Monday 3 August 2015

COMPANY LAW


The word 'Company' is an amalgamation of the Latin word 'Com' meaning "with or together" and 'Pains' meaning "bread". Originally, it referred to a group of persons who took their meals together. A company is nothing but a group of persons who have come together or who have contributed money for some common person and who have incorporated themselves into a distinct legal entity in the form of a company for that purpose. Company law (or the law of business associations) is the field of law concerning companies and other business organizations. This includes corporations, partnerships and other associations which usually carry on some form of economic or charitable activity. The most prominent kind of company, usually referred to as a "corporation", is a "juristic person", i.e. it has separate legal personality, and those who invest money into the business have limited liability for any losses the company makes, governed by corporate law. The largest companies are usually publicly listed on stock exchanges around the world. Even single individuals, also known as sole traders may incorporate themselves and limit their liability in order to carry on a business. All different forms of companies depend on the particular law of the particular country in which they reside.

How a Company is formed in India
Please note that the process of formation of a company in India has three stages viz. Promotion stage, Incorporation Stage and Commencement of Business stage.

Promotion Stage: The formation of a company begins with an idea. The manner in which the idea will work or can be implemented is termed as promotion of a company. The person or persons who are involved in promotion are called "Promoter(s)". The promoters are well in advance needed to decide about the product to be produced, the size of the company, the capital involved in the project, the sources of the capital and whether it shall be a Private Company or a Public Company etc before the formation of the company. In case of a Private Company, at least 2 persons or in case of a Public Company at least 7 persons shall subscribe their names to a Memorandum of Association (MoA) and they shall also comply with the other formalities in respect of the registration of the company under the Indian Companies Act, 2013. After the above process they approach the RoC with the MoA. Registrar of Companies (ROCs) is appointed under Section 609 of the Companies Act, covering various States and Union Territories. RoC are vested with the primary duty of registering companies floated in the respective States and the Union Territories and ensuring that such companies comply with the statutory requirements under the Act. The offices function as registry of records relating to the companies registered with them. In beginning it is always advisable that the promoters should check with the registrar the name of their new company because, if already a company with such name is existing, it shall not be allowed by the Registrar, because two companies with the similar name cannot be registered. If no other company is registered with that name, an application for the registration of the company should be presented to the Registrar of the State.

The application should contain the following components:  
Memorandum of Association
Articles of Association, if any which should be signed by the subscribers to the Memorandum of Association.
 Any agreement with the individual persons who are proposed to e appointed as Managers, Directors or Managing Director of the company.
 A statement of the nominal capital of the Company. A notice of address of the registered office of the company.  
List of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.
 Other declarations and documents

Incorporation & Commencement Stage: If the Registrar of Companies is satisfied that the entire requirement has been fulfilled then he will register the company and enter the name of the company in the Register of Companies. This stage is known as ‘Incorporation Stage’. When a company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation.

Company Act, 2013 In India the journey of company law started under the Companies Act, 1956 but in the year 2013 new company law was enacted by the Parliament which finally received the president’s acceptance and was made effective w.e.f. 12-09-2013. The new has brought in some changes to the existing one and has also introduced some new concepts in the field of company law. Some of the salient features of the new law are as follows:
1. Democracy of Shareholders: The new law has introduced new concept of class action suits with a view of making shareholders and other stakeholders more informed and knowledgeable about their rights so that they can be saved from exploitation.
2. Strengthening Women Contributions through Board Room: The new act stipulates appointment of at least one woman Director on the Board of the prescribed class of Companies so as to widen the talent pool enabling big Corporates to benefit from diversified backgrounds with different viewpoints.
3. National Company Law Tribunal: The act has also introduced National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) to replace the Company Law Board and Board for Industrial and Financial Reconstruction. This has been done to release courts from the over burden which they faced.
4. Increase in number of Shareholders: The 2013 act has increased the number of maximum shareholders in a private company from 50 to 200.
5. One Person Company: The new act has also introduced a new form of private company, i.e., one person company that may have only one director and one shareholder.

6. Corporate Social Responsibility: The 2013 act stipulates certain class of Companies to spend a certain amount of money every year on activities/initiatives reflecting Corporate Social Responsibility. There may be difficulties in implementing in the initial years but this measure would help in improving the Under-privileged & backward sections of Society and the Corporate would in fact gain in terms of their reputation and image in the Society.

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