2. Introduction & characteristics of Business
Introduction of Business
Types of Business
Objectives of Business
Requisites of a Business
Social Responsibilities of Business
5. Objective of Business
Economic Objective
Earning fair profits
Incentive to businessman
Serves as a measure of success
Imp instrument for expansion
Essential to very existence / survival of
business
Help in creating goodwill
To create customers
To undertake innovation
6. Objective of Business
Social Objective –
Sufficient supply of Goods at
reasonable price.
Fair Deal to employee
Fair return to investors
Fair Deal with suppliers Customers &
Competitors
To act as good citizen
7. Types of Business
(1) INDUSTRY
Extractive (Mining)
Genetic (Dairy farming)
Manufacturing (Steel, furniture)
Construction (Road, buildings)
COMMERCE
Trade (Wholesale, import-export)
Ancillary Services –
Transportation (Land, air, water)
Banking (money deposit and lending)
Insurance
Warehousing
Advertising
9. Non-economic activities
Personal satisfaction (hobbies)
Physical requirements (sports, going to gym)
Social obligations (cooking food for family)
Religious obligation (worshipping God)
Love and affection (dinner with friends and family)
Patriotism (Freedom-fighters)
10. Business as an Economic Activity
Objective: Sell goods/services for profit.
Use, payment of scarce resources
Capital (own, borrowed)
Men (employees)
Materials (procurement, processing)
Satisfy needs of businessmen and the general public (needs,
wants).
12. 1. Economic objectives
Profit earning (personal need, growth and expansion)
Customer creation
Innovation (new product, process, distribution, materials)
Best possible use of resources (raw material, machine,
manpower)
13. 2. Social objectives
Right quality at reasonable price
Avoiding hoarding, overcharging, adulteration, misleading
ads
Employment generation
Welfare of employees
Avoidance of slums and pollution (air, water)
General welfare of society
14. 3. Human objectives
Fair remuneration
Working condition and environment
Job satisfaction
Growth
Future security
Training and development
Help society, economically backward and handicapped
persons
16. Role of Profit
Means of livelihood
Increases volume of business
Index of performance
Reward for risk bearing
Helps to gain reputation
17. Requisites of Business
Well Defined Objective
Proper Planning
Proper Location, Layout & Size of Business
Adequate Finance
Sound Organisation
Efficient Distribution System
Efficient Management
Maintenance of Better Relations with Employees
Research Facilities
19. CSR towards…
Investors
Employees
Consumers
Suppliers
Government
Community and society
Competitors
20. Need for CSR
Long-term interest of business
Public image
Avoidance of government regulations
Moral justification
Consumer‟s awareness (Consumer
Protection Act, 1986)
21. Few Issues of CSR
Environmental protection
Equal employment opportunity
Minimum wages
Occupational safety and health
Truth in advertising
23. Syllabus
Objective
Introduction to Individual / Sole Proprietorship
Merits
Limitations
Partnership Organisation
Basic Features
Types of Partners
Registration of Partnership
Rights & Duties of Partners
Dissolution of Partnership
Advantages & Disadvantages of Partnership
Sole Proprietorship & Partnership In India
24. Sole Proprietorship
Business owned by one person, established, Financed,
managed with utmost freedom by an individual eterprenuer
Most Natural
Oldest
Simplest
Most popular
Owner bears all risk
& receives the entire gains
25. Sole Proprietorship
Merits
Limitations
Easy & Simple Formation
Limited Financial Resources
Smooth Management
Limited Managerial Ability
Promptness in Decision
Unlimited Liability
making
Personal Touch with
customers
Secrecy
Lack of Continuity
Possibility of Expansion
Limited
26. Partnership Org
Partnership Orgn has grown out of necessity to arrange more
capital, provide better skill, control and management to take
advanctage of high degree of specialization and division of
labour
2 or more persons agree to carry out lawful bsuiness and share
the profits on agreed basis
There should be an agreement between them (legally be able to
carry out contract)
Motive to share profits
Must be carried out by one or all of them
27. Partnership (Basic Features)
Number of Persons
Contractual Relationship
No Legal Distinction Between Firm and Partners
Profit Motive
Partner as Principal as well as agent.
Test of Existence of Partnership
According to Indian Partnership Act 1932 “The intentions of the
parties concerned have to be ascertained. It also has to be seen
whether these I san agreement between them, whether express
or implied, oral or written.
28. Types of Partners
Active Partners
Sleeping Partners
Nominal Partners
Partners in Profit only
Retired or Outgoing Partners
Incoming Partner
Minor as a Partner
Partner by Estoppel or Holding Out
29. Registration of Partners
Indian Partnership Act 1932
Optional
Limitations to unregistered firms
Registration Procedure
Name of Firm
Principal Place of Business
The name of places where it carries business
Date on which each partner joined the firm
The names in Fund and permanent addresses of partners
The duration of the firm
30. Rights & Duties of Partners
Right to Management
Right To inspect Books of Accounts
Right to continue unless expelled
Right to be indemnified for expenses on behalf of the
company
Right to Profit
Right to property & its use
Heir of the Partner in case of death
31. Duties of Partners
Duties to conduct business
To act bonafide (good Faith)
To see that partnership property is not used for private
Every Partner should contribute to losses equally
Indemnify the firm if any losses occur due to him
Must maintain correct accounts
Should not assign his interest in the firm to 3rd party w/o
consent of partners
32. Implied Authority of a Partner as an
Agent
A partner is an agent of the firm, his acts bind the firm
Sell Purchase
Receive / Make Payments
Make appointments HR
Execute Documents
Borrow Lend
33. Can’t do following due to Implied
Authority of a Partner as an Agent
Submit a dispute relating to the business for arbitration
Open bank acc on behalf of firm in his own name
Compromise or relinquish any claim or portion by the firm
Withdraw a suit or proceeding on behalf of firm
Admit any liability
Acquire any immovable property on behalf of the firm
Enter into partnership on behalf of the firm
34. Dissolution of Partnership (auto)
Implies the end of original partnership agreement, not the firm.
Disso of partnership may take place automatically
At the expiry of the period
At the completion of the venture for which it was formed
At death
At Insolvancy
Or retirement of a partner
35. Dissolution of Partnership
When a partner gives notice to that effect in case of partnership at
will
When all partners give consent for disso
When all partners of the firm or barring one becomes insolvent
When the business of the firm becomes unlawful
And if court passes an order
36. Dissolution of Firm thru Court
Any partner can move to court for disso & court can order disso
On Lunacy of a Partner
On permanent Incapability of a partner
On misconduct of a partner
On breach of Agreement
On transfer of Interest
On recurring losses
On any other reasonable ground
37. Sole Proprietorship & Partnership In India
Most accepted formats of business in India
Pop is poor, Little capital, small ventures
Conservative, Don‟t risk their savings, prefer small commercial
ventures
Low infra and slow growth still makes these 2 formats most
accepted
Brings in regional development, reduces concentration of wealth
Reduces unemployment.
Tax woes not present
Local market flavor still exists
39. Syllabus
Intro of Public Enterprise
Definition & Objective
Characteristics of Public Corporations
Govt. Companies
Public Enterprises in India
Problems of Public Enterprises
Some Specific Problems of Public Utilities
40. Pre Independence & 5 years on
Railways, Ports, Communications, Broad Casting, Irrigation &
Power Sector
No clear objective of Govt
Industrial Policy Resolution 1948 demarcated certain sectors.
State to play a role on development of industries
Assignment -- Find out the Public Sector Enterprises during
1940-1955?
