Companies Act

COMPANIES ACT,

COMPANIES ACT,

1956

Introduction

Introduction

Objects of Company Law

Objects of Company Law

1.

1.  T To encourage investmentso encourage investments 2.

2.  T To ensuro ensure proper administratione proper administration 3.

3.  T To prevent o prevent malpracticesmalpractices 4.

eaning of Company

 !" company is de#ned as a form of

business organi$ation in w%ic% t%e funds of a large number of investors are

managed by a few persons for t%e purpose of earning pro#ts w%ic% are s%ared by all investors&

C%aracteristics of a

Company

 'egistration

 (eparate legal entity  )erpetual (uccession  Transferable s%ares  Limited liability  Common seal  (eparate property  Capacity to sue

 Types of Companies

". *rom t%e point of view of +ncorporation

,. *rom t%e point of view of Liability

C. *rom t%e viewpoint of -ationality

1.*rom t%e point of view of +ncorporation

Types of Companies

Chartered Company

 /istorically0 most of t%e early companies

were set up t%roug% a 'oyal C%arter.

 *or eample0 t%e ast +ndia Company0 t%e

C%artered ,an of "ustralia0 +ndia and C%ina0 etc.0 were incorporated by t%e grant of a special 'oyal C%arter.

 +n +ndia0 t%is form of organi$ation does not

eist now because t%ere is no monarc%y.

 ven in ngland0 t%is met%od is rarely

used now. Companies of t%is ind may be called c%artered companies.

Statutory Company

 +n t%is case0 a special law is passed to establis% t%e

company.

  T%is is done only in special cases w%en it is necessary

to regulate t%e woring of t%e company for some speci#c purposes.

  T%ese are mostly concerned wit% public utilities

 amples of suc% companies in +ndia are t%e +ndustrial

*inance Corporation0 t%e Life +nsurance Corporation of +ndia0 t%e "ir +ndia0 'eserve ,an of +ndia0 etc.

  T%e provisions of +ndian companies act 1567 apply to

t%em if t%ey are not inconsistent wit% t%e provisions of t%eir special "cts.

e!i"tered Company

 T%e Companies "ct0 15670 lays down

procedures by w%ic% a company can be broug%t into eistence.

   "nybody w%o wants to incorporate a

company can do so by taing necessary steps outlined t%erein.

 ,y far t%e largest number of companies is

incorporated under t%e Companies "ct.  T%ese companies may be called registered

#.

*rom t%e point of view of Liability

TYPES

$n%imited Company

 o not %ave any limit on t%e etent of

liability of its members.

 Liability of eac% member etends to w%ole

amount of t%e company8s debts and liabilities.

 /owever0 t%e members cannot be sued

upon t%e directly by t%e company9s creditors.

Company &imited 'y (uarantee

Classification

Company Limite !y G"a#antee not

Ha$in% s&a#e capital

Company Limite !y G"a#antee

Company &imited 'y

(uarantee

 Not )a*in! Share Capita%

 emorandum Limits t%e member8s liability.  +t is limited to t%e amount as may %ave

been undertaen by O" to contribute in t%e case of winding up.

Company &imited 'y (uarantee

 )a*in! Share Capita%

 emorandum Limits t%e member8s liability.  oreover0 liability would also etend to t%e

unpaid value of t%e s%ares %eld by t%e member.

&imited Company

 T%e liability of t%e members of t%e

company is limited to t%e amount remaining unpaid on t%e s%ares.

 /ence t%e %olders of t%e fully paid up

s%ares cannot be called upon for t%e furt%er contribution.

 T%e liability of t%e members %olding t%e

partly paid up s%ares eists even if t%e company is in process of winding up.

+.

*rom t%e viewpoint of -ationality

TYPES

Nationa% Company

 +n t%is case0 t%e control and t%e

management of t%e a:airs of t%e company are to be carried out wit%in t%e geograp%ical boundaries of t%e country.

Mu%tinationa% Company

 T%e branc% is not an +ndependent entity

and is lined up to t%e parent company eisting in some ot%er country.

