5 Company Law 2

8/3/2019 5 Company Law 2

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Normally the memorandum will not be allowed to be

changed

However the dynamics of business calls for the

changes to be made in the M/A

The company law provided for the amendments of thevarious clauses of the M/A.

The amendments can be made by following the rules

and regulations and also by following the procedure

prescribed under the provisions of the company law


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Alteration to the memorandum of association

Alteration in the memorandum regarding

NAME CLAUSE OF THE COMPANY

May be made by passing a SPECIAL RESOLUTION

In the general body meeting.The company has to obtain central Govt. permission

In writing for the same.

The registrar will enter the new name in the place

Of the earlier name of the company and a certificateWill be issued from that date only the name of the

Company stands changed.

NAME CLAUSE OF THE COMPANY


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Change in the

Registered office of the company

[a] If the change of place is in the same town/city

company can shift it registered office from

place to another place in the same city, but itMust be intimated to the registrar with in 30

days.

[b] if the change of place is from one city to

another city in the same state

company has to pass a special resolution


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Change in the

Registered office of the company from one state to another state

For this company has to obtain the confirmation fromcompany law board.

A notice must be give to the registrar with in 30 days

and the company has to inform the

Registrar from which state it is shifted and also to

Registrar to which state is shifted.


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Hence the procedure of shifting the Registered

Office is:

1. Resolution of the board of directors

2. Special resolution in the General Body

meeting

3. Permission from the company law board

4. Notice to the affected parties

5. Notice to the registrar as the case may be

6.Copy of the order to be filed with R.O.C


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To change the object of the company

On the following grounds the company is allowed

To amend the object of the company

To carry on the business more efficiently

To attain its main purpose by new means

To enlarge its local operations

If it is advantageous to the company

To delete any objectives the same procedure

is to be followed

To amalgamate with other company

h h b f h


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To change the object of the company

On the following grounds the company is allowed

To amend the object of the company

To carry on the business more efficiently

To attain its main purpose by new means

To enlarge its local operations

If it is advantageous to the company

To delete any objectives the same procedureis to be followed

To amalgamate with other company


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To amend or alter the capital clause

By passing a ordinary resolution in the generalBody meeting it can be changed, provided

There is a clause in the article of association

To this effect.

It may be forIncrease

Consolidate

Convert

Sub-divide or

Cancel shares


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The ARTICLE OF ASSOCIATION is the secondconstitutional documents which lays down the rules

and regulation for the conduct of internal affairs of the

company. It defines the duties, rights, powers and

authority of the share holder, and directors. It tells the

mode and method in which the business is to be

conducted. The ARTICLE OF ASSOCIATION constitute

contract between the company and its members andbetween the members themselves. The ARTICLE OF

ASSOCIATION are subordinate to the Memorandum of

Association and should not therefore, contain any

regulation which is contrary to the memorandum


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The ARTICLE OF ASSOCIATION of a privatecompany having share capital must

restrict the transfer of share, and limit

the maximum number of members to 50,and prohibit the invitation to public to

subscribe for any of its shares or

debentures


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ARTICLE OF ASSOCIATION usually provide for the following

The use of common seal of the company

The alteration of capital how and to what extent The borrowings of the company the mode & limitsThe general meeting , notice, resolutions, voting rights,

proxies and quorum etc.Appointment of directors, remuneration, qualification,

powers,Minimum and maximum of directors, names of the firstDirectors And their duties and removal Dividends and reserve funds

Accounts and audit Appointments of secretary, manager etc Adoption of contract entered into by the promotersRemuneration to promoters

Special provisions for amalgamating andWinding up


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Registration of Article of association

The company has to register its article ofAssociation with the registrar.

If there is no article of association drawn up

Then the Table A of the Schedule I automatically

Apply to such companies

The article of association may be amended

By passing a Special resolution.The resolution and the alteration must be

Sent to registrar within 30 days.


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Doctrine of constructive notice means when the

Company gets registered, the copies memorandum

and Article of association of the company willbe filed with the registrar of companies and hence

It will become public documents and the persons

Who deals with the company is having access to

the above documents and it is presumed that thePersons who deals with the company knows or

deemed to know the powers and authorities

Delegated to Its directors.


