business law

1. BUSINESS LAW
COURSE CODE:575 MG 21
1

2. Non Corporate
and
Corporate Law
2

3. NON CORPORATE
• A legal entity that does not go through the incorporation
process. Shareholders posses certain responsibilities and rights.
Non-corporation companies, such as a partnerships
or sole proprietorships have no legal distinction from
the owners.
3

4. PARTNERSHIP
• Under Sec 4, Partnership is Relationship between persons who
have agreed to share profits of a business carried.
4

5. WHAT IS A SOLE PROPRIETORSHIP?
• A sole proprietorship also referred to as a sole trader or a
proprietorship, is an unincorporated business that has just one
owner who pays personal income tax on profits earned from the
business.
5

6. • A sole proprietorship is the easiest type of business to establish or
take apart, due to a lack of government regulation.
• As such, these types of businesses are very popular among sole
owners of businesses, individual self-contractors, and consultants.
• Many sole proprietors do business under their own names because
creating a separate business or trade name isn't necessary.
6

7. WHAT ARE THE BASICS OFA LIMITED
LIABILITY PARTNERSHIP (LLP)?
• LLPs are a flexible legal and tax entity that allows partners to
benefit from economies of scale by working together while also
reducing their liability for the actions of other partners.
7

8. ESSENTIAL INGREDIENTS OF A PARTNERSHIP
1. Association between two or more parties
• A partnership must emerge out of an agreement
• Minor is not allowed
• Fixed Period
• HUF Business concern is not a Partnership
8

9. 2. Carry on Some Business
3. Share the Profit of the Business
4. Carried by all the partners
5. Partners as Agents
9
ESSENTIAL INGREDIENTS OF A PARTNERSHIP

10. RESTRICTIONS IN NAMING A FIRM
• Free to choose any name
• Must not mislead
• Should not keep exceptional names
10

11. PARTNERSHIPAND COMPANY
• Any legal existence; separate legal entity
• Operates as agent; no member
• Liability is unlimited; limited to some extent
• Cant transfer his interest; can freely transfer
• Minimum of two members; minimum number of shareholders
11

12. DIFFERENCE BETWEEN PARTNERSHIPAND
CO-OWNERSHIP:
(i) Contract: Partnership is based on contractual relationship among partners. Co-ownership may be by the
operation of law. On the death of father, sons become co-owners of his property. On the other hand,
partnership is the outcome of an agreement.
(ii) Object: The object of partnership is to enter into some business and earn profits. Co-ownership is not
meant for business purposes.
(iii) Transfer of Income: No partner can transfer his interest (share) without the consent of all other
partners. A co-owner can transfer his interest at any time and without asking from other co-owners.
(iv) Agency Relationship:Partners can act as agents of the business. They have implied authority to bind
the firm by their acts. No agency relationship exists in co-ownership. Every co-owner is responsible for his
own deeds only.
12

13. (v) Division of Joint Property: A co-owner can demand the division of property.
Two co-owners may divide a plot of land by erecting a wall on the land. In
partnership the division of property cannot be demanded. A partner can demand the
payment of his share in business by way of cash.
(vi) Right of Investment: If a partner spends some money for the business he can
demand its reimbursement. On the other hand, if a co-owner spends money for the
improvement of property he cannot claim it as a lien on property.
(vii) Act: Partnership is formed under Partnership Act, 1932 but there is no such act
governing co-owners.
13
DIFFERENCE BETWEEN PARTNERSHIPAND
CO-OWNERSHIP:

14. ESSENTIAL ELEMENTS OF PARTNERSHIP
• Illegal partnership
• Partnership at will
• Particular partnership
• Registered partnership firm
• Unregistered Partnership firm
• Partner by holding out
• Sleeping partner
• Nominal partner
• Sub-partner
• Working partner
• Incoming partner
• Outgoing partner
14

15. PROCEDURE FOR REGISTRATION OF
PARTNERSHIP FIRM
• Must be registered
• Detailed statements is must
• Statement must be signed by all partners
• Must be verified
• Any alterations must be informed.
15

16. RIGHTS OF A UNREGISTERED PARTNERSHIP
FIRM ARE NOT AFFECTED?
• Will remain intact and unaffected
• File a suit for the dissolution of the firm
• Rights of an unregistered partnership firm remain intact.
16

17. RIGHTS OF A PARTNER
• Take part in conduct of business
12(a)
• Share of profits equally 12(b)
• Express his opinions 12 (c)
• Right to access 12 (d)
• Joint owner
• Claim interests 13 (c )
• Indemnified by the firm 13 (e)
• Not to be expelled
• Retire (32- 1)
17

