nature &type of company

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PRESENTATION ON NATURE AND TYPES OF COMPNIES Presented by:- Sanjay kumar Roll no. 10101156


DEFINITION OF COMPONY Lindley, L.J . defines a company as “an association of many persons who contribute money or money’s worth to a common stock , and employ it in some common trade or business( i.e.,for a common purpose) and who share profit or loss (as the case may be) arising there from. The common stock so contributed is denoted in money and is the capital of company .the person who contribute it, or to whom it belongs, are members. The proportion of capital to which each member is entitled is his share .shares are always transferable although the right to transfer them is often more or less restricted”

Characteristic of company:

Characteristic of company 1 Separate legal entity: - a company is in low regarded as an entity separate from its member. In other words, it has an independent corporate existence. Any of its members can enter into contracts with it in the same manner as any other individual can and he can not be held liable for the act of the company even if he holds virtually the entire share capital. The company’s money and property belong to the company not to the shareholders.

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2 limited liability :-the privilege of limited liability for business debts is one of the principal advantage of doing business under the corporate form of business organization. A company may be a company limited by share or a company limited by guarantee.

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3.Perpetual succession :-a company is juristic person with a perpetual succession. It is not susceptible to “the thousand natural shocks that flesh is heir to. "as such it never dies ;nor does its life depend on the life of its members. it is not any manner affected by insolvency, mental disorder or retirement of its member.

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4. Common seal :-since the company has no physical existence, it must act through its agents and all such contracts entered into by its agent must be under the seal of the company . The common seal acts as the official signature of the company.

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5.Transferability of share :-the capital of a company is divided into parts , called shares. These shares are , subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company . When the joint stock companies were established the great object was that the shares should be capable of being easily transferred.

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6. Separate property :-as a company is a legal person distinct from its members, it is capable of owning , enjoying and disposing of property in its own name. although its capital and assets are contributed by its shareholders , they are not the private and joint owner of its property. Company is the real person in which all its property is vested and by it is controlled , managed &disposed of. “no member can claim himself to be owner of the company’s property during its existence or on its winding up”

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7.Capacity to sue :-a company can sue and be sued in its corporate name . It may also inflict or suffer wrongs. It can in fact do or have done to it most of thing which may be done by or to a human being.


TYPES OF COMPANIES 1.On the basis of incorporation (a). Statutory companies :- these are the companies which are created by a special act of legislature, e.g., the reserve bank of india ,the state bank of India ,finance corporation etc. (b). registered companies :- these are the companies which are formed and registered under the act. 1956,or were registered under any of the earlier companies act.

2.On the basis of liability:

2.On the basis of liability (a). companies with limited liability:- Companies limited by share :-where the liability of the member s of company limited to amount unpaid on the shares , such a company is known as limited by share . Companies limited by guarantee :-where the liability of the member of a company is limited to a fixed amount which the members undertake to contribute to the asset of the company in the event of its being wound up , the company is called limited by guarantee.

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(b). companies with unlimited liability :-sec. 12 specifically provides that any 7 or more persons(2 or more in case of a private company) may form an incorporated company, with or without limited liability .a company without limited liability is known as unlimited company.

3.On the basis of number of member:

3.On the basis of number of member (a). a private company :- a private company is normally what the American call a ‘close corporation’. Acc. To sec.3(1)(3), private company means a company which by its articles- 1.Restricts the right to transfer its shares ,if any . This restriction is meant to preserve the private character of the company. 2.Limits the number of its member to 50 not including its employee-member (present or past)

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2.Public company :- a public company means a company which is not private company . In other words , a public company means which by its articles does not- 1.Restrict the right to transfer is shares, if any. 2. Limit the number of its members to 50;and 3prohibit any invitation to the public to subscribe for any shares in, or debentures ,of the company.

4.On the basis of control:

4.On the basis of control (a). holding company :-sec.4(4). a company is known as the holding company of another if it has control over that other company . sec.4(4), a company is “deemed to be the holding company of another if, but only if, that other is its subsidiary.” (b). subsidiary company :- sec.4(1) a company is known as a subsidiary of another company when control is exercised by the latter (called holding company ) over the former called subsidiary company.

5. On the basis of ownership:

5. On the basis of ownership (a). Govt. company :- A govt. company means any company in which not less than 51 percent of the paid up share capital is held by The central govt., or Any state govt. or govts . Party by the central govt. and partly by one or more state govt. For example , state trading corporation of india ltd. And minerals and metals trading corporation of india ltd. Are govt. companies . The subsidiary of a govt. company is also a govt. company (sec.617) (b). non govt. companies

5.Foreign company:

5.Foreign company It means any company incorporated outsides india which has an established place of business in india [sec.591(1)]. Where ,for example representatives of a foreign company frequently come and stay in a hotel in india for purchasing machinery, cotton etc.,the foreign company place in india .

6.One man company:

6.One man company This is a company (usually private) in which one man holds practically the whole of the share capital of the company .and in order to to meet the statutory requirement of minimum number of member ,some dummy members who are mostly his friends or relation hold just 1 or 2 shares each . The dummy members are usually nominees of the principal shareholder who is the virtual owner of the business and who carries it on with limited liability.

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