4. *rom t%e view point of

)ublic +nterest

TYPES

Pri*ate Company



)rivate Company is a company ;%ic%

by its "rticles <

i. 'estricts t%e rig%ts of t%e members to

transfer t%e s%ares0

ii. Limits t%e members%ip to 6=0 ecluding

t%e past and present employees of t%e company w%o are t%e members of t%e company0 and

iii. )ro%ibits t%e invitation to public0 for

subscription of s%ares or debentures of t%e company.

Pu%ic Company



)ublic Company is a company ;%ic%

by its "rticles <

i. oes not restrict t%e rig%ts of t%e

members to transfer t%e s%ares0

ii. oes not limit t%e members%ip to 6=0

ecluding t%e past and present

employees of t%e company w%o are t%e members of t%e company0 and

iii. +nvites t%e public0 for subscription of

(o*ernment Company

+t is a company in w%ic% not less t%an 61> of t%e paid<up s%are capital is %eld by one or more of t%e following or any combination t%ereof<

  _{T%e Central ?ov. @ one or more ?ovt. Co.}

 "ny (tate ?ov. or ?ovts and one or more ?ovt. Co.A

  _{T%e Central ?ovt.0 one or more (tate ?ovt. and one or more}

?ovt. CompaniesA

  T%e Central ?ovt. and one or more corporations owned or

controlled by Central ?ovt.A

  T%e Central ?ovt.0 one or more (tate ?ovt. and one or more

Corps. Owned or controlled by t%e Central ?ovt.

 One or more corps. Owned or controlled by Central ?ovt. or

(tate ?ovt.

istinction ,etween )rivate Ltd. @ )ublic Ltd. Company

 inimum capital reBuired is

10==0===

 inimum 2 and maimum 6=

members  "t least 2 directors  -o restriction on appointment of directors  -on<transferable s%ares  'estriction on invitation to

subscribe for s%ares

 Can start business wit%out

obtaining certi#cate of commencement

 Minimum capita% re-uired i" 5,,  _{Minimum / memer". No} %imit on ma0imum memer"  _{At %ea"t + director"}  _{No re"triction on}

appointment o director"  _{Tran"era%e "hare"}

 _{In*itation to "u"crie or} "hare" i" a%%o2ed

 Can "tart u"ine"" on%y ater otainin! certi3cate

o comencement

/olding Company @ (ubsidiary Company

;%en one company controls anot%er company it is called holding company.

Control may be in any following ways

 ;%ere it controls t%e composition of t%e ,oard of

irectors of anot%er companyA or

 ;%ere it controls more t%an %alf of t%e total

voting power of t%e ot%er companyA or

 ;%ere it %olds more t%an %alf of t%e nominal

value of eBuity s%are capital of t%e ot%er companyA or

 ;%ere it is a subsidiary of any company w%ic% is

One an Company

;/- " SIN(&E PESON )O&4S A&MOST A&& T)E S)AES O T)E COMPAN +T +( C"LL O- "-CO)"-. (DC/ " CO)"- /"( +T( L?"L )'(O-"L+T +* +T CO)L+( ;+T/  T/ -C(("' 'ED+'-T( O* '?+(T'"T+O-0 +T " , " )D,L+C O'

+llegal "ssociation

"- CO)"-0 "((OC+"T+O- O' )"'T-'(/+) C"''+-? O- ,"-G+-? ,D(+-(( ;+T/ O'

 T/"- TEN MEM'ES O' C"''+-? O- "-

OT/' ,D(+-(( ;+T/ MOE T)AN T7ENT

MEM'ES  T/"T /"( *O' +T( O'8ECT  T/

"CED+(+T+O- O* (AIN, WITHOUT BEING

REGISTERED UNDER THE COMPANIES ACT (/"LL , CO-(+' "- +LL?"L "((OC+"T+O-.

+ncorporation of

Companies

(teps for formation of a

company

 Types of Company  "vailability of -ame

 T%e emorandum and "rticles of

"ssociation duly signed0 and stamped.

 T%e agreement0 if any wit% any individual for

appointment as its anaging or w%ole<time director.

