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Company - Company defined under Companies Act 2013 or under any previous…
Company - Company defined under Companies Act 2013 or under any previous law Sec 2-20
Characteristics
Profit Sharing with shareholders
Business Ops- has to be conducted
Common Purpose
- Shared Objectives of Association
Voluntary association
Legal Framework
Core Characteristics
Legal Entity
Can Sue & be sued
Contractual Agreements
- Can enter Contract
Debt Responsibility
- Debt are its own not its members
Property Ownership
- Buy & Sell
Perpetual Succession
Continuous existence despite members dying
Limited Liability
- Debts are its own, not of its members
Shares Transferability
-
Shares in a company can be transferred according to the provisions in the Articles of Association, ensuring:
● Liquidity for investors
● Continuous flow of capital
● Easy exit mechanisms for shareholders
Common Seal (Optional)
Artificial Legal Person
- Acts through natural persons
Company Types
Classification Based on Membership
Public Ltd Sec 2-71
Key Features:
Members -
Min 7;Max No limit; Directors Min 3
May invite public to subscribe for shares and debentures
Shares freely transferable
Must have minimum paid-up capital as prescribed
Subject to more stringent regulatory requirements
Name must end with "Limited"
Pvt Subsidiary Company of a Public Company will be treated as a Public company
Pvt Ltd Sec 2-61
Key Features
Members -
Min 2; Max 200
Directors Min 2
Restricts right to transfer shares through Articles
Prohibits invitation to public for subscription
● Cannot issue prospectus
name
"Private Limited"
or
"Pvt. Ltd."
Enjoys certain exemptions and relaxations under the Act
Cannot invite public deposits
● Cannot issue shares with differential voting rights
● Enjoys relaxed compliance requirements
One Person Company Sec 2-62
● Can be formed by a single person
● Must nominate one person who becomes member in case of death/incapacity
Director >= 1
● Ideal structure for sole entrepreneurs and professionals
● Cannot convert into Section 8 company
● Cannot carry out non-banking financial investment activities
Eligibility
Only natural persons who are Indian citizens and residents can form OPC
One person One OPC
Nominee must give written consent
Classification Based on Liability
Company Limited by Shares [Section 2(22)]
Members' liability limited to unpaid value of shares held by them. most common structure.
Company Limited by Guarantee [Section 2(21)]
Members undertake to contribute specified amount to company assets when winding up. non-profits, clubs, & associations.
May or may not have share capital
● Liability arises only during winding up
● Suitable for charitable objects
Unlimited Company [Section 2(92)]
unlimited liability of Members for company debts. Rarely used in practice.
MoA & AoA
MoA
Table A - Company ltd by shares
Table B - Company Ltd by guarantee &
no
share capital
Table C- Company Ltd by guarantee &
having
share capital
Table D -
Unltd
Company & no share capital
Table E -
Unltd
Company
having
share capital
Clauses of MoA
Full Name
Regd Off address & Domicile address
Objective/objects
Liability - Monetary liability of each member
Subscription/Association - agreed to form company & agree to pay for subscribed shares
AoA
Table F- Company ltd by shares - Company ltd by shares
Table H - Company Ltd by guarantee &
no
share capital
Table G - Company Ltd by guarantee &
having
share capital
Table J -
Unltd
Company & no share capital
Table I-
Unltd
Company
having
share capital
Documents to be submitted incl MoA, AoA. Declaration
Sec 7
Formation of a Company
Section 3
Method 2
-
SPICe
- Simplified proforma for incorporating company electronically -
Application INC 32 & e-MoA INC 33 & e-AoA INC 34
Method 1
-
RUN
Reserve Unique Name - MCA website
Section 7
File with Registrar MoA & AoA
Declaration through Lawyer,CA,CS & by a person named in AoA as Dir/Mgr/Secy
Declaration by each Subscriber & Directors that no fraud,
Share Capital
- money raised by a company by issuing shares to investor
Represents Company ownership
Shareholders get rights (like voting, dividends)
Unlike loans, money doesn’t have to be repaid, but they bear risks of profits and losses.
Types
Authorised
-Max Capital raisable - per MoA
Issued
- Part offered to Investors
Subscribed
- Part investors buy
Called-up
- Part of subscribed Company asks shareholders to pay
Paid-up
- Amt recd from Shareholders
Equity
- Voting rights & profit based dividends
Preference
- Dividend rights & priority in repayment
Importance
Growth Fuel
– Helps finance expansion and innovation.
Reduces Debt Burden
– Unlike loans, it’s not repayable.
Investor Confidence
– strong capital base attracts more investors.
Rules and Regulations
Governed by Companies Act, 2013 in India.
Must disclose share capital details in MoA.
Shares Issue must follow SEBI regs
Preference shares: max tenure 20 years