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Every person dealing with the company is

Presumed to have read and understood its

Contents while dealing with the companyThis is known of doctrine of constructive

Notice

Even a party dealing has not read or does not

Have actual notice it is presumed that he isHaving the constructive notice

Eg.

In Kotla venkataswamy vs ram murthy,The article of association prescribed that all the deedsMust be signed by 3 persons MD, Secretary and workingDirector. A mortgage deed was signed only by theSecretary,And working director, it was held invalid


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Doctrine of indoor management means

That the persons dealing with the company may

Presume that the officer of the company will

Follow the provisions of the article of associationThey are not bound to enquire the regularity of

the internal proceedings, the outsider need not

See whether the company is following their internal

Rules and regulations.

Eg.

In Royal British Bank vs TurquandThe directors of the company were given powers to borrowBut board should pass a resolution to this effect. TheDirectors borrowed money but no resolution was passed.It was held , that the company is held liable for the

Borrowings even though there was no resolution.


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The company may raise funds eitherby private placement with friends

and relatives or by making publicissues. A company may raise funds byvarious instruments like shares,

debentures, bonds or public deposits.


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Prospectus is the basics document to raise the

funds from the public. It means, any documentdescribed or issued as a Prospectus invitingdeposits from the public or inviting offersfrom the public for the subscription orpurchase of any shares in or debenture of thecompany. Thus Prospectus is a generalinvitation to the public to subscribe to the

capital of the company on the conditionsspecified in the application form.


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Private companies are prohibited from inviting anypublic subscription.Every public company having share capital is notrequired to issue the prospectus or a statement in

lieu of prospectus when it is not raising the sharecapital from the public and when it makes privateplacement. It must file a statement in lieu ofprospectus before the registrar of the company at

least 3 days before the allotment of the share.


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Prospectus should contain the following importantinformation

Name and address of the Registered office, stockexchange where the application is filed for listing,date of opening the issue and date of closing, nameand address of the auditors, lead managers, rating ofthe company if any from CRSIL, underwriters, capitalstructure, terms of the present issue, particulars ofthe issue i.e. why the issue

Company management and project, future prospects,management perception of risk factor etc.,


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Share is nothing but the share in the share capital ofthe company and includes stock except where a

distinction between stock and share is expressed orimplied.A share signifies the interest of the shareholder inthe company

The liability of the shareholder in the company to paycalls on shares until fully paid upThe right of shareholder to transfer the shareThe binding term and conditions between companyand the share holder.


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NOMINAL CAPITAL

This is the nominal or face value ofthe share, which the company, is

authorized to issue by its M/A. Thisis the maximum capital, which thecompany can have without altering

the capital clause of the M/A


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ISSUED CAPITAL

It is the nominal value of the shares, which are

offered to the public for subscription. It cannot

be more than the Nominal capital

SUBSCRIBED CAPITAL

It is the nominal value of the shares taken up by the

public. If all the shares offered to the public havebeen subscribed by the public to the full extent thensubscribed capital will be equal to the issued capital.


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CALLED UP CAPITALThis is that part of the subscribed capital

which has been called up by the company

If the board of directors has called up thetotal amount payable in the shares the

called up capital will be equal to the

subscribed capital


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PAID UP CAPITAL

This is that part of the called up capital

which has been paid up by theshareholders or which is credited by the

company as paid up on the shares. If all

the called up capital has been received,paid up capital will be equal to called up

capital, if not received it is calls in arrears


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The company may issue various types of

shares to fund its capital depending upon

various factors:

Share capital of a company is divided into

certain indivisible units of a fixed amount.These units are called shares,. Shares meansshare in the share capital of a company. Theshareholder will get dividend for theinvestment made in the company. Dividend isthe part of the profit of the companydistributed to the shareholders.


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Kinds of shares

PREFERENCE SHARES

Preference shares are those, which have

preferential rights to the payment of the

dividend during the lifetime of the company anda preferential right to the return of the capital

when the company is wound up. It has the

following character


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The dividend on them is fixed by the A/A

A preferential shareholder get fixed rateof dividend before any dividend is distributed

among other class of shareholders.