 Consent of directors in *orm 25.

 -otice of 'egistered address in *orm 1H to

be given wit%in 3= days of t%e date of incorporation.

(teps for formation of a

company

 )ayment of 'egistration *ees.

 )ower of attorney0 to ful#ll various legal and

ot%er formalities.

 (tatutory eclaration in *orm -o. 1 t%at all

reBuirements of t%e Companies "ct and t%e rules t%ere under %ave been complied wit%.

 T%e declaration s%ould be made by eit%er

an advocate of (upreme Court I /ig% Court0 a practicing C%artered "ccountant or a

director0 or a manager or a secretary named in t%e "rticles of t%e proposed company.

ocuments

Doc"ments

emorandum of

"ssociation

 ain document of t%e company.

 +t de#nes t%e objects of t%e company for w%ic% it is

establis%ed.

 Lays down t%e conditions upon w%ic% alone t%e

company allowed to be formed.

 C%arter of t%e constitution of t%e company.

 +t de#nes t%e scope of its activity and also states

t%at anyt%ing beyond it is unaut%ori$ed and illegal.

 T%e memorandum s%all be one of t%e forms

given in Tables ,0 C0  and  in sc%edule 1 of t%e "ct.

/ow O" LoosN

 T%e emorandum of "ssociation must be

o printed0

o divided into paragrap%s0

o numbered consecutively0

o and signed by eac% Kseven or more in case of a

public company0

o w%o must add %is name0 address and description

o in t%e presence of at lease one witness w%o is to

Clauses of O"

 -ame clause

 'egistered oce or (ituation clause  Object clause

 Liability clause  Capital clause

-ame Clause

 T%e Company is a legal entity. T%erefore0 it

must %ave its name to establis% its identity.

 T%e name of t%e company s%ould not be

(imilar0 Dndesirable0 or w%ic% will mislead t%e public. .g. +ndian -ational Pag0 name or pictorial representation of a%atma ?and%i or )rime inister of +ndia0 etc.

 +ts use %as been0 t%erefore0 pro%ibited by

t%e ?overnment under t%e mblems and -ames K)revention of +mproper Dse "ct0 156=.

'egistered Oce Clause

 very company must %ave a registered oce

from t%e day it starts its business or wit%in 3= days of getting t%e Certi#cate of +ncorporation0 w%ic%ever is earlier.

 emorandum of "ssociation must state t%e

name of t%e (tate in w%ic% t%e registered oce of t%e company is situated.

 T%is clause is important as it mentions t%e

residence for t%e purpose of t%e communication wit% t%e company.

 +t determines t%e jurisdiction of t%e company

and also mentions t%e place w%ere all t%e records of company are maintained.

'egistered Oce Clause

 ;%ere t%e company wants to c%ange its

registered oce from one state to anot%er t%en it can do so by passing a special resolution as well as by con#rmation of Company Law ,oard.

 (uc% con#rmation will be given provided

debenture %olders and creditors are satis#ed and suc% alteration is fair.

Object Clause

 +t is t%e most important clause in t%e emorandum of

"ssociation.

 +t de#nes and limits t%e scope and sp%ere of t%e operation of

t%e company and a:ords protection of its funds.

 +t states t%e main objects as well as incidental objects of t%e

company.

  _{T%e transaction w%ic% does not fall wit%in t%e scope of t%e}

main objects of t%e company will not be valid and binding on t%e company simply because it is not bene#cial for t%e company.

 "s regards to t%e alteration of object clause a special

resolution must be passed and t%e con#rmation by t%e Company Law ,oard must also be obtained.

  T%e alteration is done to obtain a main purpose by new

means or to enlarge t%e area of its operation0 or to restrict t%e objects or sell or dispose of or amalgamate t%e undertaing.

Liability Clause

 T%e liability clause states t%at t%e member or

t%e s%are%older will be liable to pay only t%e unpaid value of s%ares %eld by %im.

 +f it is a company limited by guarantee0

emorandum of "ssociation must furt%er state t%at eac% member undertaes to contribute to t%e assets of t%e company at t%e time of t%e winding up w%ile %e is a member.

