Saturday, November 28, 2009

Frequently asked questions in company law

Frequently asked questions: (FAQ)

1) What is minimum paid up capital of private limited company

Rs. 1 lakh

2) What is minimum paid up capital of Public limited company

Rs.5 lakhs

3) What is industrial undertaking

Sub section 19AB of Section 2 of Companies Act, 1956 defines industrial undertakings means any undertaking pertaining to any industry carried on in one or more factories or units by any company, as defined in clause (aa) of Section 3 of the Industries (Development and Regulations) Act 1951 65 of 1951 but does not include a small scale industrial undertakings as defined in clause (j) of that section

4. What is meant by limited company?

Sub section 23 of Section 2 of Companies Act, 1956 defines a company limited by shares or by guarantee

5. Define Managing Director?

Sub section (26) of Section of 2 of Companies Act, 1956 means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with ( substantial powers of management) which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director , by whatever name called.

Provided that the power to do administrative acts of a routine nature when so authorized by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within substantial powers of management: Provided further that a managing director of a company shall exercise his powers subject to the superintendence, control and direction of its Board of directors;]

6. Define Member?

Sub section 27 of Section 2 of Companies Act, 1956, member in relation to a company does not include a bearer of a share warrant of the company issued in pursuance of Section 114 of the Companies Act, 1956

7. Define Memorandum?

Sub section 28 of Section 2 of the Companies Act, 1956 means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous companies law or of this Act.


8. Define net worth

Sub Section 29A of Section 2 of the Companies Act, 1956 net worth" means the sum total of the paid-up capital and free reserves after deducting the provisions or expenses as may be prescribed. Explanation.-For the purposes of this clause, "free reserves" means all reserves created out of the profits and share premium account but does not include reserves created out of revaluation of assets, write back of depreciation provisions and amalgamation

9. Define officer?

Sub section (30) of Section 2 of the Companies Act, 1956 "officer" includes any director, manager or secretary, or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors is or are accustomed to act;]

10. Define Operating Agency

Sub section [(31AA) of Section 2 of the Companies Act, 1956 "operating agency" means any group of experts consisting of persons having special knowledge of business or industry in which the sick industrial company is engaged and includes public financial institution, State level institution, scheduled bank or any other person as may be specified as the operating agency by the Tribunal;]

11. Define Public Holiday?

Sub section 38 of Section 2 of the Companies Act, 1956, "public holiday" means a public holiday within the meaning of the Negotiable Instruments Act, 1881 (26 of 1881): Provided that no day declared by the Central Government to be a public holiday shall be deemed to be such a holiday, in relation to any meeting, unless the declaration was notified before the issue of the notice convening such meeting;


12. Define Secretary?

Sub section [(45) of Section 2 of the Companies Act, 1956 "secretary" means a Company Secretary within the meaning of clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and includes any other individual possessing the prescribed qualifications and appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties;]


13 Define Share with differential rights?

Sub section [(46A) of Section 2 of the Companies Act, 1956 "share with differential rights" means a share that is issued with differential rights in accordance with the provisions of section 86;]

14 Define Sick Industrial company?

Sub section [(46AA) of Section 2 of the Companies Act, 1956 "sick industrial company" means an industrial company which has-
(i) the accumulated losses in any financial year equal to fifty per cent, or more of its average net worth during four years immediately preceding such financial year; or(ii) failed to repay its debts within any three consecutive quarters on demand made in writing for its repayment by a creditor or creditors of such company;
15. Define State Level Corporation?
Sub Section (46AB) of Section 2 of the Companies Act, 1956 "State level institution" means any of the following institutions, namely:-
(a) the State Financial Corporations established under section 3 or section 3A and institutions notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); (b) the State industrial Development Corporations registered under this Act;]
16. Define Total Voting power?
Sub Section (48) of Section 2 of the Companies Act, 1956 "total voting power", in regard to any matter relating to a body corporate, means the total number of votes which may be cast in regard to that matter on a poll at a meeting of such body, if all the members thereof and all other persons, if any, having a right to vote on that matter are present at the meeting, and cast their votes
17. Define Company?
As per clause (i) of sub section 1 of Section 3 of the Companies Act, 1956 "company" means a company formed and registered under this Act or an existing company as defined in clause (ii);
18. Define Existing company?
As per clause (ii) of sub section 1 of Section 3 of the Companies Act, 1956 "existing company" means a company formed and registered under any of the previous companies laws specified below:
19 Define Private company?
Sub section iii) of Section 3 of the companies Act, 1956 "private company" 5[means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles,-]
(a) Restricts the right to transfer its shares, if any;(b) limits the number of its members to fifty not including-
(i) persons who are in the employment of the company, and(ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased; and
(c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company;
6[(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives:]Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member;
20 Define Public company?
Sub section [(iv) of Section 3 of the Companies Act, 1956 "public company" means a company which-
(a) is not a private company;(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed;(c) is a private company which is a subsidiary of a company which is not a private company.]

21. What is minimum paid up capital of companies registered Section 25 of the Companies Act, 1956
Sub section (6) of Section 3 of the Companies Act, 1956 A company registered under section 25 before or after the commencement of Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital specified in this section.]
22.What is the status of private company subsidiary of body corporate incorporated outside India?
Sub section[(7) of Section 4 of the companies act, 1956 A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India.]

23.Who are all officers in default as per Section 5 of the Companies Act, 1856
(a) the managing director or managing directors;(b) the whole-time director or whole-time directors;(c) the manager;(d) the secretary;(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;(f) any person charged by the Board with the responsibility of complying with that provision:Provided that the person so charged has given his consent in this behalf to the Board;(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors:
Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form.]

24. What is jurisdiction of court under section 10 of the Companies Act, 1956
Sub section a) section 10 the companies Act, 1956 provides the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to the High Court in pursuance of sub-section (2); and
Sub section (b) of Section 10 of the companies Act, 1956 where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

25. Whether Central Government has the power to confer jurisdicition of courts by way of notification.?
Sub section (2) of the Section 10 of the Companies Act, 1956 provides The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred -
(a) in respect of companies generally, by sections 237, 391, 394, 395 and 397 to 407, both inclusive;
(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and the other provisions of this Act relating to the winding up of companies

26. In case of winding up of companies, on what basis jurisdiction of court will be determined?
Sub section (3) of Section For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.
27. How many maximum no of members to constitute company law board
As per Sub section 2 of the Section 10 E of the Companies Act, 1956 the central government appoint not exceeding 9 members by way of notification in the official gazette.

28. What are the matters to be taken up at company law board?
Sub section (4C) of Section 10 B of the Companies Act, 1956 provides that Every Bench referred to in sub-section (4B) shall have powers which are vested in a Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:-
(a) discovery and inspection of documents or other material objects producible as evidence;(b) enforcing the attendance of witnesses and requiring the deposit of their expenses;(c) compelling the production of documents or other material objects producible as evidence and impounding the same;(d) examining witnesses on oath;(e) granting adjournments;(f) reception of evidence on affidavits.
29. What is the judicial status of Company Law Board?
Sub section 4D) of Section 10 B of the Companies Act 1956 provides that Every Bench shall be deemed to be a Civil Court for the purposes of section 195 and 9[Chapter XXVI of the Code of Criminal Procedure, 1973 (1 of 1974)] and every proceeding before the Bench shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860) and for the purpose of section 196 of that Code.]

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