At the time of winding up to of the companythe preference shareholders must be paidback their capital before anything is paid to

the ordinary share holders


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T the preference shares may be

v Cumulative preference sharev Non cumulative preference sharev Participating preference sharev Non participating preference sharev

Redeemable preference sharev Irredeemable preference share


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Equity or ordinary share

It is nothing but the normal share capital ofthe company, which is divided into small units.

Equity or ordinary shares will not carry anyfixed rate of dividend and they will get thedividend only after preference shareholder

got their fixed rate of dividend.


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What is sweat equity?

It is the equity shares issued by the companyto its employees or directors or for

consideration other than cash for providingthe technical know how or rights given underintellectual property rights or value additionby whatever name called. A company may issue

the sweat equity if the following conditions arefulfilled.

v A special resolution is to be passed in the general body


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v A special resolution is to be passed in the general bodyv The resolution must specify the details like number ofshares, current market price, and consideration, class ofclasses of directors or employees.

v At least one year must have been completed from the dateof commencement of the businessv If the shares are listed in any stock exchange then theSEBI rules and regulations must be passed


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ISSUE OF BONUS SHARES

Bonus shares are shares of the company

allotted to the existing equity shareholders

without any consideration being received by

the company in cash or kind. They are issued

to capitalize the profit of the company. Bonus

shares can be issued only if the article of the

association of the company permit such anissue. The company has to seek the

permission of the SEBI and to follow the

guidelines of the central government.


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Bonus share can be issued only out the freereserve made out of profits of the company orshare premium collected in cash.Reserves made out of the revaluation of the

asset cannot be used to issue the bonus sharesAfter the issue of the bonus share, theremaining reserves should be at least 40% of

the paid up capital of the company.

RIGHT ISSUE


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RIGHT ISSUEWhen the company which as already issued shareswants to make a further issue of shares it is under a

legal obligation to first offer the fresh issue to theexisting share holders. The right of the existingshareholder to buy such new issue is alsotransferable

Debenture

Debenture is nothing but the borrowing of the companyIt is defined as Debenture includes debenture stocks, bondsand any other security of a company, whether there is acharge or not on the asset of the company.


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If the declaration of the director is not based


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If the declaration of the director is not basedon the reasonable opinion to discharge thedebts, and the debts are not discharged within

the period specified in the declaration thenthe directors are punishable with fine up toRs.50000=00 or imprisonment up to 6 months

or with both.

After filing the declaration of solvency a

resolution will be passed by the members forvoluntary winding up and a liquidator will beappointedOn appointment of the liquidator themana erial owers will vest with the li uidator


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The charge created by the issue of the

debenture is known as PARIPASU CHARGEwhich means proportionately.

Debenture stocks meansA company instead of issuing individualdebentures evidencing separate and distinctdebts the company creates one loan fund

known as debenture stock divisible among aclass of lenders each of whom is given adebenture stock certificate evidencing the

parts of the whole loan to which he is entitled

1 BEARER DEBENTURE


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1. BEARER DEBENTURE

Bearer Debenture is a bearer documents just like sharewarrant transferable by delivery.It is transferable like a bearer instruments for valueIt usually has an interest coupon / the payment by

company against the coupon is good discharge for thecompany to the bearer of the coupon


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It enables the bearer to have right against

the companyThe bearer who gets it for consideration

is a bona fide holder

The bearer is entitled to encase thecoupon and redeem it


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4 REDEEMABLE DEBENTURE

This type of debenture is issued for a particularperiod of time. After the expiry of the period thecompany has a right to repay the debenture money tothe debenture holder and get the mortgage chargereleased to that extent. This is known as redeemingthe debenture. The company may again re issue the

debenture as per sec 121 of the companys act. as perthe article of association.


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5 NAKED DEBENTURE

Normally the debentures will be issued by creating acharge on the assets of the company. However, naked

debenture are also issued by the company whichmeans that the debenture is not backed by thecharge on the assets of the company by way ofmortgage. It is unsecured debenture. It is merely an

acknowledgement of the debt by the company. Theholders of such naked debenture are unsecuredcreditors of the company.