 Ordinarily t%is clause cannot be altered ecept

t%at t%e liability of t%e directors may be made unlimited under certain circumstances.

Capital Clause

 "mount of s%are capital wit% w%ic% t%e

company is to be registered and its division into s%ares of a #ed amount must be stated in t%e emorandum of "ssociation of a company limited by s%ares.

 T%e capital wit% w%ic% t%e company is

registered is called Q'egistered8 or Q"ut%ori$ed8 or Q-ominal8 Capital

 Capital clause can be varied or capital can be

reduced Kby special procedure or t%e rig%ts of t%e s%are%olders can be varied.

(ubscriptionI"ssociation

Clause

 T%is clause gives idea about t%e people

w%o %ave created t%e company.

 aimum seven members in a public

company and two members in a private company s%all subscribe to t%e emorandum of t%e company.

 " declaration is to be given. (uc%

declaration is to be signed by a member in presence of a witness.

 oreover t%e details as regards to name0

address0 age and business of t%e promoters are also recorded under t%is

octrine of Dltra Fires

 "ny act done by t%e company w%ic% is

neit%er aut%ori$ed by its object nor by t%e Companies "ct0 t%at act is called QDltra

Fires8 i.e beyond t%e powers and aut%ority of t%e company.

 "n act w%ic% is ultra vires t%e company is

void and cannot bind t%e company.

 (ince t%e act is void i.e it doesnot create

any legal relations%ip0 it cannot be rati#ed even by t%e s%are%olders.

octrine of Dltra Fires

 +f t%e directors do any act w%ic% are outside

t%e object clause of t%e company t%en t%e

s%are%olders are not liable. T%e directors are personally liable for t%e ultra vires act done by t%em.

 "ct Dltra Fires to O" cannot be rati#ed by

t%e s%are%olders but acts Dltra Fires to "O" can be rati#ed by t%em.

 "ny s%are%older can bring court order to

prevent t%e company from doing an Dltra Fires "ct.

(CO)

 T%e articles of association are subordinate

to t%e memorandum of association of t%e company.

 T%e articles contain t%e internal regulations

of t%e company.

 T%e provisions of t%e articles must not be

inconsistent wit% or repulsive to any of t%e provisions of t%e memorandum of t%e "ct.

 "O" can be altered at any time according

CO-T-T(

"rticles usually contain provisions relating to t%e following matters.

  _{(%are capital0 rig%ts of s%are%olders0 variation of}

t%ese rig%ts0 and payment of commissions0 s%are certi#cates

  _{Calls on s%ares}

   _{Transfer of s%ares}

   _{Transmission of s%ares}   _{*orfeiture of s%ares}

  _{Conversion of s%ares into stoc}   _{"lteration of Capital}

CO-T-T(

  _{?eneral meetings and proceedings t%ereat}

  _{Foting rig%ts of members0 voting poll and}

proies

  _{irectors0 t%eir appointment0 remuneration0}

Buali#cation0 powers and proceedings of ,oards of irectors

  _anager   _(ecretary

  _{ividends and reserves}

  _{"ccounts0 audit and borrowing powers}   _{Capitali$ation8s of pro#ts}

"LT'"T+O- )ass t%e (pecial 'esolution

 *ile t%e copy of t%e (pecial 'esolution wit% t%e

'egistrar wit%in 3= days of passing t%e special resolution

 "ttac% t%e resolution wit% every copy of "O"  ust not be inconsistent wit% t%e "ct

 ust not conPict wit% O"

 ust not sanction anyt%ing illegal

 ust be for bene#t of t%e company

 ust not increase t%e liability of t%e members

CO-(T'DCT+F -OT+C

 very outsider dealing wit% t%e company is

deemed to %ave t%e notice of t%e contents of O" @ "O".

 T%ese documents0 on registration wit% t%e

'egistrar0 assume t%e c%aracter of public documents.

 T%is is nown as Constructive -otice of

+-OO' "-"?-T

  T%ere is one limitation to t%e doctrine of constructive

notice of t%e O" @ "O" of t%e company.