41. Definition & Objective
Public Enterprise means state ownership & operation of
Industrial, agricultural, financial, and commercial
undertakings” A H Hanson.
PE are autonomous or semi autonomous corporations and
companies established and owned and controlled by the state
engaged in industrial and commercial enterprises” M N
Mallaya
Public Ownership, Public Control and Public Interest rather
than profit.
42. Planned Development
Objectives of PE
Balance Development
Acceleration of Rate of Economic Development
Provision for Infra Facilities
Balanced Regional Development
Provision of Funds for Development
Revival of sick units
Regulate concentration of wealth and Power
Prevention of monopolistic tendencies
Provision of Greater Employment Opportunities
Helping Defense in Countries
Achieving Self Sufficiency
Encouraging Import Substitution
Necessary Goods & Services
43. Characteristics of PE
Wholly Owned by State
Created by special law, defining powers, duties and
immunities.
Autonomous Nature
Seed Capital by State
Self Financed further
Exempted from many regulations
Not subject to budget, accounting and audit laws
Servants are recruited, remunerated under special terms and
conditions
44. Govt Companies
As an alternative to PE, Govt Companies are popular in India
Body Corporate under a general law (Comp Act 1956)
The whole of Capital Stack is 51% or over by Govt of India
Directors from Govt of India
It can sue, get sued, contract, agreement, acquire property in
its own name
Created by Executive decision and not legislature
Articles of Association can be drawn, revised by Govt
Seed Cap by Govt
Exempt from Govt Audit
Employee not civil servants
45. Reasons for adoption of this form
Salvage Financial Crisis
Emergency
Need of sector
National / International Interest
Misc Interest
Assignment – Study how oil companies in India were
formed?
46. Criticism of PE
It evades constitutional responsibilities compared to
special powers granted
Company Law becomes fictional
Shareholders Dumb as Govt is the supreme authority to
decide
Extent of Autonomy could have been reduced
47. Public Enterprise in India
29 Crores in 1950-51 to 21.226 Crs in March
1981
5 to 199 PE at 1981
146971 Crs in March 1993
Assignment -- Make a developmental chart of PE
from 1950 – 2010 on an A4 Sheet.
48. Problems of PE
Poor Planning
Bad Financial Planning
Heavy Overheads
Faulty Production, Planning & Utilization Capacity
Over Staffing
Absence of Healthy Ind Selections
Lack of Autonomy in Mgmt
Problem of Incentive
Growing Sickness
Privatization and Dis-investment
49. Introduction of Public Utilities
Estb for supply of essential products or services, operating in
limited market areas on monopolistic or semi monopolistic
market conditions
Gas, Electricity, Water, Rail, Transport etc.
Competition in such sectors undesirable, duplication, and
unsatisfactory catering of consumer needs
50. Characteristics of PE
Supply of Essential Products / Service
Unduly Heavy Fixed Capital
Inelastic Demand
Non Transferability of Demand
Limited Market Area
Natural Monopoly
Regulation of their working
51. Specific Problems of PU
Plant Location (No Choice, rely on local auth or
state to acquire land.
Size ( require Huge Capital, requires large size
for EOS)
Ownership and Management (Regulated by app
public authority – local or National DNCR
Marketing – Employees attitude take it or leave
it.
Political Scenario – Changes policy and long term
objective of PU
54. Competitive Priorities Introduction
It talks about the way products / services are manufactured
Market (Oil)
Processes (Ship Building)
Technology (BHEL)
Elements of Labor Space and Equipment Needs
for Public Enterprise.
55. Objectives of Good Plant Layout
Proper Efficient & Economic handling of materials
Economic Utilization of Floor Space
Increased Turnover of WIP & reduction in amt of GIP
Speedy Disposal of work / Admin
Avoid Process Hindrances
Efficient control over various production
Efficient utilization of machinery and labor
Min Cost of Production
57. Policy re volume and size
Managerial emphasis on quality
Policy to attain flexibility & adaptability
Policy to achieve delivery to customers
Purchasing policy
Policy re more facility to employees
58. Plant Layout affecting factors
Plant location
Climate and environment
Nature of Products and type of Industry
Sequence of operation
System of production
Available Floor Space
Requirement & maintenance of equipments
Achieving Balance
Achievement of Optimum Flow & min Movement
Flexibility Approach
59. Effective Plant Layout Benefits
Improved Production Process
Higher Production Capacity
Min Materials Handling
More Efficient Utilization of Machinery & Labor
Reduction in Amount of Goods in Processes
Good Production Planning & Control
Improvement in Supervision
Increased Safety & Work Conditions
60. Effective Plant Layout Weaknesses
Bad Production Process
Low Production Capacity
Unmanaged Materials Handling
Under Utilization of Machinery & Labor
Cumbersome Processes
Good Production Planning & Control
Bad Supervision
Decreased Safety & Work Conditions
Higher Costs
Inadequate Storage
61. Assignment
Study & Describe Functional Layouts of following
Machine Shop –
Assembly of a Ship
Hospital
Municipal Office
Draw the Line Layout Pattern for Product Focus
63. Syllabus
Introduction
Company Management in India
Shareholders
Board of Directors
Chief Executive
Managing Director
Manager
New Pattern of Company Management Introduction
64. Company management
In case of sole proprietorship, the business is owned
by on person operated for ones own profit.
In partnership all the partners or few of them take the
responsibility of managing the affairs of the firm.
In case of corporation which is owned by share
holders is not managed by them.
The shareholders in annual general meeting elect the
board of directors who manage the company.
The board of directors is the top organ of the
company.
65. share holders
elect
board of directors
appoint
chief executive
finance production purchase sales
manager manager manager manager
66. Share holders
The share holders are the owners of a public company.
Due to separation of ownership from control, the
shareholders do not take part in management of corporation.
They are greater in number and are scattered in different
part of country.
Most of them possess few shares individually, they are
interested in receiving the dividend and are least concerned
with management.
Majority of shareholders are ignorant of the operation of the
company.
They have no time to attend the annual general meeting.
Most of them have loose association with company they sell
the shares In case they receive no dividend or less dividend.
67. Rights of shareholders
In case of company the shareholders are owners but
the management is controlled by the board of
directors.
There are certain rights which have been given to
shareholders.
These rights are grouped into two broad categories.
Individual rights and group rights.
68. Individual rights of shareholders
He is entitled to receive dividend as declared by the
company.
He can sell his shares free in the stock market.
He possesses the voting rights in person or by proxy.
He can freely take part in policy making process of company
in annual general meeting.
On the death of shareholder the share will be transferred to
the dependants.
He can inspect company books and record as per articles of
association.
He can receive a copy of the minutes of the general meeting.
He has the right to share in the assets of the company on
dissolution.
69. Group rights of shareholders
They as a group determine objectives and policies in annual
general meeting.
They have the right to discuss, approve or disapprove the
work done by the board of directors.
The share holders have the right to discuss directors report,
profit and loss account and balance sheet of the company in
the meeting.
The shareholders elect the directors in the annual general
meeting.
The share holder have the right to declare dividend at the rate
recommended by directors. They have no right to increase the
rate of dividend as recommended by the directors.
If situation arise to discuss some issue urgently and cannot be
postponed to next annual general meeting, they ask board to
call an extra-ordinary meeting.
70. Directors of company
In company form of organization, the ownership is
separated from management.
The shareholder who are the owners of the company
elect the board of directors in the annual general
meeting.
The elected board called the board of directors is the
governing body of the company.
71. In company form of organization, the ownership is
separated from management.
