Company Law ACT 1956: Presented By

COMPANY LAW
ACT 1956
PRESENTED BY:-
GROUP LEADER:- HARSHITA BHATIA
ABHISHEK KUMAR
PRAGYA SHARMA
RAFEEQ AHMAD
INTRODCUTION
 The Company act came into force from 1 April
1956
 The act was based upon the recommendation
of company law committee appointed under the
Chairmanship of Mr. C.H. BHABA on
25.10.1950.
 The company submitted its report in 1952 the
Indian company act extends to whole India
 Under the section 3(1)(i)&(ii) of the
Companies Act, 1956 defines a company as: a
company formed and registered under this act
or an existing company.
 Existing company means a company formed
and registered under any of the earlier
Company Laws
DEFINIATION
• The word 'Company' is a mixture of the Latin
word 'Com' meaning "with or together" and
'Pains' meaning "bread". Originally, it referred to
a group of persons who took their meals together.
A company is nothing but a group of persons who
have come together or who have contributed
money for some common person and who have
incorporated themselves into a distinct legal entity
in the form of a company for that purpose.
INCORPORATION UNDER
COMPANY ACT 1956
♦ Separate legal entities
♦ Artificial person
♦ Perpetual existence
♦ Common seal
♦ Limited liability
♦ Transferability of shares
Separate legal entity
 A company is an separate legal entity means
it is different from its members. It works as
an individual body.
 It can make contracts, open bank account,
can sue and can be sued by others.
Salomon V Salomon & Co.
Ltd (1897)
 Salomon sold his business of leather merchant
for £ 30,000 to Salomon & Co. Ltd which
consisted of Salomon himself, his wife, his
daughter and four sons. The purchase
consideration was paid by company by
allotment of £ 20,000 fully paid £ 1 shares and
£ 10,000 in debentures conferring a floating
charge over all the company’s assets to
Salomon.
• In law, a debenture is a document that either creates a
debt or acknowledges it. In corporate finance, the term
is used for a mediuOne share of £ 1 each was
subscribed by the remaining six members of his family.
• Salomon was the MD of the company and as he

virtually had whole of the stock and he had absolute
control over the company.
• Only a year later, the company became insolvent and

winding up commenced. On winding up the statement
of affairs of the company was assets £ 6000, Liabilities
Salomon as debenture holder £10,000 and unsecured
creditors £ 7000.m- to long-term debt
Artificial person
 A company is purely a creation of law. It is
invisible, intangible and exists only in the
eyes of law.
 It has no soul, no body but has a position to
enter or exist into a contract.
 In short it can do anything just like a normal
person.
Perpetual existence sec
34(2)
 Section 34(2) of the act states that an
incorporated company has a perpetual life.
 The life of the company is not related to the
life of its members.Law creates the company
and law alone can dissolve it.
 The existence of the company is not affected
by death, insolvency, retirement or transfer
of share of members.
Common seal
 A company being an artificial person can
not work as a natural being.
 Therefore, it has to work through its
directors, officers and other employees.
Common seal used as a official signature of
a company.
Limited liability
 It means that the liability of a member shall
be limited to the value of the share held by
him, he cannot be called upon to bear the
loss from his personal property.
Transferability of share
sec82
 The share of a company are freely
transferable. The shareholder can transfer
his share to any person without the consent
of other members.
 A company cannot impose absolute
restrictions on the rights of members to
transfer their shares.
 Capacity to sue and being sued:
A company can sue or be sued in its own
name as distinct from its members.
 Separate Management:
A company is administered and managed
by its managerial personnel i.e. the Board of
Directors. The shareholders are simply the
holders of the shares in the company and
need not be necessarily the managers of the
company.
One Share-One Vote:
 The principle of voting in a company is one
share-one vote. I.e. if a person has 10
shares, he has 10 votes in the company. This
is in direct contrast to the voting principle
of a co-operative society where the "One
Member - One Vote" principle applies i.e.
irrespective of the number of shares held,
one member has only one vote.
Distinction between Company
and Partnership
 A Partnership firm is sum total of persons who have come
together to share the profits of the business carried on by
them or any of them. It does not have a separate legal
entity.
 A Company is association of persons who have come
together for a specific purpose. The company has a
separate legal entity as soon as it is incorporated under
law.
 Liability of the partners is unlimited. However, the
liability of shareholders of a limited company is limited to
the extent of unpaid share or to the tune of the unpaid
amount guaranteed by the shareholder

• Property of the firm belongs to the partners and they are
collectively entitled to it. In case of a company, the property
belongs to the company and not to its members.
• A partner cannot transfer his shares in the partnership firm
without the consent of all other partners. In case of a
company, shares may be transferred without the permission
of the other members, in absence of provision to contrary in
articles of association of the company.
• In case of partnership, the number of members must not
exceed 20 in case of banking business and 10 in other
businesses. A Public company may have as many members
as it desires subject to a minimum of 7 members. A Private
company cannot have more than 50 members
• There must be at least 2 members in order to form a
partnership firm. The minimum number of
members necessary for a public limited company is
seven and two for a private limited company.
• In case of a partnership, 100 % consensus is
required for any decision. In case of a company,
decision of the majority prevails.
• On the death of any partner, the partnership is
dissolved unless there is provision to the contrary.
On the death of the shareholder the company'
existence does not get terminated

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COMPANY LAW

• Salomon was the MD of the company and as he

• Only a year later, the company became insolvent and

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