  T%e outsiders dealing wit% t%e company are entitled

to assume t%at as far as internal proceedings are concerned0 everyt%ing %as been regularly done.

  T%ey are presumed to %ave read t%ese documents

and to see t%at t%e proposed dealing is not inconsistent t%erewit%.

  T%ey cannot inBuire into t%e regularity of internal

proceedings as reBuired by O" @ "O". T%ey can presume all is being regularly done.

  T%is limitation of doctrine of constructive notice is

ceptions to t%e octrine of +ndoor

ceptions to t%e octrine of +ndoor

anagement

anagement



 Gnowledge of +rrGnowledge of +rregularityegularity



 "ct of an agent outside t%e scope of %is"ct of an agent outside t%e scope of %is

aut%ority aut%ority



MOA MOA

1.

1. etermines t%eetermines t%e

constitution and constitution and

activities of t%e co. activities of t%e co.

2.

2. +t is fundamental+t is fundamental

c%arter c%arter

3.

3. very co. must %avevery co. must %ave

a O" a O"

4.

4. "lteration of O" is"lteration of O" is

dicult dicult

AOA

AOA

1.

1. +t contains rules and+t contains rules and regulations of internal regulations of internal management of co. management of co. 2. 2. +t is subsidiary to+t is subsidiary to O"@ if conPicting0 O"@ if conPicting0

O" would prevail

O" would prevail

3.

3. )ublic company)ublic company

limited by s%ares may

limited by s%ares may

or may not %ave "O"

or may not %ave "O"

4.

4. "lteration is easier by"lteration is easier by special resolution

special resolution

i:erence ,etween O"

i:erence ,etween O"

@"O"

4IECTOS

;%at oes Company Law

(peaN

 Section #;1+<  de#nes director as Rdirector

includes any person occupying t%e position of a director by w%atever name called.R

 irector is not servant of t%e company. /e is

rat%er an ocer of t%e company.

 T%e articles of association of t%e company and

provisions of t%e companies "ct will govern t%e selection of t%e directors of t%e company.

 T%e management or t%e a:airs of t%e company

will be in t%e %ands of t%e directors. T%e directors are collectively called t%e ,oard of irectors.

 T%e articles will determine t%e number of

directors to be appointed to t%e ,oard of irectors of a company. "s per t%e "ct0 minimum

)osition of irector

Position

"( " T'D(T

 " trustee is a person w%o is owner of t%e

property deals as a principal or owner or master wit% obligation on be%alf of t%e companyIperson

 T%e directors %ave to use t%eir powers in

t%e interest of t%e company. T%e directors are epected to s%ow t%e capacity and

diligence as a trustee.

 +f t%e directors misuse t%e position0 t%ey are

%eld liable. T%e directors are t%e trustees in connection wit% t%e transfer and distribution

"( "- "?-T

  T%e position of director is lie an agent.

 T%ey %ave to function as per t%e provisions contain in t%e "rticles of t%e company and t%e Company Law.

  T%eir actions are not t%eir personal

transactions0 but t%ey are t%e transactions done for and on be%alf of t%e company.

"( " )"'T-'

 irectors %eld s%ares. T%e members of

t%e company also %old s%ares. T%e directors wor as t%e representatives of t%e members. T%us0 t%ey are lied partners of t%e members of t%e company.

"ppointment of irectors

 "ppointment as *irst irectors

 "ppointment by lection in ?eneral eetings  "ppointment by -omination by ,O

 "ppointment by -omination by Central ?overnment

 "ppointment by -omination in (tatutory Corporations

 "ppointment on t%e basis of Euali#cation s%ares  "ppointment by )roportional 'epresentation

*irst irectors

)ersons named in t%e articles of association as directors become t%e #rst directors of t%e company or in t%e absence of t%e provision in t%e articles regarding persons to be appointed *irst irectors0 t%e subscribers to t%e memorandum of association will become t%e #rst directors.

"ppointment by lection in

?eneral eetings

 T%e members at t%e general meeting of

t%e company will elect t%e directors.

 "t t%e general meetings generally

directors are appointed in place of retiring directors.