The shareholder who are the owners of the company
elect the board of directors in the annual general
meeting.
The elected board called the board of directors is the
governing body of the company.
72. POWERS OF DIRECTORS
The directors of a company by passing a resolution
shall exercise the following powers on behalf of
company.
To issue shares.
To issue debentures.
To borrow money otherwise than on debentures.
To invest the funds of the company.
To make loans.
73. To authorize director of the company to enter
into any contract with the company for making
sale, purchase, or supply of goods.
To approve yearly or half yearly or other
periodical accounts as are required to be
circulated to the members.
To approve bonus to employees.
74. Liability of directors
The directors are personally liable for acts such as
wrongful acceptance or surrender of shares.
Payment of dividend.
Payment of capital.
Misapplication of funds of company.
To pay back the debts of company.
Receiving advance calls for personal use.
Getting secret profits.
For misstatement of fact.
75. Chief executive
The board of directors of a company is the top
organ of management of company.
The board appoints one of its director as chief
executive.
The whole time executive is called the chief
executive or the managing director of the
company.
He is a director and a chief executive.
76. As director he shares the responsibilities of the board
and as chief executive carries out the management of
company.
The chief executive is appointed for a period not
exceeding three years.
Chief executive of a company carries out the general
policies and plans as determined by the directors.
77. Different from Sole Prop & Partnership Firms
Different System of Operation & management
Different Departments
Shareholders
Board of Directors
Executive Comittee
Chief Executive
Works
Mgr
Mktg
Mgr
Finance
Mgr
HR
Mgr
78. Shareholders
Furnish the required capital, assume the risks, and being the real
owners.
Certain rights to exercise control
Chronically the directors & MDS are holding shares so they too
can exercise shareholders control
Following Rights
Attend meeting of the company
Cast Vote in person or proxy
Receive Dividends
Share assets of the company on dissolution
Inspect Statutory Books & certain records of the company
To transfer his shares
79. Board of Directors
Elected members by Shareholders
Shareholders delegate the power of Management to them
Individually they have no powers
BOD may delegate powers to either one directors or to a
committee of directors
BOD is ultimate executive committee
80. Appointment - Board of Directors
Every Public Limited Company – 3 BOD
Every Pvt Limited Company – 2 BOD
Process – File Intention --- 14 days bfr Gen Meeting –
Election – File Consent to act as BOD
Acquire Nominal Shares (5Rs x 1000)
BOD not more than 20 firms
81. Chief Executive & MD
Board of Directors is the Ultimate Executive Authority of the
Company
Day 2 Day Affairs, Policy Matters, Functions & Supervision
One BOD member as CEO
Effective Management
Policy Matters
Day 2 Day functioning
CEO & MD one and the same thing 2 roles combined to extract
performace “A director who by virtue of an agreement with the
company or by Memo or Artcle of Asso is entrusted with substantial
powers of mgmt whch wud not be otherwise exercised by him”
82. Manager
An individual who, subject to superintendent,
control and direction of BOD has the
management of whole or part as a manager”
83. New Pattern of Company Mgmt
New Pattern of Mgmt – Managing Directors as an alternative
to the managing agents”
This form of management combines some advantages of
managing agency system without its disadvantages”
CEO & MD are same…
New Companies (amendment act 1974) – restricts
appointment of any former managing agents, / secretaries /
treasurers / as consultant secretary or advisor in any other
office capacity except in case of special approval thru Gen
Meeting & Cent Govt.
84. India's 10 Fastest Growing Companies
Lot of companies are emerging up in India and slowly
growing with addition of new entrepreneurial ventures.
Some make it big, some slug behind. Let‟s take a look at
the fastest growing companies in India.
85. 1. Jindal Steel & Power
Jindal Steel and Power Limited (JSPL) is an
Indian steel and energy company based in
New Delhi, India and a division of Jindal
Group conglomerate. Its annual turnover of
over US$4 billion, Jindal Steel & Power
Limited (JSPL) is a part of about $12 billion
diversified O. P. Jindal Group. The company
produces steel and power through backward
integration from its own captive coal and ironore mines. However, in terms of tonnage, it is
the third largest steel producer in India. The
company manufactures and sells sponge
iron, mild steel slabs, ferro chrome, iron
ore, mild steel, structural, hot rolled plates
and coils and coal based sponge iron plant. The
company is also involved in power generation.
86. 2. Adani Ports
Adani Ports and Special Economic Zone
Limited (APSEZ) is India‟s largest private
multi-port operator. APSEZ is a part of the
Adani Group, a global integrated
infrastructure player. The company (earlier
known as Mundra Port & Special Economic
Zone Ltd) changed its name to “Adani Ports
and Special Economic Zone Limited”
effective January 06, 2012. It has its
presence in India's largest multi-product
special economic zone, at the Mundra port.
It is banking on multiplying traffic on India's
major ports in the coming years. Adani Port
& Special Economic Zone Limited was
conferred with the Gateway Awards of
Excellence – Ports & Shipping 2012 in the
“Private Port of the Year” category.
87. 3. Opto Circuits
Opto Circuits Limited is an Indian medical devices
company based in Bangalore. It designs, manufactures
and markets a range of health monitoring, emergency
care, and treatment and sensing devices. It was
established in 1992 in Bangalore. The company has
acquired many businesses that have significantly
improved its profit margins. Its medical equipment
business brings almost 80 percent of its revenues. It has
aggressive plans to increase its presence in emerging
markets, so it will maintain around 15 to 20 percent
growth rate in the coming few years. It went public in
2000, with a listing on the Bombay Stock Exchange and
the National Stock Exchange. It acquired German
company Eurocor Gmbh in 2006. In 2008, it acquired
US-based Criticare Systems. The company was listed in
Asia's Best under a Billion lists by Forbes magazine in
2011.
88. 4. IRB Infra Developers
IRB Infrastructure Developers is India's
leading highway construction company
headquartered in Mumbai. It is part of
IRB Group. IRB Infrastructure, which
executed the country‟s first buildoperate-transfer (BOT) road project, is
one of the largest operators of such
ventures. Currently it has about 3404.40
lane KM operational and about 2330.4
lane KM under development. One of
most notable projects is Mumbai Pune
Expressway. In 2012, IRB acquired Tamil
Nadu based BOT Road builder MVR
Infrastructure and Tollways for 130
crore.
89. 5. J Kumar Infraprojects
J Kumar is a leading contractor based in
Mumbai. The turnover of this engineering
company is around 2500 crore. It has
bagged the prestigious Navi Mumbai metro
project. The thinning margins on road
construction are putting pressure on the
profitability of this construction giant. The
main focus of J Kumar Infraprojects Ltd. is
the development of residential and
commercial buildings, airport runways,
bridges, roads, sports complexes, flyovers,
railway buildings and irrigation projects. J
Kumar Infraprojects Ltd. has been active in
the various regions of Maharashtra like
Aurangabad, Mumbai, Vidharbha and Pune.
90. 6. Educomp Solutions
Educomp Solutions was set up in the year
1994 and has recently become one of the
largest Indian technology based advanced
education companies. The company provides
learning services to nearly 3.6 million
learners and has centers in countries like
Singapore and U.S. Educomp Solutions gives
maximum weight age to the Information
Technology and worldwide web based
education models. The company indulges in a
lot of projects of private and public
partnerships. Educational programs, teacher
training programs, implementations in the
infrastructure of education, and development
of content are only some projects that have
been successfully implemented by Educomp
Solutions. The company also takes part in
educational programs in tie-ups with NGOs.