18. DUTIES OF A PARTNER
• To be just and Fair Sec 9
• Each partner to indemnify the firm for the loses sec 10
• Partner is duty bound to indemnify sec 11(2)
• Attend his duties sec 13 (a)
• Partner is duty bound to account for profit sec 16(a)
• Partners business competes with firms own business 16 (b)
18

19. LIABILITIES OFA PARTNER
• Not Performing his duties provided in the Act.
• General liabilities
• Liable to indemnify the firm for the losses due to fraud
• Liable to indemnify the firm for the losses due to negligence
• Partners business competes this business.
• Contribute losses in equal proportions
19

20. LIABILITY OF A FIRM FOR WRONGFULACTS
OF A PARTNER
• Sec 26 and 27 …the firm is liable for that.
• Receives money is misappropriate.
20

21. WHAT IS DISSOLUTION OF A PARTNERSHIP
FIRM
• Dissolving a partnership firm means discontinuing the business
under the name of the said partnership firm. In this case, all
liabilities are finally settled by selling off assets or transferring
them to a particular partner, settling all accounts that existed
with the partnership firm
21

22. RECONSTITUTION
• Constitute again.
• Death, retirement or insolvency takes place.
22

23. MODES OF DISSOLUTION OF A PARTNERSHIP
FIRM
• By Mutual agreement
• By Notice of dissolution
• By operation of law
• By the happening of certain contingencies
• By a decree of the court
23

24. CONSEQUENCES OF DISSOLUTION
• Liability for Acts done by Partners after the Dissolution of
Firm ...
• Wind up the Business Post-Dissolution...
• Settlement of Partnership Accounts...
• Paying Firm Debts and Separate Debts
24

25. DEFINITION OF COMPANY
• As per Sec 3 of the Act, a company formed and registered under
the Act or an existing company formed and registered under any
of the previous company laws.
25

26. CHARACTERISTIC FEATURES OF A COMPANY
• An incorporated association
• An Artificial Person
• Common Seal
• A separate legal entity
• Limited liability
• A separate liability
• A separate property
• Transferability of Shares
• Perpetual existence
• May Sue and be Sued in its Own
name
• Nationality and Domicile
• No fundamental rights
• Lifting of a Corporate Veil
26

27. TYPES OF COMPANIES
• Company limited by shares
• Company limited by guarantees
• Company limited by shares as also by guarantees
• Unlimited company
27

28. DISTINGUISH BETWEEN PUBLIC AND PRIVATE
COMPANIES
• Minimum share holders is seven; minimum two and max 50.
• Shares are freely transferable; restrictions
• Can issue share warrants; cannot issue
• No special privileges; have special privileges
28

29. CONVERSION FROM PRIVATE TO PUBLIC
COMPANY
• Must pass Special resolution
• Increase of members
• Garden silk (Private) Limited----Garden silk limited
• Register the company with in 30 days
29

30. CONVERSION FROM PUBLIC TO PRIVATE
COMPANY
• Must pass special resolution
• Garden silk Limited----Garden silk (Private) limited
• Approval from central government
• With in 30 days register the company
30

31. ONE MAN COMPANY
• One person alone owns almost all shares
• Both in private and public
• Entire procedure of formation with in three steps
1. Promotion
2. Registration and
3. Flotation
31

32. MEANING AND PURPOSE OF MEMORANDUM
OF ASSOCIATION
• Fundamental conditions
• Formation of company
• Enables share holders, creditors and suppliers
32

33. FORM AND CONTENT
• Memorandum of Association of a company in form
• Should be written or printed.
33

34. MEMORANDUM 0F ASSOCIATION OF LIMITED
COMPANY REQUIRES….
• Name as Limited
• Object of company
• Declaration
• Authorized share capital
34

35. ALTERATION IN MEMORANDUM OF
ASSOCIATION
• Sec 16 provides that company cannot changes
• Can change its name or office by certain procedures
• Increases its share capital
35

36. MEANING AND PURPOSE OF ARTICLES OF
ASSOCIATION
• Share holders can make regulations
• Governed by internal affairs
• Contractual force between company and members
36

37. ISSUANCE OF SHARES IN PUBLIC COMPANIES
• Appointment of various experts
• Underwriting
• Agreements
• Prospectus
• Appointment of bankers
• Auditors
• Company secretory
37

38. UNDERWRITING
• Underwriting is the process through which an individual or
institution takes on financial risk for a fee.
• most typically involves loans, insurance, or investments.
• originated from the practice of having each risk-taker write their
name under the total amount of risk they were willing to accept
for a specified premium.
38

39. SUB UNDERWRITING
• which agree with the underwriter to take up a proportion of any
shares which the underwriter has underwritten.
• Most large share issues and offers by listed companies are
underwritten.
39

