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INTRODUCTION Cherished child of English parents

First passed in India in 1850

First amendment in the year 1857 Amended several times later

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THE COMPANIES ACT 1956 Came into force on 1st april 1956

Based largely on the recommendations of company lawcommittee (Bhabha committee)

Largest piece of legislation (658 sections and 15schedules)

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FEATURES Full and fair disclosure of various matters in the

prospectus

Detailed information of financial affairs of thecompany to be disclosed in its accounts

Provision for intervention and investigations by thegovernment into the affairs of the company

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FEATURES (Contd) Restrictions on powers of managing agents and other

managerial personnel

Enforcement of proper performance of their dutiesby company management

Protection of minority shareholders

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FORMATION OF COMPANY

Documents to be filed

MOA (Memorandum Of Association)

AOA (Articles Of Association) A statement of the normal / authorized capital

A notice of address of the registered office of thecompany

List of directors* An undertaking*

A declaration

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FORMATION OF COMPANY ( contd )

Certificate of IncorporationCertificate of Commencement of BusinessPromoter

Liability of Promoters Remuneration of Promoters

Preliminary or Pre-Incorporation contractsProvisional contracts

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KINDS OF COMPANIES BASED ON MEMBERSHIP

Private Company-Min no. of members: 2

-Max no. of members: 50-Restricts right to transfer its shares-Prohibits public issue of shares or debentures

Public Company

-Min no. of members: 7-Max no. of members: Unlimited-Doesnt restrict right to transfer its shares-Doesnt Prohibit public issue of shares or

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KINDS OF COMPANIES ( contd)

BASED ON INCORPORATION Chartered companies -companies which are

incorporated under a special charter granted bythe king or queen in exercise of royal power.

-East India Company(1600) Statutory Companies -which are created by

special act of parliament or state legislature atcentral or state govt. level-Reserve Bank of India

Registered Companies are companies whichare registered under the co.s act of 1956

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KINDS OF COMPANIES ( contd) BASED ON LIABILITIES

Co.s limited by SHAREScompanies in whichthe liability of its members is limited to theextent of the amount unpaid on the shares held

by a particular member. Co.s limited by GUARENTEE -the liability of

members is limited to a fixed amount whichmembers undertake to contribute to the assets

of the company in case of its winding up. Unlimited Co.swherein members are liable for

the debts of the company irrespective of theirinterest in the company

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BASED ON CONTROL

Holding Company -51% of the share capital

Subsidiary Company less that 51% Govt. Companies MNTC, ONGC

Foreign Companies IBM, MICROSOFT

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A)

B)

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PUBLIC CO. VS. PRIVATE CO.

Number of members

Commencement of business

Invitation to public

Transferability of shares Number of directors

Statutory meeting

Restrictions on appointment of directors

Managerial remuneration

Further issue of capital

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PARTNERSHIP VS. COMPANY

Registration

Number of members

Legal status

Property

Contracts

Management

Life duration

Liability

Creditors

Dissolution on death

Agency relationship

Transfer of interest

Statutory obligations

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MERGERS AND ACQUISITIONS

MERGER:Combination of two companies to form new

company or to run business under any one of the

merging companies name.

Eg.:1. NBC Universal; NBC and Vivendi UniversalEntertainment

2. US Airways; with America West Airways

3. Sony Ericson; Sony and Ericson4. NSN; Nokia and Siemens

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ACQUISITION:

Purchase of one company by another with no

new company being formed.

Eg.:1. P&G buys Gillette

2. Tata steel acquires Corus

3. Google buys Youtube4.Vodafone acquires Hutch

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MOTIVES AND BENEFITS OF M&A

Economies of scale

Improved market reach

Reduction in Tax liability Diversification of risk

Limit competition

Eliminating the financial constraints

Synergy

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TYPES OF MERGES

Horizontal merger

Vertical merger

Market-extension merger Product-extension merger

Conglomerate merger

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M&A -ITS FINANCING

All Shares Deals

Cash

Hybrids

DEMERGER/SPIN-OFF/SPIN-OUT:

-Effective opposite of a merger

-One Co. splits into two

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