91. 7. Godrej Consumer Products
Godrej Consumer Products Limited (GCPL) is an Indian
consumer goods company based in Mumbai, India. GCPL‟s
product range includes soaps, hair colourants, toiletries and
liquid detergents. GCPL has five manufacturing facilities in
India at Malanpur (Madhya Pradesh), Guwahati
(Assam), Baddi- Thana (Himachal Pradesh), Baddi- Katha
(Himachal Pradesh) and Sikkim. GCPL has an international
presence through the acquisitions of Keyline Brands Limited
(United Kingdom) in 2005, Rapidol in 2006, and Godrej
Global Mid East FZE in 2007 and the joint venture with SCA
Hygiene Products AB, Sweden in 2007. GCPL acquired 49
percent stake in Godrej Sara Lee (GSLL), an unlisted joint
venture between the Godrej Group and Sara Lee Corporation
USA in early 2010. Subsequently in May 2010 it entered into
an agreement to acquire the remaining 51 percent stake. It
has acquired Megasari, a leading FMCG player in household
care sector in Indonesia and has agreed to acquire Tura, a
leading personal care player in Nigeria.
92. 8. Titan Industries
Titan Industries is the world's fifth largest
wrist watch manufacturer and India's
leading producer of watches under the
Titan, Fastrack, Sonata, Nebula, RAGA, Re
galia, Octane & Xylys brand names. It is a
joint venture between the Tata Group, and
the Tamil Nadu Industrial Development
Corporation (TIDCO). Its product
portfolio includes watches, accessories and
jewellery, in both contemporary and
traditional designs. It exports watches to
about 32 countries around the world with
manufacturing facilities in
Hosur, Dehradun, Goa and manufactures
precious jewellery under the Tanishq brand
name, making it India's only national
jewellery brand.
93. 9. Sun Pharma
The leading pharmaceutical giant has seen its
domestic business growing by an average of 21
percent between the fiscal years of 2007 and
2011. It‟s also expanding into U.S. market. Sun
Pharma was listed on the stock exchange in
1994 in an issue oversubscribed 55 times. The
founding family continues to hold a majority
stake in the company. Today Sun Pharma is the
fifth largest and the most profitable
pharmaceutical company in India as well as the
largest pharmaceutical company by market
capitalization on the Indian exchanges. The
Indian pharmaceutical industry has become the
third largest producer in the world and is
poised to grow into an industry of $ 20 billion
in 2015 from the current turnover of $ 12
billion.
94. 10. Lupin Pharmaceutical
Lupin is world's largest manufacturer of
the anti-TB drugs based in Mumbai,
Maharashtra, India. The company
production contains the Cardiovascular
(prils and statins), Diabetology, Asthma,
Pediatrics, CNS, GI, Anti-Infectives and
NSAIDs therapy and world largest
manufacturer of Anti-TB and
Cephalosporins segments. It is also India'
fourth largest drug maker by revenue.
India is the first Asian country where the
company has launched the new
prescription drug after launching first anti
TB drugs in single tablet.
95. Company - Advantages
Companies are designed as to make it easy to raise
capital.
Companies have the ability to subdivide their capital into
small amounts, allowing them to draw in huge numbers
of investors who also benefit from the sub-division by
being able to sell on small parts of their investment.
Limited liability also minimises the risk for investors and
is said to encourage investment.
95
96. Company – Advantages (cont.)
It is also said to allow managers to take greater risk in the
knowledge that the shareholders will not lose everything.
The constitution of the company provides a clear
organisational structure which is essential in a business
venture where you have large numbers of participants.
96
97. Company - Disadvantages
Forming a company and complying with company
law is expensive and time consuming.
It also appears to be an very complex
organisational form for small businesses, where
the Board of Directors and the shareholders are
often the same people
97
99. Legal meaning
Sec 3(1) (i); “Company means a company formed and
registered under this Act or an existing company. An existing
company means a company formed and registered under any
of the previous companies laws”
99
Companies Act 1956
100. Nature and definition of a company
„Literal meaning - Company‟ in common parlance means a
group of persons associated together for the attainment of a
common end, social or economic.
Represents different kinds of associations, both business and
otherwise
100
Companies Act 1956
101. Contd Lindley – An association of many persons who contribute money
or money‟s worth to a common stock and employ it in some
common trade or business (i.e.) for a common purpose and who
share the profit or loss (as the case may be) arising therefrom. The
common stock so contributed is denoted in money and is the
capital of the company. The persons who contribute it, or to
whom it belongs are members. The proportion of capital to which
each member is entitled is his share. Shares are always transferable
although the right to transfer them is often more or less restricted
101
Companies Act 1956
102. Characteristics of the company
An artificial person created by the law.
A separate Legal entity
Case: Saloman and Saloman &Co ltd
o (1897) (AC) (22)
Corporate personality is distinct and different from that of its
members individually and collectively
102
Companies Act 1956
103. Separate Legal Personality (cont.)
The most famous case in this area is Salomon v Salomon &
Co
Mr Salomon was in business as a leather merchant
In 1892, he formed Salomon & Co Ltd
He held most of the shares with his wife and 5 of his children
each holding one share as company law at that time required
at least 7 shareholders in a company
103
104. Separate Legal Personality (cont.)
Unfortunately, the company did not do well and it went into
liquidation
A liquidator was appointed to sell the assets of the company
and pay its debts
104
105. Separate Legal Personality (cont.)
The liquidator claimed that the company was a fake because
Mr Salomon owned 20001 shares and his family owned only
6 altogether
Mr Salomon was really just running the same business
Therefore, the liquidator argued that Mr Salomon was liable
for all the debts of the company
105
106. Separate Legal Personality (cont.)
1.
106
However, the House of Lords disagreed
The court held that
The fact that some shareholders only held 1 share as a
technicality was not relevant
The registration procedure could be used to create a oneman company
107. Separate Legal Personality (cont.)
2.
107
A company which is properly formed under the
Companies Act is a separate person
As a result the debts of a company were its own and not
those of its members
108. Characteristics of a company
Perpetual existence
Continued existence
Death, insolvency or unsoundness of mind of its members does
not in any way affect the existence of the company.
Comes into existence by law and comes to an end by law.
108
Companies Act 1956
109. Lifting the Veil of Incorporation
Although the general rule is that a company has a separate
legal identity from its members, there are exceptions to this
rule when a court will not treat a company as a separate
entity
This is often referred to as “lifting the veil of incorporation”
Often, this is to prevent abuse of the principle of separate
identity
109
110. Lifting of corporate veil
Veil of corporate personality used as a cloak for fraud and
improper conduct. In such case, the court may disregard the
corporate personality. The overlooking of corporate
personality or separate entity is known as the phenomenon of
lifting the corporate veil
110
Companies Act 1956
111. Lifting the Veil of Incorporation (cont.)
At common law, the general principle is that the courts will
not allow a company to be used for a fraudulent purpose or
to avoid a legal duty
For example, in Gilford Motor Co v Horne, a term in an
employee‟s contract prevented him from approaching former
customers after he left Gilford Motor Co
111
112. Lifting the Veil of Incorporation (cont.)
Therefore, when he left he formed his own company, and the
company approached his former customers
The court held the company was a sham being used to avoid
the term in his contract
112
113. Lifiting of corporate veil
For the protection of revenue.
Where a company is acting as the agent of the shareholders
Where a company has been formed for a fraudulent purpose.
