2.  Meaning, Definition and Features of a Company
 Formation of a Company
 Memorandum of Association
 Article of Association
 Prospectus
 Share and Share Capital
 Allotment of Shares
 Declaration of Dividends
 Management of the Company
 Companies (Amendment) Bill 1993
 The Proposed Company Act 2009
 Business Ethics

4. A "Company" means-
(i) any Indian company, or
(ii) any body corporate incorporated by or under the laws of a country
outside India.
(iii) any institution, association or body which is or was assessable or was
assessed as a company for any assessment year under the Indian Income-tax
Act, 1922.
(iv) any institution, association or body, whether incorporated or not and
whether Indian or non-Indian, which is declared by general or special order
of the Board to be a company.
“an association of many persons who, contribute money or
money’s worth to a common stock and employ it in some trade
or business; and who share the profit and loss (as the case may
be) arising therefrom”.
- Lord Lindley
Company

5. INDIAN COMPANY
"Indian company" means a company formed and registered under the
Companies Act, 1956, and includes-
(i) a company formed and registered under any law relating to companies
formerly in force in any part of India (other than the State of Jammu and
Kashmir);
(ia) a corporation established by or under a Central, State or Provincial
Act;
(ib) any institution, association or body which is declared by the Board
to be a company under section 2(17);
Provided that the registered or principal office of the company,
corporation, institution, association or body, in all cases is in
India.

6. FOREIGN COMPANY
It means a company which is not a domestic company, i.e. a company
registered outside India in any other foreign country.
The Foreign Company may be treated as Domestic Company if such
company makes prescribed arrangement for declaration and payment of
dividends within India.
Foreign Company is treated as Resident in India if its Control and
Management is located wholly in India.
Foreign Company is treated as Non-Resident in India if its Control and
Management located wholly / partially Outside India.

7. DOMESTIC COMPANY
A Domestic Company means an Indian Company or any other company with
respect to its income, liable to tax under the Income-Tax Act.
If a Foreign Company makes prescribed arrangements for payment of
dividends in India it shall be treated as Domestic Company.
Thus, all Indian Company are treated as Domestic Company but
all Domestic Company are not Indian Company.
RESIDENTIAL STATUS OF A COMPANY
Indian Company : The Company registered in India is an Indian Company.
Indian Company is always treated as Resident in India whether Control &
Management is in India or Outside India.
Foreign Company : If Control & Management of the affairs of the business
of Foreign Company is situated wholly in India then its residential status is
Resident in India. If its Control & Management of the affairs of the business
is situated wholly / partially outside India then its Residential Status is
Non-Resident in India.

9. The whole process of formation of a
company may be roughly divided into
three parts:
 Promotion
 Registration
 Floatation

10.  A term of wide import, broadly denotes the preliminary steps taken for the purpose
of registration and floatation of the company.
 The persons (individual, syndicate, association, partnership or company) who
assume the task of promotion are called “Promoter”.
 A promoter can make profit but is forbidden from making hidden profit.
 All profits are to be disclosed to an independent Board of Directors and/or
shareholders.
 For Non Disclosure by Promoter the company may either
 Rescind the contract and recover the purchase price
 Recover the profit made
 Claim damages for breach of Fiduciary Duty
 Promoter is liable to the original allottee of shares for the mis-statements in the
prospectus.
 In the course of winding up of a company, on application made by official
Liquidator, the court may make the Promoter liable for misfeasance or breach of
trust.
 Death of a Promoter does not relieve his estate from liability arising out of abuse of
his fiduciary position.

11.  As per Section 12 “any seven or more persons or where the company to be formed will be a
private company, two or more persons, associated for any lawful purpose may, by subscribing
their names to a memorandum of association and otherwise complying with the requirements of
this Act in respect of registration form an incorporated company, with or without limited
liability”.
 The following documents are to be presented to the Registrar of Companies of the State in which
the registered office of the company is to be situated
 The Memorandum of the Company
 The Articles of Association, if any and
 The Agreement, if any, with its Managing or wholetime Director or Manager.
 These need to be signed by seven persons in case of a public company and by two persons in case
of a private company.
 In addition to these a “Statutory Declaration of Compliance” certifying that all requirements of
the Act and its rules in respect of registration have been complied with, needs to be filed with the
Registrar along with the above mentioned documents.
 For Public Companies having share capital, if the first directors are appointed by the articles then
the following must be complied.
 Written consent of those directors to act, signed by them or by an agent duly authorized in writing
 An undertaking in writing signed by each director to take from the company and pay for his qualification
shares (if any), unless he has paid or agreed to pay or signed the Memorandum for a number of shares not
less than the qualification shares.

12. Name of the Company:
 A company can NOT be registered by a name, which in the opinion of the Central
Government is undesirable.
 Thus three names in order of priority should be filed with the Registrar of
Companies to check the availability of the proposed name of the company.
 The following documents though not required for the purpose of registration, need
to be filed within thirty days of registration of the company.
 The address of the registered office of the company.
 Particulars of directors, manager and secretary (if any).
Certificate of Incorporation:
 After the documents have been filed with the Registrar and necessary fees paid, the
Registrar will, if satisfied, enter the name of the Company in the Register of
Companies and issue a Certificate of Incorporation.
 The Company comes into existence as a legal person distinct from its members.
 From the earliest moment of the day of incorporation stated in the certificate the
company has got its rights and liabilities similar to a natural person and is
competent to enter into contracts.
 If the company has been incorporated with illegal objects, they would not become
legal by the issue of this certificate.

13.  When a company has been registered and has received its certificate of
incorporation, it can go ahead and raise capital sufficient to commence business
and to carry it on satisfactorily.
 In a private company the capital is obtained through private arrangements.
 In a public company the capital is raised by inviting public to subscribe to its
capital share.
 In some cases the promoters of a public company, in order to take advantages of
the incorporation not available to a private company (like unlimited member,
unrestricted transfer of shares etc.. ) arrange the capital privately.
 Every Public Company is obliged to take either of the following two steps:
 Issue a prospectus in case public is invited to subscribe to its capital OR
 Submit a “Statement in lieu of Prospectus” in case capital has been arranged privately.
 This must be done at least 3 days before allotment of shares.

14.  When a Company has complied with certain conditions, the Registrar
will issue a certificate to commence business.
 Penalty : If any Public Company having share capital commences
business or exercises borrowing power without obtaining the certificate
to commence business, then every person at fault is liable to a fine upto
Rs 5000 for every day of default.
 The certificate to commence business entitles the company to commence
business given in the main objects clause of the memorandum only.
 All business mentioned under the “other objects” clause can be
commenced only after obtaining prior approval of the shareholder by
special resolution.
 The Central Govt. may, on application by the Board of Directors allow a
company to commence business under the “other objects” clause by
passing an ordinary resolution in the company’s general meeting.