40. BROKERAGE CONTRACTS
• A brokerage contract is a written contract by which a broker is
employed as an agent to make contracts in the name and on
behalf of the principal.
• A broker usually receives a commission under the brokerage
contract.
• It is also called as a brokerage agreement, dealer agreement, or a
broker agreement.
40

41. LISTING OF SHARES IN THE STOCK
EXCHANGE(S)
• Necessary for public company
• Listing of shares
• True fact
41

42. ISSUANCE OF PUBLIC DEPOSIT
• Publish and advertise for deposits
• Deposits of repayable
• Less than three months
42

43. SHARES
• Shares are units of equity ownership interest in a corporation
that exist as a financial asset providing for an equal distribution
in any residual profits, if any are declared, in the form of
dividends.
• Shareholders may also enjoy capital gains if the value of the
company rises.
43

44. SHARES VS STOCKS
• It is often used to describe a slice of ownership of one or more
companies.
• In contrast, in common parlance, "shares" has a more specific
meaning:
• It often refers to the ownership of a particular company. ... Stocks, on
the other hand, exclusively refer to corporate equities, securities
traded on a stock exchange.
44

45. DIFFERENT TYPES OF SHARES
• Equity shares
• Preference shares
Equity shares represent the extent of ownership in a company. Preference shares
come with preferential rights when it comes to receiving dividend or repaying
capital. Shareholders receive dividends after all liabilities have been paid off.
45

46. SOME TERMINOLOGIES
• Par Value
• Book Value
• Issue Price
• Issue at par value
• Issue at Premium
• Issue at Discount
• Bonus Share
• Market Value
• Public issue
• Private Placement
• Rights Issue
46

47. TYPES OF PREFERENCE SHARES
• Cumulative and non cumulative
• Callable and non callable
• Convertible and non convertible
• Redeemable and non redeemable
• Cumulative convertible preference shares
• Participating and non participating
47

48. TYPES OF SECURED LOANS
• Secured loans are business or personal loans that require some
type of collateral as a condition of borrowing.
• Term Loans
• Working Capital Loans
48

49. UNSECURED LOANS
• An unsecured loan is a loan that doesn't require any type of
collateral.
• Instead of relying on a borrower's assets as security, lenders
approve unsecured loans based on a borrower's
creditworthiness.
• Examples of unsecured loans include personal loans, student
loans, and credit cards.
49

50. TYPES OF UNSECURED LOANS
• Public deposits
• Unsecured loans from promotors
• Inter corporate loans
• Unsecured loan from commercial banks and term lending
institutions
50

51. WHAT IS A DEBENTURE?
• A debenture is a type of bond or other debt instrument that is
unsecured by collateral.
• Since debentures have no collateral backing, they must rely on
the creditworthiness and reputation of the issuer for support.
• Both corporations and governments frequently issue debentures
to raise capital or funds.
51

52. CHARACTERISTIC FEATURES OF
DEBENTURES
• Issued by a company
• Specifies the date of redemption
• Creates the charge on the assets.
52

53. DEBENTURE STOCKS
• A registered participation in debt issued by a company which is
normally freely transferable and is generally listed on a
recognized investment exchange.
• Debenture stock will typically be secured by a floating charge
over all the undertaking and assets of the issuing company.
53

54. DEBENTURE CAPITAL
• Debenture capital is a loan that an organization secures with its
assets.
• This situation is most common for smaller organizations that
cannot convince lenders to issue them debt without some form
of collateral.
54

55. TYPES OF DEBENTURES
• Fully convertible debentures
• Partly convertible debentures
• Non convertible debentures
55

56. SALIENT FEATURES OF DEBENTURES
• Security
• Trustee
• Debenture redemption reserve DRR
• Rate of interest
• Fixed rate
• Period of maturity
56

57. DEBENTURE TRUST DEED
• A debenture trust deed is a debt instrument that is accompanied
by a contract for repayment from the company issuing the debt.
• The company receives cash to fund its capital expenditures, and
the investor receives guaranteed interest and principal payments.
57

58. CLAUSES OF DEBENTURE TRUST DEED
• Mortgage over the company
• Lease the property
• Modify
• Claims
• Actions
• Enforceable
58

59. ADVANTAGES OF DEBENTURE TRUST DEED
• Function of trustees
• Have legal mortgage
• Ensure property charged
59

60. BORROWING AND POWER TO BORROW
• Borrowing is an external source of raising money.
• A company cannot borrow money until it is so authorised by its
memorandum.
1. Ultra Vires Borrowing
2. Ultra Vires the Directors not company
60

61. REGISTRATIONS OF CHARGES(SEC 125)
• Securing
• Share capital
• Immovable property
• Book debt
• Floating charges
• Goodwill
61