113
Companies Act 1956
114. Contd Where the device is used for some illegal purpose
Where the number of members fall below the statutory
minimum
Where the prospectus includes a fraudulent misrepresentation
114
Companies Act 1956
115. Registration and incorporation
Sec 12: Any seven or more persons or where the
company to be formed will be a private company, two or
more persons, associated for any lawful purpose may, by
subscribing their names to a memorandum of association
and otherwise complying with the requirements of this
act in respect of registration, form an incorporated
company with or without limited liability.
115
Companies Act 1956
116. Contd Before a company is registered, it is essential to ascertain
from the registrar of companies if the proposed name of the
company is approved
Then the following documents duly stamped along with the
necessary fees are to be filed with the registrar.
Memorandum of association duly signed by the subscribers
116
Companies Act 1956
117. Contd Articles of association duly signed by the subscribers
Agreement which the company proposes to enter into with any
individual for appointment as its managing or whole time
director or manager.
A list of directors who have agreed to become the first directors
of the company.
A declaration stating that all the requirements of the companies
act and other formalities relating to registration have been
complied with
117
Companies Act 1956
118. Contd Certificate of incorporation is issued by the registrar after
due examination of the documents. From the date of issue of
the certificate the company becomes a separate legal entity
Certificate of commencement of business. –A conclusive
evidence that the company is entitled to do business
118
Companies Act 1956
119. Classification of Companies
Companies may be classified as :
Incorporated Companies
A company formed for the purpose of carrying on a business and
is incorporated under the Company‟s Act,1956.
Unincorporated Companies
These companies are large partnerships, not regarded as distinct
entities separate from the members constituting them. In such
companies the liability of members is unlimited.
119
Companies Act 1956
120. Classification of Companies
Companies on the basis of Incorporation
1. Chartered Companies: If a company is incorporated by a
charter granted by a monarch, it is called a chartered
company. Ex: East India Company.
2.Statutory Companies : These are companies which are
created by a special Act of the Legislature, e.g.
LIC,SBI,UTI. The provisions of the Company’s Act ,1956
apply to them , if they are not inconsistent with the
provisions of the special Act under which they are formed.
120
Companies Act 1956
121. Classification of Companies
2.Registered companies : These are the companies which
are formed and registered under the Companies Act,
1956, or were registered under any of the earlier
Companies Acts.
121
Companies Act 1956
122. Classification of Companies
Companies on the basis of Number of Members
1. Private Company :
1. Company which has a minimum paid up capital of Rs
1,00,000.
2. Minimum members: 2 - 50
2. Public company:
1. Minimum paid up capital: 5 lakhs
2. Minimum no of members: 7
122
Companies Act 1956
123. Classification of Companies
Companies on the basis of Liability
Companies with limited liability
(a)Companies limited by shares: It is a registered company
with the liability of members limited by the
memorandum of association to the amount, if
any, unpaid on the shares respectively held by them.
123
Companies Act 1956
124. Classification of companies
Company limited by guarantee: A company having the
liability of its members limited by the memorandum to such
an amount as the members may respectively undertake by the
memorandum to contribute to the assets of the company.
124
Companies Act 1956
125. Classification of Companies
Unlimited company:
It is a company in which the liability of the members is
not limited by its memorandum.
The members of such companies may be required to pay
the losses from their personal property.
Because such companies have separate legal entity, its
creditors cannot file a suit against the members directly.
125
Companies Act 1956
126. Classification of Companies
Classification based on control
1. Government company: 51% of the paid up shares held
by the government.
2. Non-government Company:
3. Foreign Company: Company which is incorporated in
a country outside India under the law of that country.
4. Domestic company: Company which cannot be termed
as a foreign company
5. Holding and subsidiary company: If one company
controls another company
126
Companies Act 1956
127. Classification of Companies
The controlling company is called the holding company and
the company so controlled may be called the subsidiary
company.
5. Public financial Institutions: LIC, UTI etc
6. One-man company: A member may hold virtually the
entire share capital of a company.
127
Companies Act 1956
128. Classification of Companies
Non-trading company or association not for profit –
company formed for promoting the objects of art, science ,
religion –a license is granted by the central government.
Investment company –A company whose principal business is
the acquisition of shares, stock, debentures etc.
128
Companies Act 1956
129. Classification of Companies
Producer Company – Cooperative societies can be made
companies under the Companies Act. a company formed and
registered under theses provisions shall be known as
producer companies.
Multinational Companies – companies operating in
more than one country – ex: Coca Cola, LG
129
Companies Act 1956
130. Classification of Companies
Illegal Association: According to sec 11 No
company, association or partnership consisting of more
than 10 persons for the purpose of carrying on the
business of banking and more than 20 persons for the
purpose of carrying on another business shall be formed
unless it is a registered as a company under this Act or is
formed in pursuance of some other Indian Law.
130
Companies Act 1956
131. Promoter
Who is a promoter?
A promoter is one who undertakes to form a company with
reference to a given project and to set it going, and who takes
the necessary steps to accomplish that purpose.
131
Companies Act 1956
132. PRE-INCORPORATION CONTRACT
A contract made by promoters on behalf of the company
before its incorporation is termed as pre-incorporation
contract.It is correct to say that a company can‟t retify
PIC.A company gets its legal status only after
incorporation.Therefore,the only remedy open to the
company after incorporation is to enter into a fresh
contract.
132
Companies Act 1956
133. Legal position of preincorporation contracts
The promoters while entering into preliminary
contracts are treated as agents of the company
that is about to be formed.
The legal position is that for a valid contract two
consenting parties are necessary and a company
before incorporation is a non-entity.
A pre-incorporation contract which is purported to
be made by the company which does not exist, is
a nullity .
Thus when the company comes into existence it
can neither sue nor be sued on that contract
133
Companies Act 1956
134. Provisional contracts
Provisional Contracts
Provisional contracts refer to the contracts entered into
by the public company after its incorporation but
before it is issued certificate to commence business.
According to sec 149(4), any contract made by a
company before the date at which it is entitled to
commence business shall be provisional only, and shall
not be binding on the company until that date, and on
that date it shall become binding
134
Companies Act 1956
135. The Constitution of the Company
The company’s constitution essentially consists of two documents:
the memorandum of association
the articles of association
These are essential documents as they:
set out the nature and character of the company
outline the powers of directors
define the relationship between directors and shareholders
136. Memorandum of Association
It is a fundamental document .
It contains the fundamental condition on which alone the
company is allowed to be incorporated.
It lays down the area of operation of the company.
It regulates the internal affairs of the company in relation to
the outsiders.
It has to be printed, divided into paragraphs, numbered
consecutively and signed by at least 7 persons
137. Memorandum of Association
The
memorandum – is essentially for external
consumption as it sets out the names of the
promoters, the share capital and the purpose (objects)
of the company
This is useful information for potential customers and
investors
138. Contents
The name clause
The registered office clause
The objects clause
Liability clause
Capital Clause
Association clause
139. Memorandum of Association
3. Object Clause (Sec 13 (1))
The objects of the company shall be clearly set forth in the
Memorandum.
It defines and confines the scope of the Company’s Powers.
The object clause in the Memorandum must State
a) Main Objects of the company to be pursued by the company
on its incorporation and objects incidental to it.
b) Other objects not included above.
140. Memorandum of Association
Purpose of the Main objects:
To enable subscribers to the Memorandum to know the
uses to which their money may be put.
To enable creditors and persons dealing with the company
to know what its permitted range of enterprise or
activities is.
The narrower the objects expressed in the Memorandum
the less is the subscriber’s risk.
