The Slideshow discussed Indian Companies Act 2013. It talks about Meaning of a company, kinds of companies, formation of a company, memorandum and articles of association, prospectus - contents and types, company directors and their appointment, removal, powers and duties, meetings of the board, winding up of a company.

1. Indian Companies Act 2013
UNIT – 4

2. Introduction
Indian Companies Act 2013
• There are 29 chapters, 470 sections and 7
schedules in the Indian companies Act 2013
• It has conceptualized the idea of one person
company
• Corporate Social Responsibility [CSR] has
been made mandatory for every company
• Introduced the concept of dormant companies,
which are not active in business since 2 years

3. Meaning of a Company
• According to the companies act 2013, the
definition of a company is as follows:
• A registered association, which is an artificial
legal person, having an independent legal
entity, with perpetual succession, a common
seal for its signatures, a common capital
comprised of transferable shares and carrying
limited liability.

4. Characteristics of a Company

5. Characteristics and Features of a
company
• The following are the important features of a
company:
Registered association: it registered with the
registrar of companies.
Legal entity: for coming into existence, a
company has to fulfill legal requirements
Artificial legal person: in the eyes of the law, a
company is an artificial legal person. It has the
right to enter into contracts in its own name.

6. Characteristics and Features of a
company
• The following are the important features of a
company:
Separate Legal Entity: a company is treated as a
separate member from the people who control it.
Perpetual Succession: the life of the company
does not depend on the life of its shareholders,
employees or director. It is stable.
Common seal: the company being a separate legal
person uses its common seal or signatures with its
name engraved on it

7. Characteristics and Features of a
company
• The following are the important features of a
company:
Limited Liability: a company has a limited
liability unlike partnership. This means that the
liability of shareholders of a company is
limited to the value of shares that they hold.

8. Example of company seals

9. Kinds of Companies

10. Kinds of Companies
• The companies can be classified as:
Classification of
Companies
By Mode of
Incorporation
Based on Liabilities
of Members
Based on number
of members
Royal Chartered Companies
Statutory Companies
Registered or Incorporated
Companies
Companies limited by shares
Unlimited Companies
Companies limited by
guarantee
Public Limited Company
Private Limited Company

11. By Mode of Incorporation
• Royal Chartered Companies: these companies
are formed by special order from king or
queen. E.g. the east India company, BBC etc
• Statutory Companies: formed the government
of countries or states to carry on work of
National or state importance e.g. RBI
• Registered or Incorporated Companies: these
companies are formed under the companies act
passed the parliament.

12. Based on Liabilities of Members
• Companies limited by shares: in such
companies the liability of each shareholder is
limited to the value of the shares subscribed by
him. Such companies have a fixed share
capital.
• Companies limited by Guarantee: in such
companies, the liability of each members is
limited to the amount of money he / she has
promised to pay in the payments of debts etc.

13. Based on Liabilities of Members
• Unlimited liability companies: there is no
restriction on the amount of money the
shareholder has to pay in the payment of the
debts of the company.

14. Based on number of Members
• Public Limited Company: a public company or
a public limited company is a company whose
ownership is open to public.
• Anyone can buy the shares of a public
company.
• In India, a public company should have at least
7 members and at least 3 directors.

15. Based on number of Members
• Private company or private limited company: a
private limited company cannot be owned by
the public.
• A private limited company cannot invite
people to buy its shares.
• In India, A private limited company is a
separate legal entity with a suitable company
name, an address, at least 2 members and at
most 200 members, and at least two directors
with one being an Indian resident.

16. Incorporation of a Company

17. Incorporation of a Company
• The process of incorporation [formation] of a
company in India is:
• A company being a separate legal entity comes
into existence only after its registration with the
registrar of companies.
• A number of steps are involved in companies
registration. A number of documents are
submitted.
• After ensuring that all the necessary documents
are filed, the certificate of incorporation is issued
to the company. Thus is comes into existence.

18. Incorporation of a Company
• Main documents needed for registration of a
company are:
Application of approval of name.
Memorandum of association
Articles of association
Address proof of registered office
Particulars of Directors [identity proofs etc]
Declaration [signed by a CA or an advocate of HC
/ SC]
Prescription fees and filing fees.

19. Incorporation of a Company
• When all the required documents are filed with
the Registrar along with the requisite fees, a
scrutiny is made.
• When all documents are found in order, the
Registrar will enter the name of the company
in the Register of Companies and issues a
Certificate of Incorporation.
• The date mentioned in the certificate is the
date of incorporation of the company.

20. Memorandum & Articles of
Association

21. Memorandum of Association – MOA
• It is the constitution of the company, which
describes its objects and scope and the relation
with outside world.
• The memorandum is to be signed by at-least
seven persons if it is a public limited company
and at least two persons in case of a private
limited company.
• The memorandum should also be properly
stamped.

22. Articles of Association – AOA
• It is a document which contains rules and
regulations relating to the internal management
of the company.
• A public limited company may not file its own
Articles of Association, it may adopt model
clauses prescribed in Table A, Schedule 1 of
the Act.
• A private limited company is also required to
submit its Articles duly signed by the
signatories.

23. Difference between Memorandum &
Articles of Association

24. Functioning of a Company
Prospectus – Content & Types

25. Prospectus of a company
• The prospectus of a company is a legal document.
It is required by and filed with the Securities and
Exchange Board of India [SEBI].
• The prospectus of a company provides details
about the investment offering to the public. It also
informs the investors about the risk which is
involved in the investment.
• The document helps the investors to make
informed investment decisions because it contains
relevant information regarding company’s
security offering.