"ppointment by -omination

by ,O

  T%e ,oard of irectors will #ll up t%e ca!"al #acancy   arising among t%e directors by nomination.

 " casual vacancy arises in case o deat%0 resignation0 disBuali#cation or any ot%er reason t%an retirement by rotation.

 irectors so appointed will remain in t%e oce only for t%e unepired period for w%ic% t%e director w%ose post is vacant0 would %ave remained in t%e oce.

"ppointment by -omination

by Central ?overnment

Dnder Section => of t%e "ct0 t%e Central ?overnment can nominate some directors to t%e ,oard in case of mismanagement and oppression.

"ppointment by -ominations

in (tatutory Corporations

Certain statutory corporations possess similar powers e.!. t%e +ndustrial *inance Corporations "ct of 154S empowers t%e Corporation to nominate a director to t%e ,oard of a company

"ppointment on t%e ,asis of

"ppointment on t%e ,asis of

Euali#cation

Euali#cation

(%ar

(%ar

es

es

;%ere a person %olds minimum number ;%ere a person %olds minimum number of s%ares as provided in t%e articles t%en of s%ares as provided in t%e articles t%en %e is said to %ave obtained %e is said to %ave obtained

$%"ali&ca'ion !ha()!

$%"ali&ca'ion !ha()!9. " person can be9. " person can be appointed as a director on t%e basis of appointed as a director on t%e basis of suc% Buali#cation

"ppointment by

"ppointment by

)r

)r

oporti

oporti

onal

onal

'

'

epresentati

epresentati

on

on



  T%e  T%e articles articles of of t%e t%e company company may may provide provide forfor

t%e appointment of not less t%an 2I3

t%e appointment of not less t%an 2I3rdrd  of t%e  of t%e

total number of directors of a public total number of directors of a public company0 according to t%e principles of company0 according to t%e principles of proportional

proportional reprrepresentation.esentation.



  T%e  T%e appointments appointments must must be be done done once once inin

every 3 years and interim casual vacancies every 3 years and interim casual vacancies must be #lled by t%e ,O in ,oard meetings. must be #lled by t%e ,O in ,oard meetings.

"lternate irectors

"lternate irectors



  T%e  T%e ,oard of ,oard of irectorirectors s of of a a Company0 may0 Company0 may0 ifif

so aut%ori$ed by its articles or by resolution so aut%ori$ed by its articles or by resolution passed by a company in general meeting0 passed by a company in general meeting0 appoint alternate director during absence of appoint alternate director during absence of t%e eisting director

t%e eisting director or a period not %e""or a period not %e"" than three month"

than three month" from t%e (tate in w%ic% from t%e (tate in w%ic% meeting of t%e ,oard are ordinarily %eld.

meeting of t%e ,oard are ordinarily %eld.



  T%e  T%e alternate alternate director director cannot cannot %old %old oceoce

longer t%an t%e original director. /e will longer t%an t%e original director. /e will vacate %is oce if and w%en t%e original vacate %is oce if and w%en t%e original director r

Euali#cation to be a

irector



" director must be<

i. "n individual0

ii. Competent to contract0 and

iii. /old a s%are Buali#cation0 if so reBuired

isBuali#cation for

irectors

 " person s%all not be capable of being

appointed as director of t%e company0 if  +. /e %as been found to be of unsound mind

++. /e is an insolvent.

+++. /e %as applied to be adjudicated as an insolvent and %is

application is pending.

+F. /e is convicted by a Court0 of any o:ence involving moral

turpitude and sentenced in respect t%ereof0 to imprisonment for not less t%an si mont%s and period of #ve years %as not elapsed from t%e date of t%e epiry of t%e sentence.

F. /e %as not paid any call in respect of s%ares of t%e

company %eld by %im and si mont%s %ave elapsed from t%e last date #ed for t%e payment of t%e call.