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1. CONVERTIABLE DEBENTURE

A Company may also issue convertible debenture, which meansthat the holder has a choice of converting it into a share or a

preference share at a stated rate of exchange after certain period.

When converted to share then it cannot be re converted todebenture once again. It can be:

Fully convertible debenture: Which can be fully converted to

shares after a certain period

Non-convertible debenture: Which cannot be converted toshares, there is no option to convert it in to shares

P partly convertible debenture: When the debenture can be partly

convertible and partly non-convertible, partly convertible

debenture will be issued. The convertible debenture will be

converted to the share after the expiry of the specified period.


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Director-Appointment - Powers and duties

Who is a Director?

Since the company is an artificial person and as itcannot act on its own some one has to do the work onbehalf of the company

This makes it necessary that the companys businessmust be entrusted to some natural person hence there isa need for a human being to act as a director of thecompany.

The director is not defined in the co law but

Directors are those natural persons who manager theaffairs of the company. The are collectively called asboard or board of directors.


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Qualifications

Only individual can be appointed as directors and no bodycorporate , association or firm shall be appointed as adirector.

This is to hold individual person responsible for the workdone by him

He should have signed as director and filed with registerhis consent to become director of a company.

He should hold or purchase qualification shares asmentioned in the A/A, with in 2 months of his appointment

The qualification share shall not be more than Rs.5000=00


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Disqualification

If a directors does not get qualification sharewithin 2month of his appointment,

[ if he acted as director without qualificationshare then he has to pay Rs.500=00 per day

If he is of unsound mind

If he is undercharged insolvent

If he is convicted , and 5 years is not

completed after jail termIf he not paid calls in arrears

If there is any court order


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Appointment of director

First directors will be named in A/A of the co

If not they shall be determined by the subscriber of the M/AOr

All the subscribed of M/A will be directors

Appointment of the directors by the company

In the General Body meeting the directors will beappointed

While 1/3 of director can be permanent and

Remaining 2/3 are liable to retire by rotation

They can be reappointed


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Appointment of directors by Board of Directors

BOD can appoint additional director till next annual general bodyCasual vacancies may be filled if the A/A permits

BOD can appoint an alternate directors if authorized by A/A or

General body

Appointment of directors by third party

Some time when bank advances huge advances they nominate adirector on the board of the company to ensure the end use offunds


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Appointment of Director by Central Govt.

Central Govt. in order to prevent

Mis management or

To take care of minority share holder

Will appoint directors for 3 years

They need not have qualification or will

retire by rotation


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Th f th di t b b dl


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The powers of the directors can be broadlydivided into two

1. Statutory powers

2. Managerial powers

Statutory power

The law has given all directors statutorypowers

Board of directors can exercise the following

powers by passing board resolution

1. Power to make calls on shares

2. Power to issue debentures

3. Powers to borrow money


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4. Powers to invest the funds of the co

5. Powers to make loans

6. On taking approval from general beady they can:

sell or lease or dispose the whole or part of thecompanies undertaking

remit or allow time for repayment of debt due bydirectors

appoint a sole selling agent for more than 5 years

issue bonus shares

reorganize the share capital of the co

Other powers


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Other powers

1.To appoint additional director

2.To fill up casual vacancies of director

3.To sanction powers to director to enter intocontracts with the co

4.To appoint MD

5.To invest in any share of any other company

6.To declare solvency


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To make contract on behalf of co

To decide terms of additional share or debenture

To issue allot forfeit transfer share of the co

To appoint director to fill up any casual vacancies

To appoint additional/alternative directors

To set goal and objectives and to make major

policies

To determine organizational structure of the co


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General duties

1.To establish general objectives and todetermine the business of the co

2.To issue directors for implementation of

policies, review and check

3.To delegate power to any committee or toCEO or others if permitted by the article of

the association

4.To appoint staff


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STATUTORY DUTIES

1. To disclose the interest in the contract proposed to beentered into by the company

2. To disclose particulars of shares in other companies

3. To disclose name address occupation etc for enteringin the registrar of directors

4. To issue prospect ion and set minimum subscription

5. To hold statutory and annual general meeting and toplace reports accounts etc.,

6. To convey extraordinary general body meeting

7. To circulate and filea with the register of company theresolution accounts etc required by the act.

8. To issue/allot/transfer of shares etc

9 To recommend declaration of the dividend


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9. To recommend declaration of the dividend