26. Prospectus of a company
• The prospectus is filed in two stages
• First stage is when the preliminary prospectus
if filed. However it doesn’t contain
information about number of shares being
issued and their price. It is filed to know the
interest in market about the public offering.
• Final stage is when the final prospectus if filed
which contains all the relevant details about
the public offering.

27. Contents of the Prospectus
• The main contents of the company prospectus are:
A brief summary of the company’s background
and financial information
The name of the company issuing the stock
The number of shares
Type of securities being offered
Whether an offering is public or private
Names of the company’s principals
Names of the banks or financial companies
performing the underwriting

28. Types of Prospectus
• There are two main types of prospectus of a
company:
• Red-Herring prospectus: Red herring prospectus
does not contain all information about the prices
of securities offered and the number of securities
to be issued. According to the act, the firm should
issue this prospectus to the registrar at least three
months before the opening of the offer.

29. Types of Prospectus
• Abridged prospectus: Abridged prospectus is a
memorandum, containing all salient features of
the prospectus as specified by SEBI. This type of
prospectus includes all the information in brief,
which gives a summary to the investor to make
further decisions.

30. Company Directors
Numbers, Types,
Appointment, Removal,
Powers and Duties, Meetings

31. Company Directors and their types
• Directors refer to the part of the collective body
known as board of Directors. The BOD is
responsible for controlling, managing and
directing the business of the company. Directors
must perform their duties diligently and skillfully.
• A director of a company plays multiple role – as
an agent of the company, as an employee of the
company, as a trustee of the company and also as
an officer of the company.

32. Number of Company Directors
• As per the company law 2013:
• There must be at least 3 directors in case of a public
limited company
• There must be at least 2 directors in case of a private
limited company
• There must be at least 1 director in case of a one person
company
• A company of any type can have maximum 15 directors
• To add more directors, the company must pass a special
resolution in its AGM [Annual General Meeting]

33. Types of Company Directors
• The main types of Directors of a company are:
• Residential director: As per the law, every company
needs to appoint a director who has been in India and
stayed for not less than 182 days in a previous
calendar year.
• Independent director: an independent director is a non
executive director who is not an employee of the
company. The tenure of independent director is up to 5
years and he can be re-appointed. There must be at least
two independent directors.

34. Types of Company Directors
• Small shareholders director: A listed company, could
upon the notice of minimum 1000 small shareholders
or 10% of the total number of the small shareholder,
whichever is lower, shall have a director which would
be elected by small shareholders.
• Woman director: Every company listed on the stock
market needs to appoint at least one woman director.
• Alternate director: is the person who acts as a director
on behalf of a person who has been away from the
country for 3 months or more.

35. Appointment of Directors
• Every Director must have a DIN number [Director
Identification Number]
• Convening a meeting of BOD by giving a notice 7 days
in advance
• Taking consent and declaration from the proposed
Director
• Obtaining DIN and Digital signature certificate along
with other documents – ID proof, photo, address proof
etc
• Convene a general meeting of shareholders
• Informing registrar of companies
• Entry into register of Directors

36. Removal of Directors
• The director can be removed from his position if he
himself resigns from the company. Registrar of the
companies has to be informed about his resignation and
removal
• If the director is not appointed by the central
government, he can be removed by the company
through an ordinary resolution in the board meeting
• A director can be removed if he doesn’t attend three
board meetings in a row [section 167]
• A director can also be removed if he hasn’t attended
any board meeting in the last 12 months [section 167]

37. Powers of Director
• Main powers of Directors are:
 Call meetings on suo-moto basis
 Issue shares, debentures etc
 Borrow and invest funds for the company
 Approve financial statements
 Approve bonus for employees
 Declare dividend
 Approve merger/takeover

38. Duties of Director
• Main duties of the Director are:
 To act in good faith
 To act in accordance with the articles of association of
the company
 To act in the best interest of the shareholders
 Not to achieve any undue advantage
 Not to get involved in any controversial situation
[conflict of interest]
 Diversify the business of the company

39. Meetings of the Board of Directors
• According to section 173 [1], first meeting of the board of
directors must held within 30 days of incorporation of the
company
• There must be at least 4 meetings in an year. Gap between
each meeting should not be more than 120 days.
• Meetings can take place in person or through tele/video
conference section 173 [2]
• For some matters like approval of board report, financial
statement, prospectus etc, meeting should be in person.
[rule 4]
• Quorum of the meeting is 1/3 of total strength or 2
directors, which ever is higher [section 174]

40. Winding up of a Company

41. Winding up of a Company
• Winding up of a company is the process through which the
company is brought to an end. [Section 270 – Section 365]
• A company can be wounded up in two ways – voluntary
winding up & compulsory winding up through company
law tribunal
• Winding up through tribunal [Section 271]: this can happen
in case of:
• A. Sick company
• B. Fraudulent company
• C. Act against the Government
• D. Failed to submit financial statements to the registrar for 5
years

42. Winding up of a Company
• Voluntary winding up [Section 304]
 Through a general resolution in its AGM
 Through a special resolution
• Process of winding up:
 Directors of the company make a declaration that there is no
debt etc on the company
 The resolution has to be published in a local newspaper
 A liquidator is appointed by the company
 The liquidator will update the members and creditors of the
company about the liquidation process every quarter
 Liquidator will prepare a liquidation report & will send final
liquidation statements to the registrar of companies