'emoval of irectors

 ,y (%are%olders

 ,y Central ?overnment  ,y Company Law ,oard

'emoval ,y (%are%olders

 " company may by ordinary resolution remove a

director before t%e epiry of period of oce on t%e intent of t%e s%are%olders in t%e annual general meeting by<

 _{?iving special notice to t%e director at least 14 days}

before t%e meeting in w%ic% t%ey are to be removed0

 _{" copy of t%e notice to be sent to t%e s%are%olders}

and to ot%er directors0

 _{(%are%olders can remove t%e director by appointing}

a new director in %is place w%o will %old t%e oce only for t%e unepired tenure of t%e previous director.

irectors w%o cannot be

removed by (%are%olders

 "n additional director appointed by t%e Central

?overnment under Section => in case of mismanagement and oppression cannot be removed.

 +n a private company a director appointed for

life and %olding oce as suc% on 1st "pril 1562 cannot be removed by member9s resolution.

 ;%ere t%e articles of a company provide

for t%e election of directors by

proportional representation0 a director elected by t%at met%od cannot be removed by t%e resolution.

'emuneration to t%e irector

for %is 'emoval

+f a director0 by an agreement or ot%erwise is entitled to receive compensation for t%e premature termination of %is service0 %e can enforce %is claim notwit%standing t%e removal by t%e resolution.

'emoval ,y Central ?overnment

 T%e Central ?overnment s%all by order remove from t%e oce any directors against w%om t%ere is a decision of t%e /ig% Court0 %olding t%at %e is not a #t or proper person to %old t%e oce of director

'emoval ,y Company Law ,oard

 Section =# read wit% Section" +9/ and 35H gives wide power to t%e court including t%e removal of t%e directors.

 On an application by any memberImembers of t%e company in cases of mismanagement or oppression0 t%e Company Law ,oard may terminate any irector.

 irectors so terminated cannot be appointed as directors of ot%er companies also upto a period of 6 years of t%eir termination.

 (uc% directors are not entitled to any damages or compensation for loss of oce.

'etirement

 )roportion of irectors to retire by rotation<

2I3rd _{only in #rst "? t%e ratio is 1I3rd}

 Facancy to be #lled at "?0 if not t%en

retiring directors will be deemed to be re< elected

)owers of irectors

Limitations of irectors

 (ell0 lease0 etc. t%e w%ole undertaing  'emit or give time for t%e repayment of

any debt by a director

 +nvest or borrow money in contravention

of t%e act.

uties of irectors

 D-' T/ CO)"-+( "CT +'CTO'( "'

"CCOD-T",L TO *O' T/+' "CT( 

O-,/"L* O* T/ CO)"-. ,(+( T/ (T"TDTO' DT+(0 ;/+C/ T/ +'CTO'( /"F TO )'*O'  TO -(D' (T'+CT CO)L+"-C ;+T/ T/ F"'+OD(

)'OF+(+O-( O* T/ "CT T/ "L(O /"F C'T"+-DT+( ;/+C/ "'+( ODT O* T/+' *+DC+"'

'L"T+O-(/+) ;+T/ T/ CO)"-.

STAT$TO 4$TIES@

 To &l) ()'"(n o* allo'm)n'+

 No' 'o i!!") i(()d))ma,l) p()*)()nc) !ha() o( !ha()! o(

!ha() ()d))ma,l) a*')( - y)a(!+

 _{To di!clo!) in')()!'} 

 _{To di!clo!) ()c)ip' *(om '(an!*)( o* p(op)('y}   _{D"'y 'o a'')nd Boa(d m))'ing}

 OTHER DUTIES+

  _{TO CO-F- (T"TDTO'0 "--D"L ?-'"L T+-? K"? "-}

"L(O T'"O'+-"' ?-'"L T+-?(.

  _{TO )')"' "- )L"C "T T/ "? "LO-? ;+T/ T/ ,"L"-C}

(/T "- )'O*+T @ LO(( "CCOD-T " ')O'T O- T/ CO)"-8( "**"+'( +-CLD+-? T/ ')O'T O* T/ ,O"' O* +'CTO'(.

  _{TO "DT/-T+C"T "- "))'OF "--D"L *+-"-C+"L (T"T-T.}   _{TO "))O+-T *+'(T "D+TO' O* T/ CO)"-.}

(ENEA& 4$TIES@

 4uty o !ood aith  4uty o care.

