectus” means a memorandum containing such salient
salient features of a prospectus as may be prescribed [Sect. 2(1)].

18. CONTENT OF PROSPECTUS:
 Date of issue of prospectus.
 Name and register office of the company.
 Consent of Central Govt. for the present issue/compliance with the with the SEBI guidelines.
 Voting rights ,dividend ,expenses on issue etc.
 Name of the stock exchange.
 Punishment for fictitious application.
 Refund of issue if 90% min. subscription not received.
 Names and addresses of leading managers.

19. CONTINUE….
 Issue of allotment letter or refund within 10 weeks with interest.
 Date of opening and closing of issues.
 Credit rating from CRISIL (CREDIT RATING INFORMATION SERVICES OF INDIA LIMITED)
 Terms of Underwriting & Risk Factors.
 Capital Structure of the company
 Terms and particulars of the issue.
 Restriction on transfer and transmission of shares..

20. LIABILITY FOR MIS-STATEMENT IN THE PROSPECTUS
 The public, who are investing their money in the public
company, comes to know of the company only by the
prospectus.
 The golden rule as regards, the prospectus was laid down
in New Brunswick & Canada Rly.& Land Co.v/s
Mugeridge (1860) 3 L.t.651- “ Nothing should be stated as
fact, which is not so, and no fact should be omitted the
existence of which might in any degree affect the nature
quality of principle and advantage which the prospectus
holds out as an inducement to take shares”

21. CONTINUE….
Liability For Mis-Statement In a Prospectus
Civil Liability (Sec.62 & 56)
Against The
Company
Rescission of
contract
Claim For Damages
Against the
Promoters, Directors,
other Offices And
Expects
Damage
Compensation under
section 62 and 56
Criminal Liability (Sec.63)
Against The
Company
Fine Up to
Rs.50000
Against the
Promoters, Directors,
other Offices (not
available against
expects)
Imprisonment up to 2
years
Fine Up To
Rs 50000
Both

22. CIVIL LIABILITY
 Whenever a person subscribes to the shares or debentures of a company on
the basic of untrue statements in the prospectus, has the right of action both
against persons responsible for the issue of such Mis-statements as well as
against the company.
 Example: The directors of a Tramway Company Issued a prospectus stating that they
had the right to run tram-cars with team power instead of the horse drawn carriages.
carriages.
 This statements was issued, as their application satisfying the condition required was
required was pending before the Board of Trade rejected their application. Peek, a
a shareholder sued the directors for damages for fraud. Held, the director were not
not liable for fraud, as they honestly believed what they said in the prospectus to be
be true. ( Derry v/s Peek 1889 A.C,337)

23. CRIMINAL LIABILITY
 Criminal Liability Against the company is a fine upto Rupees Fifty Thousand.
 Where the prospectus contain any untrue statement, every person who authorizes the issue of the
prospectus is punishable with
 1) Imprisonment Up to 2 year;
 2) Fine Upto rupees 50000; or Both
 He not able to be liable is he proves either, that
 (a) The Statement was immaterial; or
 (b) He had reasonable grounds to believe and did up to the time of the issue of the allotment believe to
be true.

24. STATEMENT IN LIEU OF A PROSPECTUS
 A public limited company,
 (1) Which has not issued a prospectus, or
 (2) Which has issued a prospectus, but has not
proceeded to allot any of the shares, offered to the
public for subscription, is required to deliver to
the Registrar a “Statements in lieu of Prospectus”
for registration, at least three days before the
allotment of shares or debentures.

25. PUBLIC DEPOSITS
 Deposit means any deposits of money with the company and
includes any amount borrowed by a company, but shall not
include such categories or amount as may be prescribed in
consultation with the RBI.

26. MEMBERSHIP OF A COMPANY
 Members (Section 41): A company when incorporated is
an artificial person. It is a constitution of natural persons
called members of a company.
 Who are the members of a company?
(1) Subscribers to the memorandum of a company and entered as members in the
Register of Members;
(2) Every other person who agrees in writing to become a member of a company and
name is entered in its Register of Members;
(3) Every person holding equity share capital and whose name is entered as beneficial
the records of the depository.

27. ACQUISITION OF MEMBER
 How is membership acquired? (In any of the following ways)
By subscribing to the MoA before registration.
By agreeing in writing and name is entered in the register of members.
By subscribing to the shares.
By purchase of shares in his own name and when entered in the register of members.
By succession.
On insolvency of a member where official assignee or receiver is entitled to be member in his place.
By allowing his name to appear in register of members.
By entry as beneficial owner in the records of the depository.

28. REGISTER OF MEMBERS
 Every company must keep a register of members with the
following particulars:
i) Name, address & occupation.
ii) Shares held by each member, distinguishing each share
by its number, and the amount paid on those shares.
iii) Date at which each member was entered in the
register.
iv) Date on which any person cease to be member.

29. INDEX OF MEMBERS
 Every company having more than 50 members shall keep
an index in the form of a ‘Card-index’ of the names of the
members of the company.
 The index, shall at all times, be kept at the same place as
the register of members.
 On payment of a fee of Re. 1 for each inspection, any
member may make extracts from any register or acquire a
copy of any register.

30.  A company which has a share capital
or which has issued debentures may keep in any State or
country outside India a branch register of members or
debenture holders resident in the State or country.
 Every company has to file every year
with the Registrar annual returns containing certain
particulars. Shall give the particulars as on the date of
holding the annual general meeting.

31. RIGHTS OF A MEMBER/SHAREHOLDER
 To receive notices of all general meetings.
 To attend & vote at general meetings, appoint directors & auditors.
 To receive copies of accounts of company.
 Entitled to a copy of report of a statutory meeting.
 To inspect the minutes of proceedings of any general meeting.
 To inspect the register, index of members, debenture holders.
 To transfer his shares.
 Priority to have shares offered if there is increase of capital by the company.
 To receive share certificate.
 To receive dividends in case of preference shares.
 To make an application to the Central Government for ordering investigation into the affairs of the company.
 To apply to CG to convene the AGM when Board of Directors fail to convene the same.
 To present a petition to the Court for winding up of company.
 Entitled to share in the surplus assets, if available, on liquidation.

32. LIABILITIES & DUTIES OF MEMBER
 To pay calls on the shares whenever demanded by the
company.
 To pay the full nominal value of the shares held by him in
case of a company limited by shares.
 To pay all the debts of the company, in case of a company
with unlimited liability.
 All moneys payable by any member to the company
under the Memorandum or Articles shall be a debt due
from him to the company [Sec. 36(2)]

33. THANK YOU