10 to maintain books and register

11 to all other acts

FIDUCIARY DUTIES

DIRECTORS HOLD A TRUST IN RELATION TO THECOMPANY AND THEY ARE DUTY BOUND

to act honestly

to act for benefit of the co

not to give room to conflict

to act at most good faith

no personal gains


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1. To exercise reasonable skill and care in the dischargeof their duties

2. If they fail to do they are liable for damages

3. Duty not to delegate

4. Remuneration

REMOVAL OF DIRECTORS

1. CAN BE REMOVED BY SHARE HOLDERS

2. CENTERL GOVT MAY REMOVE

3. CAN BE REMOVED BY CO LAW BOARD


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1. LIABILITY TO THIRD PARTIES

a. issue of mis -statement in prospectus

b. if they fail to refund application money

c. if the shares allotment are irregular

2. If they sign a Negotiable instruments without

mentioning the co name and if they act in their ownname

3. Liability to the company

- ultra virus acts- for negligence

- breach of trust/ statutory duty/ misfeasence[mis conduct


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KINDS OF COMPANY MEETING


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S O CO G

Broadly speaking , company meetings may be

classified as follows

1. Meeting of shareholders or members : this

against may be of four types:

* Statutory general meeting

* Annual general meeting* Extraordinary general meeting* Class meeting


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2. Meeting of directors

* Meetings of board of directors

* Meetings of committees of directors

3. Meetings of creditors,

debenture and contributors


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01. meeting of members

02.meeting of directors03.meeting of creditors

3 types of meeting are:

REQUISITES OF A VALID MEETING


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If the business transacted at a meeting is tobe valid and legally binding, the meetingitself must be validly held.

A meeting will be considered to be validly

held, ifIt is properly convened by proper authorityand by a proper notice

It is properly constituted with requisitequorum of member and by duly electedchairmanIt is properly conducted, i.e. according to

rules

PROPER AUTHORITY TO CONVENE MEETING


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PROPER AUTHORITY TO CONVENE MEETING

A meeting be convened or called by a proper

authority. Otherwise it will not be a valid meeting. Theproper authority to convene general meetings of acompany is the Board of Directors. The decision toconvene a general meeting is issue notice for the samemust be taken by a resolution passed at a validly heldBoard meeting.

NOTICE OF MEETINGSA meeting in order to be valid, must be convened

by a notice issued by the proper authority. It means that

the notice convening the meeting be properly draftedaccording to the Act and the rule, must be served on allmembers who are entitled to attend and vote at themeeting.

LENGTH OF NOTICE


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LENGTH OF NOTICE

For general meeting of any kind at least21 days notice must be given to members. Ashorter notice for Annual General Meeting willbe valid, if all members entitle to vote give

their consent.The member of day in each case shall beclear day, i.e. the days must be calculatedexcluding the day on which the notice is

issued, a day or so for postal transit, and theday on which the meeting is to be held.

CONTENCE OF NOTICE


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CONTENCE OF NOTICE

Every notice of meeting of a company must specify the

place and the day and hour of the meeting, and shallcontain a statement of the business to be transactedthereat.

PLACE OF MEETING:

Every annual general meeting of a company must beheld either at the registered office of the companyor at some other place within the same city.

DAY OF MEETING:

Every annual general meeting of a company must be held ona day that is not a public holiday

TIME OF THE MEETINGEvery annual general meeting shall be called for a time during

the business hours of the company.


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QUORUM

Quorum is the minimum number ofmembers who must be present at ameeting as required by the rules. Any

business transacted at a meeting withouta quorum is invalid. The main purpose ofhaving a quorum is to avoid a smallminority of team members takingdecisions which may be unacceptable to

the vast majority of members

6.There are two kinds of resolutions which can be passed


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6.There are two kinds of resolutions which can be passedat members meetings. They are

i) Ordinary

ii) Special resolutions

all mattes which are not required by the companies act orthe articles to be done by a special resolution are done byordinary resolutions.Also, the companies act,1956 requires certain matters ofagenda to be passed by resolutions requiring specialnotice.Section 192 requires registration of certain resolutionspassed at the meeting with the registrar of companies within 30 days of the passing thereof.