4e3nition

 ;inding up of a

company is t%e process of putting an end to its life. "t t%e end of t%e winding up0 t%e company will be destroyed or dissolved and will %ave no assets or liabilities.

7indin! up and 'anruptcy

from ,anruptcy. +n

banruptcy0 t%e

property of t%e debtors is divested from %im and rests in t%e ocial receivers or t%e ocial assignees w%ile t%e winding up t%e property of t%e company is not divested from it.

ea"on" or 2indin! up o a company

 T%e main object of t%e

company for w%ic% it was establis%ed %as been accomplis%ed.

 +t %as become impossible to

carry out t%e main objects of t%e company.

 T%e company %as sold t%e

business or t%e undertaing to anot%er company or an individual.

 T%e company is not in a

(round" or 2indin! up y

triuna%

• (pecial resolution

• *ailure in %olding statutory

meetings.

• *ailure to commence or

suspend its business

• 'eduction of members%ip

below minimum

• +nability to pay debts

•  Uust and eBuitable

• efault in #ling balance s%eets0

pro#t and loss account or annual returns

• "cted against sovereignty and

integrity of +ndia

Specia% re"o%ution

• +f a company by a

special resolution resolved t%at it may be wound up by t%e tribunal0 t%e tribunal may pass a winding up order.

ai%ure in ho%din! "tatutory

meetin!"

ai%ure to commence or "u"pend

it" u"ine""

• +f a company does not

commence its business wit%in a year from its incorporation or suspends its business for a w%ole year0 t%e tribunal may order for its winding up.

eduction o memer"hip e%o2

minimum

• ;%en t%e number of

members is reduced below S in t%e case of a public company and below 2 in t%e case of a private company0 t%e tribunal may order winding up of t%e company.

Inai%ity to pay det"

•  Tribunal may order for

winding up a company if it is unable to pay debts.

 8u"t and e-uita%e

 just and eBuitable t%at t%e company s%ould be wound up if it is of t%at opinion. ;%at is just and eBuitable will depend on t%e tests of eac% particular case.

4eau%t in 3%in! a%ance "heet", pro3t

and %o"" account or annua% return"

•  T%e tribunal may order for

winding up0 if t%e company %as made a default in #ling wit% t%e registrar its balance s%eets0 pro#t and loss account or annual returns for any consecutive years.

Acted a!ain"t "o*erei!nty and

inte!rity o India

• +f company %as acted

against t%e sovereignty and integrity of +ndia0 t%e security of t%e state0 public order0 decency or morality0 t%e tribunal may order for its winding up.

Sic indu"tria% company

• +f t%e tribunal is of

opinion t%at t%e company s%ould be wound up under t%e circumstances speci#ed in (ec. 424 ?0 t%e tribunal may order for its winding up.

App%ication o 2indin! up

 "ccording to section

4350 t%e following can send petition to tribunal for winding up of a company.

  _{Company itself.}   _{Contributories.}   _Creditors.

  _{"ll or any of t%e above}

parties jointly or

separately.

4e3nition

• Foluntary winding up

means winding up by t%e members or creditors of t%e company wit%out t%e interference of t%e tribunal.

4e3nition

•  T%e object of a voluntary

winding up is t%at t%e company as well as t%e creditors is left free to settle t%eir a:airs wit%out going to t%e tribunal.

Circum"tance" in 2hich company

can e 2ound up *o%untari%y

• ,y passing an ordinary

resolution.

• ,y passing special

'y pa""in! an ordinary re"o%ution

• ;%en t%e period for t%e

duration of a company by t%e "rticle %as epired0 t%e company in ?eneral eeting may pass an ordinary resolution for its voluntary winding up.

'y pa""in! "pecia% re"o%ution

• " company may at any

time pass a special resolution w%at it be wound up temporarily.

4i"tinction et2een memer" and creditor" *o%untary 2indin! up

4i""o%ution

 " company is said to be

dissolved w%en it ceases to eist as a corporate body capable of %olding property or of being sued in any tribunal.