141. Doctrine of Ultra Vires
A company cannot go beyond its objects mentioned in
its memorandum. The company’s activities are confined
strictly to the objects mentioned in the memorandum
and if they go beyond these objects, then such acts will
be ultra vires
The object of declaring such an act as ultra vires is to
protect the interests of shareholders and all others who
deal with the company
142. Alteration of Memorandum
To Alter the Memorandum the provisions of the
memorandum can be divided into 2 :
Conditions : Are the main provisions included in the
Memorandum.
They can be altered as per the express provisions laid
down in the company’s Act.
Other Provisions : Can be altered by passing a special
resolution.
143. Doctrine of Ultra Vires
Company exists only for the objects which are expressly
stated in its objects clause or which are incidental to or
consequential upon these specified objects
Any act done outside the express or implied objects is
ultra vires
The ultra vires acts are null and void ab intio. The
company is not bound by these acts and neither the
company nor the other contracting party can sue upon
it
144. Doctrine of Ultra Vires
In case a company is about to undertake an ultra vires act the
members of a company (even a single member) can get an order
of injunction from the court restraining the company
If the directors have exceeded their authority and done something
then such matter can be ratified by the general body of the
shareholders, provided the company has the capacity to do so by
its memorandum of association.
145. Doctrine of Ultra Vires
Any property acquired by a company under an
ultra vires transaction may be protected by the
company against damage by third persons
Directors and other officers can be held liable to
compensate the company for any loss
occasioned to it by an ultra vires act.
Directors and other officers shall be personally
accountable to the third parties
146. Doctrine of Ultra Vires
Money or property gained through an ultra vires
transaction available in specie or capable of being
identified shall be restituted (restored) to the other
party.
In case an ultra vires loan taken by a company is used for
the payment of its intra vires debts the lender of the
ultra vires loan is substituted in place of the creditor
who has been paid off and as such can recover money
147. Articles of association
Sec 2(2) – AOA of a company as originally framed or as altered
from time to time in pursuance of any previous companies law or
act.
They are the bye-laws of the company according to which director
and other officers are required to perform their functions as
regards the management of the company, its accounts and audit.
Subordinate to the memorandum
They can be easily altered by passing a special resolution.
147
Companies Act 1956
148. Articles of Association
Contents of Articles
1.
2.
3.
4.
5.
Different classes of shares and rights of shareholders
Procedure for making an issue of share capital and
allotment thereof.
Procedure for issue of share certificates and share
warrants.
Forfeiture of shares and the procedure for their
reissue.
Procedure for transfer and transmission of shares.
149. Articles of Association
6.
7.
8.
9.
10.
11.
12.
The time lag between calls on shares, conversion of
shares into stock.
Directors, their appointment,
remuneration ,
qualification etc.
Accounts and Audit.
Lien on shares.
Payment on commission of shares and debentures to
underwriters.
Rules for adoption of preliminary contracts, if any.
Re-organisation and consolidation of share capital.
150. Articles of Association
13. Alteration of share capital and buy back of shares.
14.Borrowing powers of Directors.
15. General Meetings, proxies and polls.
16.Voting rights of members.
17. Dividends and reserves.
18.Winding up.
151. Articles of Association
Limitations to Alteration of Articles
1.
Alterations should not be inconsistent with the provisions
of the Act or any other statute, and conditions contained in
the Memorandum.
Case: M.R.Kamath vs Canara Banking Corporation Ltd.
A Company passed a resolution expelling a member and
authorising the directors to register the transfer of his
shares without the transfer deed.
Held the resolution was in violation of provision relating to
the transfer under the act
152. Articles of Association
Alteration of Articles
Every company has the power to alter its Articles by a
special resolution. (sec 31)
Procedure for Alteration of Articles
By passing a special resolution.
Copy of Special Resolution to be sent to ROC within 30
days.
Copy of altered Articles to be submitted to ROC within
3 months of passing resolution.
153. Articles of Association
2. Must not sanction anything illegal
Case : Andrew vs Gas meter co. Ltd.
The Memorandum of the Company provided that the
Nominal Capital of the company was 60,000 pounds
divided into 600 shares of 100 pounds each. The
Memorandum and Articles did not contain any express
provisions as to issue of preference shares. The
company by a special resolution, altered its Articles so
as to give itself power to issue preference shares, and
then issued them.
Held the issue was valid.
154. Articles of Association
3.Must be bonafide for the benefit of the company as a whole.
Case: Shuttleworth vs Cox Bros.& Co.
The Articles of a company provided that S and 4 others
should be permanent directors of the company. They
could however be disqualified by any of the 6 specific
event. S failed to account for company’s money on 22
occasions within 12 months. The Articles were accordingly
altered and a 7th event disqualifying a director was added.
The event added was that if a Director was so requested in
writing by all other Directors he should resign. S was so
requested to resign.
Held the alteration was bonafide for the benefit of the
company as whole, and was valid.
155. Articles of Association
4.Must not deprive any person of his rights under a
contract.
5.Must not be contrary to the order of the National
Company Law Tribunal.
6. Alteration in Articles which has an effect of converting a
public company into a private company can be made
only if it is approved by the central government.
156. Articles of Association
Binding force of Memorandum and Articles
a) The company is bound to its members.
b) Each member is bound to the company
c) Each member is bound to the other member in so far as
rights and duties arising out of the articles are
concerned.
d) Neither the members nor the company is bound to the
outsiders.
157. Articles of Association
Difference between Articles and Memorandum of
Association
Memorandum is the charter of the company while
Articles are the regulations for the internal
management of the company.
2. Memorandum defines the scope of activity of the
company whereas Articles contain the rules for
carrying out the objectives of the company.
1.
158. Articles of Association
3. Memorandum is a supreme and primary document
where as Articles are subordinate to the Memorandum.
4. Memorandum is a must for every company where as for
Articles , it is not a must for companies limited by
shares which may simply adopt Table A of the schedule.
5. Memorandum is subject to strict restrictions and some
alterations must be subject to the Central Government
approval where as articles can be Altered by just
passing a special resolution.
159. Articles of Association
6. Acts Ultra vires the memorandum are wholly void and
cannot be ratified where as acts ultra vires the Articles
but intra vires the memorandum can be ratified
160. Articles of Association
Doctrine of Constructive Notice
Memorandum and Articles on registration with ROC
assume the character of Public documents.
Every outsider dealing with the company is deemed to
have notice of the contents of the same.
This is known as Doctrine of Constructive Notice
161. Articles of Association
Doctrine of Constructive Notice
Case : The Articles of Association of the company
contained a clause that all deeds and documents shall
be signed by the Managing Director, the secretary and
the working Director on behalf of the company. A deed
of mortgage was signed by the secretary and the
working director only.
162. Articles of Association
Doctrine of Constructive Notice
Decision
It was held that the Mortgage was invalid in spite of the fact that
the plaintiff acted in good faith and the money was utilised for
the company. The mortgagee should have consulted the Articles
of Association before executing the mortgage deed.
163. Articles of Association
Lord Hatherley observed in this regard in a case of
Mahony vs East Holyford Mining Co.
Whether actually the outsider reads the Articles or the
Memorandum or not, it will be presumed that he has
read them. Every Joint stock company has its
Memorandum and Articles of Association open to all
and every person who deals with the company must be
affected with the notice of all that is contained in these
two documents
164. Articles of Association
Doctrine of Indoor Management
There is one limitation to the doctrine of Constructive
Notice.
The outsiders dealing with the company are entitled to
assume that so far as the internal proceedings of the
company are concerned, everything has been regularly
done.