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The proceedings of the meeting arerecorded and it is called minutes of the

meeting

It will be first drafted and corrected ifany and finally it will be made final andthe chairman of the meeting will sign

The minutes are a record of business

transacted at meetings.


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397 Application to Company Law Board


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397 - Application to Company Law Boardfor relief in cases of oppression.

(1) Any member of a company who complain that the affairs of thecompany are being conducted in a manner prejudicial to public interest orin a manner oppressive to any member or members (including any one ormore of themselves) may apply to the Company Law Board for an orderunder this section, provided such members have a right so to apply in

virtue of section 399.(2) If, on any application under sub-section (1), the Company Law Board isof opinion(a) that the company's affairs are being conducted in a manner prejudicialto public interest or in a manner oppressive to any member or members;and

(b) that to wind up the company would unfairly prejudice such member ormembers, but that otherwise the facts would justify the making of awinding up order on the ground that it was just and equitable that thecompany should be wound up ;the Company Law Board may, with a view to bringing to an end the matterscomplained of, make such order as it thinks

398 - Application to Company Law Board for relief in cases of


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398 Application to Company Law Board for relief in cases ofmismanagement.

(1) Any members of a company who complain

(a) that the affairs of the company are being conducted in a mannerprejudicial to public interest or in a manner prejudicial to the interests ofthe company ; or

(b) that a material change (not being a change brought about by, or in theinterests of, any creditors including debenture holders, or any class of

shareholders, of the company) has taken place in the management orcontrol of the company, whether by an alteration in its Board of directorsor manager, or in the ownership of the company's shares, or if it has noshare capital, in its membership, or in any other manner whatsoever, andthat by reason of such change, it is likely that the affairs of the companywill be conducted in a manner prejudicial to public interest or in a

manner prejudicial to the interests of the company ;

may apply to the Company Law Board for an order under this section,provided such members have a right so to apply in virtue of section 399.

(2) If li i d b i (1) h


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(2) If, on any application under sub-section (1), theCompany Law Board is of opinion that the affairs of

the company are being conducted as aforesaid orthat by reason of any material change as aforesaidin the management or control of the company, it islikely that the affairs of the company will be

conducted as aforesaid, the Company Law Boardmay, with a view to bringing to an end or preventingthe matters complained of or apprehended, makesuch order as it thinks fit.

399 Right to apply under sections 397 and 398


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399 - Right to apply under sections 397 and 398.

(1) The following members of a company shall have the

right to apply under section 397 or 398 :

(a)in the case of a company having a share capital, notless than one hundred members of the company

(b)(b) in the case of a company not having a share capital,not less than one-fifth of the total number of its members

(c)(4) The Central Government may, if in its opinioncircumstances exist which make it just and equitable so

to do, authorise any member or members of thecompany to apply to the Company Law Board undersection 397 or 398


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(a)402 - Powers of Company Law Board on application undersection 397 or 398

a) the regulation of the conduct of the company's affairs in future ;(b) the purchase of the shares or interests of any members of the

company by other members thereof or by the company ;(c) in the case of a purchase of its shares by the company as

aforesaid, the consequent reduction of its share capital.

(d) the termination, setting aside or modification of any agreement,howsoever arrived at, between the company on the one hand, andany of the following persons, on the other, namely

(i) the managing director.(ii) any other director,

(v) the manager,


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(e) the termination, setting aside or modification ofany agreement between the company and any

person

(f) the setting aside of any transfer, delivery ofgoods, payment, execution

403 - Interim order by Company Law Board.Pending the making by it of a final order undersection 397 or 398, as the case may be, theCompany Law Board may, on the application of any

party to the proceeding, make any interim orderwhich it thinks fit for regulating the conduct of thecompany's affairs, upon such terms and conditionsas appear to it to be just and equitable.