62. WHO SHOULD REGISTER THE CHARGE?
• Duty of the company
• With in 30 days
• Creditors participation
62

63. EFFECT OF NON REGISTRATION
• Charges Becomes void
• Charges created remains valid
• Money becomes payable
63

64. NEED FOR MEETINGS IN COMPANY
• Statutory meeting
• Annual general meeting
• Extra ordinary general meeting
• Class meeting
64

65. STATUTORY MEETING
• Held by public company
• Notice is must
• Statutory report
• Formation of the company
• penalties
65

66. ANNUAL GENERAL MEETING
• Time interval
• Day and hour of meeting
• Business to be transacted
• Annual accounts
• Notice
66

67. EXTRA ORDINARY GENERAL MEETING
• Other than AGM
• Transact business
67

68. CLASS MEETING’S SEC 107
• Proposed for alter
• Resolutions
• Confirmed by court
68

69. APPOINTMENT OF AUDITORS AND RE-
APPOINTMENT
• Obligatory on the part of the company
• Appointed by board
69

70. AUDITORS REPORT
• Financial statement
• Ture and fair
• Explanations
70

71. PAYMENT OF DIVIDENDS
• A dividend payment is the distribution of a company's profits to
its shareholders.
• Dividends are usually paid in cash but sometimes in company
stock, and companies often use them to return profits they don't
need for their operations back to investors.
71

72. PAYMENT OF INTERIM DIVIDENDS
• An interim dividend is a dividend payment made before a company's
annual general meeting (AGM) and the release of final financial
statements.
• This declared dividend usually accompanies the company's interim
financial statements.
• The interim dividend is typically the smaller of the two payments
made to shareholders.
72

73. MANAGERIAL PERSONNEL
• Managerial Personnel means any person employed by a Party or
its Affiliate as a director or other corporate officer or who
occupies a managerial position in such a Party with direct
responsibility for the performance of this Agreement or any
component thereof;
73

74. LEGAL POSITIONS OF DIRECTORS
• Number of directors
• Increase in the number of directors
• Only individuals to be directors
• Appointment of first directors
• Appointment of subsequent directors
• Disqualifications of directors
74

75. MINOR AS DIRECTOR
• May not
• Both public and private company
• Act as ornamental not active
75

76. MANAGING DIRECTOR
• A managing director is someone who is responsible for the daily
operations of a company, organization, or corporate division.
76

77. APPOINTMENT OF MANAGING DIRECTOR
• Virtue of agreement
• Virtue of resolution of AGM
• Virtue of directors
• Virtue of memorandum of association
77

78. TENURE OF APPOINTMENT
• Five years
• Reappointed
78

79. DISQUALIFICATIONS OF MANAGING
DIRECTOR
• Undischarged insolvent
• Suspended
79

80. MANAGER
• A Manager means individual who, subject to the
superintendence, controlling direction of the board of directors,
has the management of the whole.
80

81. DISQUALIFICATION OF MANAGER
• who is an undischarged insolvent
• preceding five years
• convicted within the preceding five years
81

82. WHOLE TIME DIRECTOR
• A director in the whole time employment of the company.
• Same provisions as managing director
82

83. COMPANY SECRETARY
• It is compulsory to appoint whole time Company Secretary,
company secretary act 1980
• the concept of secretary in whole time practice to mean
secretary who shall be deemed to be in practice
83

84. QUALIFICATIONS OF COMPANY SECRETARY
• Membership in the institute of company secretaries
• a degree of law
• membership of of Institute of Chartered Accountants
• post graduate degree
• diploma in company law
• diploma in corporate secretary
84

85. WINDING –UP OFA COMPANY
• The company is bought to its end.
• the statutory process by which this is achieved is referred to do
as liquidation.
85

86. DIFFERENT MODES OF WINDING UP
• Compulsory winding up
• voluntary winding up
• voluntary winding up under the supervision of the court
86

87. COMPULSORY WINDING -UP
• By passing a special resolution
• any combination of creditors
• register of Companies
• official liquidator
87

88. GROUNDS FOR COMPULSORY WINDING -UP
• Special resolution
• default in holding statutory meeting
• failure to commence business
• reduction in membership
• inability to pay debts
• just and equitable
88

89. VOLUNTARY WINDING-UP
• By its creditors or members with out court.
89

90. VOLUNTARY WINDING-UP UNDER COURT
SUPERVISION.
• Fraud resolutions
• Rules of winding-up
• Liquidator is prejudicial
90

91. DISSOLUTION OF COMPANY
• Ceases to exists as an entity of all particular purposes.
• Declared by the court within a period of 2 years
• on the of application of liquidator of the company
91

92. MODES OF DISSOLUTION
• Defunct company
• Amalgamation
• Winding-up
92

93. • Thank you
93