They need not inquire about the regularity of the internal
proceedings as required by the Memorandum and
Articles. They can presume that all is being done
regularly.
165. Articles of Association
Case: Royal British Bank vs Turquand
The Directors of the company had issued a bond to T. They
had the power under the Articles to issue such a bond
provided they were authorised by a resolution passed
by the shareholders at the General Meetings of the
Company. No such resolution was passed by the
company.
166. Articles of Association
Decision
T could recover the amount of the bond from the company
on the ground that he was entitled to assume that the
resolution had been passed.
167. Articles of Association
Exceptions to the Doctrine of Indoor Management
1.Where the outsider has the knowledge of irregularity.
Case:T.R.Pratt
Company A lent money to company B on a mortgage of its
assets. The procedure laid down in the Articles for such
transactions were not complied with. The Directors of
the companies were the same.
Held the lender had notice of irregularity and hence the
mortgage was not binding.
168. Articles of Association
2. Negligence on the part of the outsider
Case : Anand Bihari Lal vs Dinshaw and Co.
The plaintiff in this case accepted a transfer of company’s
property from its accountant.
Held the transfer was void as such a transaction was
beyond the scope of Accountant’s authority. The
plaintiff should have seen the Power of Attorney
executed in favour of the accountant by the company.
169. Articles of Association
3. In case of a forgery
Case: Ruben vs Great Fingall consolidated Co.
The secretary of the company issued a share certificate
under the company’s seal with his own signature and
the signature of a Director forged by him.
Held the share certificate was not binding on the
company. The person who advanced money on the
strength of this certificate was not entitled to be
registered as holder of shares.
170. Articles of Association
4. Acts outside the scope of apparent authority.
Case: Kredit Bank Cassel vs Schenkers Ltd.
A branch manager of a company drew and endorsed bills
of exchange on behalf of the company in favour of a
payee to whom he was personally indebted. He had no
authority from the company to do so .
Held the company was not bound.
171. Directors
Brains of the company
A person having control over the direction, conduct and
management or superintendence over the affairs of the
company
Only individuals can be directors.
Public company – three directors
Private company – two directors
171
Companies Act 1956
172. Directors
Director is a person who has control over the direction
, conduct and management of the affairs of the
company.
According to Lord Cairns
A company cannot act on its own . It can only act through
directors, and the relation between the company and
directors is that of Principal and agent.
172
Companies Act 1956
173. Management and Administration
According to Companies Act 1956, Sec 2(13)
A Director is defined as “ any person occupying the position
of the director, by whatsoever name called.
Only Individuals can be Directors
No Body corporate or Association or firm can be
appointed as director of the company,
173
Companies Act 1956
174. Management and Administration
Qualification of a Director
The Act prescribes no academic or professional
qualification for a director. The Articles may provide
what qualifications the company’s directors must
possess.
Disqualification of Directors
Following persons are not eligible to be
directors
Persons of unsound mind
An Undischarged insolvent
174
Companies Act 1956
175. Powers
General powers of the Board
Powers to be exercised at board meetings
To issue debentures
To invest the funds of the company
To make calls on shareholders in respect of money unpaid on
their shares
Powers to be exercised with the approval of company in
general meeting
175
Companies Act 1956
176. Contd To borrow money
To contribute to charitable trusts
To remit or give time for repayment of any debt due to the
company by a director
Duties
176
Fiduciary duties
Duties of skill, care and diligence
Attend board meetings
Not to delegate his functions
Companies Act 1956
177. Meetings
General meetings
Statutory meeting
Annual General meeting
Extraordinary meeting
Class meeting
Meeting of creditors and debenture holders
Meeting of directors
177
Companies Act 1956
178. Requisites of a valid meeting
Proper authority
Notice of meeting
Quorum of meting
Chairman of meeting
Minutes of meeting
178
Companies Act 1956
179. Statutory Meetings (Sec 165)
Definition
Applicability
The 1st General Meeting of the members of the company after
the incorporation of the company to acquaint members with
matters arising out of the promotion and formation of the
company
Company limited by shares
Company limited by guarantee and having a share capital
Not applicable to Private Limited Company
Periodicity
Should be held between 1 months ≥ 6 months from the date
at which the company is entitled to commence business
Statutory Report
Report has to be forwarded to every member at-least 21
days before the date of meeting
179
Companies Act 1956
180. Annual General Meetings (Sec
166)
AGM is the regular meeting of the members of a company held
annually for the purpose of transacting Company’s ordinary
business.
Definition
Frequency of
Meeting
Companies Act 1956
Ordinary
Business
180
Once every year
The gap between 2 AGM should not be more than 15 months
Company may hold its 1st AGM within a period of not more
than 18months from the date of incorporation
The registrar may for special reason extend the period of
AGM by a period not more than 3 months (except in case of
1st AGM).
To Consider and adopt Audited Balance Sheet
To declare dividend on shares
To appoint Directors in place of those retiring by rotation
To appoint Auditors and to fix their remuneration.
181. Annual General Meetings (Sec
166)
Power of the Central Government (section 167)
The Central Government on an application from any member of
the company may call or give direction to call a AGM if the
same has not been held as per the provision of section 166
Penalty for default in complying with section 166 & 167 (section 168)
The company and every officer of the company who is in default
shall be punishable with a fine which may extend upto Rs 50,000
In case of continuing default a further fine of Rs 2,500 for each
day of default
181
Companies Act 1956
182. Annual General Meetings (Sec
166)
Every AGM shall be called for :
At a time during business hours
On a day that is not a public holiday
Shall be held either at the registered office of the company or some other place within the city,
town or village in which the registered office of the company is situated
Exceptions
The central government may exempt any class of company from the requirements mentioned
above subject to conditions as it may impose
A public company or a private company which is a subsidiary of a public company may by its
article fix the time for its AGM and may also in one AGM fix the time for the subsequent
AGM
A private company which is not a subsidiary of a public company may in a like manner and
also by a resolution agreed to by all the members thereof, fix the time and place for its AGM
182
Companies Act 1956
183. Extra Ordinary General Meetings
(Sec 169)
Every general meeting other than the statutory meeting and the annual general
meeting or any adjournment thereof, is an extraordinary general meeting
Such meeting is usually called by the Board of Directors for some urgent
business which cannot wait to be decided till the next AGM.
Every business transacted at such a meeting is special business.
BOD can call EGM if it has received a requisition from such
number of members of the company as mentioned below:
183
Company having share capital – members holding ≥ 1/10th of the paid up capital of the
company ( voting rights) at the date of the deposit of the requisition
Company not having share capital – members having ≥ 1/10th of the total voting power
of all members as at the date of the deposit of the requisition
Companies Act 1956
184. Notice of Meetings
Contents and manner of service of notice – Section 172
Meeting can be called by giving not less than 21 days notice
Meeting can be called with shorter notice, if consent is accorded there to
* AGM
By all members entitled to vote thereto
Company having share capital
Members holding ≥ 95% of the paid up share capital
* Other meeting
Company not having share capital
Members having ≥ 95% of the total voting rights
An explanatory statement of the special business must also accompany the notice calling the
meeting.