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416 - Contracts by agents of company inwhich company is undisclosed principal.

a) the contract shall, at the option of the company,be voidable as against the company ; and

(b) the person who enters into the contract, orevery officer of the company who is in default, asthe case may be, shall be punishable with finewhich may extend to two thousand rupees.


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Wi di f


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Winding up of company

Winding up of the company means the activities ofthe company coming to the end, or the process ofputting an end to the companys life. It is a processby which the dissolution of the company takes place

and the asset of the company will be distributed tothe members and creditors, surplus if any is alsodistributed to the eligible members according totheir rights.

E


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MODES OF WINDING UP

BY THE ORDE OF COURT UNDER SUPERVISION

OF COURT

BY CREDITORS BY MEMBERS

VOLUNTARY WINDING UP

WINDIND UP OF COMPANY

There are 3 modes of winding up


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There are 3 modes of winding up

1. Compulsory winding up by the order ofthecourt

2. Voluntary winding up a. By membersb. By creditors

3. winding up under the supervision of thecourt

Compulsory winding up by theorder of the court


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Sec 433 lays down the following grounds for this type of

winding up by special resolution stating that the company be wound upby the order of the court if the company fails to deliver statutory reports to theregistrar in holding the statutory meeting where the public company fails to commence the businesswithin a year from the date of incorporation or suspends itsbusiness for a whole year the court may order for its windingup of the company where the number of members reduced

below 7 in case of public co and 2 in case of private companywhen company ceased to be commercially solvent

on just and equitable grounds

any ground, which is warranted under thcircumstances


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circumstances.The application may be filed into the court by a

one of the following personsq petition by the company itselfq petition by the creditorsq petition by the contributors

petition by the Registrar

CONSEQUENCES OF WINDING UP


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CONSEQUENCES OF WINDING UP

The court will send immediately intimation toofficial liquidatorThe petitioner and the company with in 30 days

has to file a certified copy of the court order.

It acts as a notice of discharge of the allemployeesThe power of the board is terminated and vests

with O/L

No suit can be filed against the company

VOLUNTARY WINDING UP


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Winding up by the creditors or members without any

intervention of the court is termed as voluntarywinding up.

If the members of the company pass an ordinaryresolution in the general body meeting on thecompletion of the period for which the company wasstarted expired or if some event happens resulting in

winding up of the company.

2. By passing special resolution in the general body towind up voluntary for any reason.

There are two types


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There are two types

Members voluntary winding upCreditors voluntary winding up

Members voluntary winding up

It requires the filing of a statutory declaration of thesolvency by the majority of the director of the

company with the registrar.

The question of credit voluntary winding up will

arise in a case where the company is not in a

position to pay off of his liability in full. In such a

case declaration of the solvency shall not be madeand filed with the registrar.


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CREDITORS VOLUNTARY WINDING UP

Th d i dit l t i di i b d


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The procedure in creditors voluntary winding up is based onthe presumption the company is insolvent

pprocedure1. Meeting of the creditor is to be called

A creditors meeting will be called for and the positions of the company and

the creditors estimated claims list is placed in the meeting.

2. Notice to registrar is to be given

A copy of the resolution passed must be filed with the registrar with in 10

days.


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VOLUNTARY WINDING UP UNDER SUPERVISION

OF THE COURT

At any time after a company has passed aresolution for voluntary winding up the courtmay make an order that the voluntary windingup should continue subject to the supervision ofthe court.

This will take place under the followingcircumstances


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3. Appointment of liquidator is to be made

The creditors and the members may nominate aperson to be The liquidator

1. Committee of Inspection may be appointed

If the creditors want they may appoint a committee of

inspection consisting of not more than 5 members.2. Board powers to cease on appointment of the

liquidator.

The liquidator will take over and complete the

liquidation process as per law

Th l ti f i di bt i d


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The resolution for winding up was obtainedby fraud

The rules relating to winding up order arenot being observed

The liquidator is prejudiced or negligent incollecting assets

When the company is wound up its name isstruck off from the registrar


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5 Company Law 2

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Transcript of 5 Company Law 2