COMPANY.

Companies act 1956

KINDS OF COMPANIES. MEMORANDUM OF ASSOCIATION. ARTICLES OF ASSOCIATION. COMPARISON BETWEEN MOA &AOA.

DEFINITION OF COMPANY
Section 3(1) sub section I and ii of the companies act define a company as a" company formed and registered under this act or an existing company. Association of many persons who contribute money or money worth to a common stock and employ it in some trade or business, and share the profit and loss arising there from.

CHARACTERISTICS OF COMPANY
Incorporated association. Artificial legal person. Separate legal entity. Perpetual existence. Common seal. Limited liability. Transferability of shares.

KINDS OF COMPANIES
Companies according to the mode of incorporation. Companies on the basis of number of members. Companies on the basis of liability of members.

MODE OF INCORPORATION
Statutory company: Incorporated by a special act passed either by the central or state government. Companies intending to carry on some business of national importance. Example: RBI,SBI,LIC. Do not require to have a MOA. Registered company: a company registered under companies act is called registered or incorporated company. All companies except statutory company fall under this category.

BASIS OF NUMBER OF MEMBERS

Private company: any company having minimum paid up capital of 1 lakh and above and by its article of association. i. Restricts the right to transfer shares. ii. Minimum number of members required is 2. iii. Maximum number of member should not exceed 50. iv. Minimum number of directors required is 2. v. Prohibits invitation to public. vi. Can commence immediately after getting certificate of incorporation.

PUBLIC COMPANY
As per section 3(1) (iv) a public company means any company Having a minimum paid up capital of 5 lakh. Having a minimum of 7 members. Does not have any limit for the maximum members. At least 3 directors. Shareholders can transfer his shares freely . Can invite public for subscription of its shares. Must prepare a prospectus.

Basis of liability of members

Companies limited by shares- The company where the liability of shareholders of the company is limited up to the extent of face value of the shares held by every shareholder is called company limited by shares. Companies limited by guarantee - The liability of members of the company is limited up to specific amount guaranteed by them. Unlimited companies - A company which is incorporated without the provision that the liability of its members is limited is an Unlimited Liability Company.

MEMORANDUM OF ASSOCIATION
MOA contains the fundamental conditions upon which alone the company is allowed to be incorporated. It defines the limitation of the powers of the company. It enable the share holders, creditors and those who deal with the company, to know what is its permitted range of enterprise.

Contents of MOA
The name clause. The registered office clause. The object clause. The liability clause. The capital clause. The subscription clause.

Article of association
Contains the rules regarding the management of its internal affairs. They prescribe rules and regulations for the general management of the company and for the attainment of its objects.

Contents of AOA
Different classes of shares and their rights. Procedure of making an issue of share capital. Procedure for transfer of shares. Conversion of shares in stock. Alteration of share capital. Voting rights of members. Payments of dividends and creation of reserve. Appointment, powers, duties, and remuneration of directors. General meetings, proxies and polls. Use of common seal. Maintaining books of accounts. Duties , powers, appointment of auditors.

MOA VS AOA
MOA fundamental conditions the company is allowed to be incorporated. AOA defines and limits action of the company. MOA must be filed with the registrar. AOA need not be filed with the registrar. MOA defines company relations with the outsiders (creditors, buyers, seller) AOA govern internal relationship between company and members. MOA can not be easily alerted. AOA can be altered by passing a special resolution. Acts done by a company ultra vires the MOA are void and cannot be ratified by share holders. Acts done by the company ultra vires the article and not MOA and can be ratified by the share holders.

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