Notice should also give the nature and extent of the interest of the directors or manager in the
184 special business, as also the extent of shareholding interest in the company of every such person
185. Quorum of Shareholders’ Meetings
Quorum for meeting - section 174
Unless the article provides for a larger number, the Quorum for the meeting :
* Public ltd. Company
5 members personally present
* Private Ltd. Company
2 members personally present
If Quorum not present within 30 minutes of the time fixed for the meeting :
* Meeting called on requisition
meeting stands dissolved
from members
* Other meetings
* In case of adjourned meeting
185
shall stand adjourned to the same day in the
next week, at the same time & place or such
other day at such other time & place as
Board may decide
members present shall form the quorum
186. Board Meetings
Frequency of Meeting (section 285)
At least once in every 3 calendar months and 4 meetings in every year
If 4 BMs are held in a calendar year, one in each quarter, the interval between 2 meetings may
be more than 3 months
Section 25 company (An association not for profit) needs to hold only one meeting in 6 months
Notice of the Meeting (section 286)
Notice must be given in writing to every director for the time being in India and at the usual
address in India to every other director
Agenda of the Meeting
186
Unless otherwise required by the article, no agenda required
In some matters prior intimation of the business to be transacted is required i.e. appointment
of managing director (Sec 316), inter - company loans & investment (sec 372A) appointment
of a person as a manager who is already a MD in some other company (sec 386)
187. Board Meetings
Quorum for Board Meetings
1/3 rd of the Board’s total strength or 2 directors which ever is higher
Total strength for the purpose means total strength of the Board as reduced by
the number
of positions vacant at that time
Article of association can always fix a higher quorum but not lower number
The quorum shall consist of fully qualified and disinterested directors only.
Number of the interested directors ≥ to 2/3rd of the total strength, quorum shall
be the
remaining directors present at the meeting being not less than 2.
Chairman of the Board Meeting
The Board shall elect one of the directors as its chairman
Voting at Board Meeting
187
Question decided by majority of votes
Chairman will have the right exercise casting vote
188. Winding up
Winding up or liquidation of a company represents the last
stage in its life.
A proceeding by which a company is dissolved.
Assets of the company are disposed of, debts are paid out
188
189. Modes of winding up
Winding up by the court – compulsory winding up
Voluntary winding up
(a) members voluntary winding up
(b) creditors voluntary winding up
Winding up subject to the supervision of the court
189
190. Grounds for compulsory winding up
By special resolution
Default in holding statutory meeting
Failure to commence business
Reduction in membership
Inability to pay debts
Just and equitable
190
Companies Act 1956
191. Voluntary winding up
Winding up by the creditors or members without the
intervention of the court.
Grounds
If the company in the general meeting passes an ordinary
resolution for voluntary winding up where the period
fixed by the Articles of Association for the duration of
the company has expired or the event has occurred on
which under the articles the company is to be dissolved.
191
192. Contd If the company resolves by special resolution that it shall be
wound up voluntarily
192
193. Members winding up
Members winding up is possible only when the company is
solvent and is able to pay the liabilities in full.
193
194. Creditors voluntary winding up
Based upon the assumption that the company is insolvent
From the beginning the meeting of creditors is held
along with the members.
The chief power to appoint the liquidator is in the hands
of the creditors and there is a provision for appointing a
committee for inspection
194
197. Intro
Business Combi grew in 19th Century “Free Competition”
Laissez Fair
Invisible Hands Adam Smith
Survival of the fittest
To combine it to simply to become one of the parts of a whole,
and a combination is merely a union of persons to make whole
or group for the some common purpose”
When two or more business units combine together with some
common purpose, it is termed as combination.
Economies of Scale
Eliminate wasteful competition
Enhance prestige
198. Causes of combination
Wasteful Competition (Consolidation due to Patent)
Popularity of Joint Stock Orgn (TATA AIG)
Economics of Large Scale Org (Reduce Cost of Prod)
List for power (TATA Empire)
Influence of Tariffs (Import Tariff)
Vagaries of Trade Cycles ( Depression & Boom)
Rationalization (Co-operatives)
Organizing Ability (Indian Hotels managing Taj Group)
Respect for bigness
200. Horizontal
Also known as Trade, Parallel or unit combination.
Same industry companies combine together – sugar mill
acquiring sugar mill.
Eliminates competition
Economies of scale
Helps control the market conditions
Leads to monopoly
Concentration of Industrial power
201. Vertical
Also known as Industry, Sequence or Process
combination.
Successive Stages of activity in same industry combine
together – sugar cane farm acquiring sugar cane crushing
plant – sugar mill to confectionery.
Same or interconnected industry
Quality of product
Cheaper product and better the market conditions
Where one process is complimentary to another
202. Lateral
Also known as allied integration.
When the business enterprise engaged in manufacture of
goods in different industries through allied to each other in
some sense, combine them that is known as lateral or allied
combination. It may be subdivided into two
Convergent lateral combination and
Divergent Lateral Combination
Combination – Printing Press – paper ink cardboards etc
Auto Manufacturer – into Glass Unit
Divergent Lateral Combination - Leather –
Shoes, Suitcases, Bags, Saddles, Harnesses, Fancy Goods
Reduction in cost of production
Loss of one market may make gain of another market
203. Forms of combination
In businesses various forms of combinations are found with varying
degrees of control of integration. Simple combination is of two or
more individual combining for business.
Compound Combination –
Association – Trade Association, Loose informal agreements,
chambers of commerce and industry
Federations – Partial Consolidations – Trusts- Holding
Companies – Community of Interests
Complete Consolidation –
Mergers
Amalgamations
204. Benefits of combination
Combination of business units offer benefit of
Spirit of cooperation
Eliminates waste
Streamlines – economies of scale and purchasing raw material
Lowers cost of production
Increases profit
206. Syllabus
Introduction
Globalization Advantages & Disadvantages
Kenchi Ohame‟s Theory
International Monetary Fund
Balance of Payments and role of IMF
GATT
WTO
Globalization Good or Bad
207. What is Globalization?
Globalization is the process of increased interconnectedness
among countries, most notably in the areas of
Economics
Politics
Culture
It is the global distribution of products goods and services
through reduction of trade barriers of international trade
such as
Tariffs
Export Fees and
Import Quotas
208. Four Aspects of Globalization
1. Globalization as Westernization or Modernization – The
social structure of modernity (capitalism rationalism etc) are
spread the world over, are normally destroying pre existent
cultures and self determination.
2. Globalization as liberalization – Remove govt imposed
restriction in order to create an open borderless world
economy.
3. Globalization as Universalization – Spreading various objects
and experiences to people at all corners of the world
4. Globalization as detoriatationalization – reconfiguration of
geography so that social space is no longer wholly mapped in
terms of territorial space- distance, boundaries, and borders
209. Positive Aspects of Globalization
1.
2.
3.
4.
5.
6.
More Money in Developing Economies – more chances of
success and elevated living standard of people
Global Competition – Prices are in check
Global Competition – Encourages creativity and innovation
Global Technology Access – Less effort Less R&D
Govt Able to work towards common goals with awareness on
global issues – environment, economic, and social.
World of Choices – Global infusion of culture, food, movies,
music, and choices
210. Negative Aspects of Globalization
1.
2.
3.
4.
5.
Outsourcing – opportunities moving from countries for self
interest
Culture Erosion -- Fusion of culture leads to ultimate erosion
Global Health Issues – Encourages transnational diseases
Global Environmental Loss – Less or no regulation creating
destruction of environment and eco systems
Western Focus Applied on non western country by IMF, World
Bank and thus create multidimensional problems.
211. Globalization and Kenchi Ohmea’s theory
Fundamental reason 4 Globalization –
1.
1.
2.
3.
Migration of Corporations,
Citizens
Capital Across
3C Theory –
2.
1.
2.
3.
The Corporation
The Customer
The Competitor
212. Balance of Payments
Exports – XYZ
Imports – XYZ + ABC
IMF – 180 member countries
Regulatory
Consultative
Financial