CONVERSION
OF PRIVATE Company TO PUBLIC Company
1) BY
Default S. 43 Automatic conversion of a private
Company into public Company takes place by operation of law in case of default
in complying with statutory requirements of section 3(i)(iii). However Central
Govt. on being satisfied that failure to comply with conditions was accidental,
or due to inadvertence or due to other sufficient cause, may on application
order that Company be relieved from such consequences.
2) By Choice
S. 44 If
a private Company alters, by special resolutions its Articles constituting
private Company, it shall on the date of alteration cease to be a private
Company.
A prospectus or a statement in lieu
of prospectus be filed with the registrar within 30 days after such alteration.
Other requirements of public Company be also complied with. After conversion,
the word private would be deleted from the name of the Company.
3) By
operation of law S. 43A this section has been made inoperative except subsection 2A
by Companies (Amendment) Act, 2000. The effect of the amendment is that a
private Company will not automatically become a public Company on account of
turnover or shareholding.
CONVERSION
OF Public Company TO Private Company S.31
A public Company may by special
resolution alter its articles so as to include the requirements of a private
Company as mentioned in S. 3(i)(iii) an approval of Central Govt. is obtained.
10) Producer
Company Part IX A dealing with producer
Company inserted by Companies Act 2002
It focuses on multi state
Company-operative societies to bring them in the mainstream economic activity
without giving up the cooperative principle of mutual assistance. It provides
for incorporation cooperative societies as Companies and gives the option of conversion
of existing cooperatives into Companies. Features
:
·
Offers a statutory and regulatory framework to compete with
other enterprises on competitive footing.
·
Provides for incorporation of producer Companies on mutual
assistance and cooperative principles basis with liberal regulatory framework
and modifications.
·
Shares may be transferred with the approval of BOD, no
takeover targets by MNCs
·
Conversion of cooperative society to producer Company is
voluntary
·
Conversion possible only if 2/3rd members vote in
favor of resolution to that effect.
·
Members of producer Company have to be primary producers.
·
Objects of producer Company, inter alia, include production,
manufacture and sale of primary as well as allied produce.
10) Company regulated by Special Acts
S. 616
·
Banking Companies governed
by Banking Companies Regulation Act, 1949
·
Insurance Companies
governed by Insurance Act, 1938
·
Cos. engaged in generation and supply of electricity governed
by Indian Electricity Act, 1910.
REGISTRATION OF COMPANY S. 33
Application
with the following documents be presented to the Registrar of state in which registered
office of Company as stated by the memorandum to be situate-
I.
Memorandum of Company
II.
Articles
III.
The agreement, if any, Company proposes to enter with any
individual for appointment as its managing or whole time director or manager
IV.
A deceleration to the effect that all the requirements of
Companies Act and rules made thereunder complied with such deceleration be made
by any of the following :
·
An advocate of Sc or HC or
·
An attorney or pleader entitled to appear before HC , or
·
A secretary or a CA in whole time practice in India engaged
in forming a Company
·
A person named in articles as Director, manager or secretary
of the Company
Effect of registration/ Certificate of Incorporation
1)
The registrar shall state, on registration of memorandum certify
under its hand, that the Co. is incorporated. The Co. comes into existence from
the date of certificate of incorporation.
2)
From the date of incorporation mentioned in the certificate
of incorporation, subscribers and members of Company shall be a body corporate
by the name contained in memorandum, having perpetual succession and a common
seal.
Conclusiveness of certificate of incorporation S. 35
Certificate of
incorporation shall be conclusive evidence that all the requirements of the Act
have been complied with in respect of registration and association is a Company
authorized to registered and duly registered under the Act.
Thus, certificate of
incorporation once issued can’t be challenged except in case of alleged illegal
objects. Remedy would be to wind up the Company.
MEMORANDUM OF ASSOCIATION
S.
2(28) memorandum means MOA of a Company originally framed or altered from time
to time in pursuance of provisions of Company law or this Act.
·
It sets out the constitution of the Company
·
It is charter of the Company
·
It defines the relation of the Company with the outsider and
scope of its activities
·
It contains the fundamental conditions for incorporation.
S. 16= A Co. shall not alter the
conditions in MOA except in cases and in manner and to the extent provided in
the Act.
S. 15= MOA shall be
·
Printed
·
Divided into paras numbered consecutively
·
Signed by each subscriber with address, description and
occupation in the presence of at least one witness attesting the signature.
Changes
in MOA
1.
Name Clause
·
A Company must have a name
·
A Company cannot be registered with a name which in the
opinion of Central govt. is undesirable or identical with nearly resembling
name of another registered Company.
·
The last word of the name must be ‘Ltd’ in case of limited
Company with limited liability and ‘Private Limited ‘in case of Private
Company.
·
The central govt. may by license grant exemption from S.
13(1)(a) after being satisfied that object of co0 is promotion of commerce ,
art, science, religion, charity etc.
·
Name and address of Company must be painted or affixed
outside of entry place of business in a conspicuous position in letters easily
legible and in prescribed language.
·
Name must be mentioned in all business letters and other
official publication, on all negotiable instruments issued or endorsed by the
Company.
ALTERATION
·
By special resolution with
the approval of the central govt. signified in writing.
·
No such approval required
if change is addition thereto/ deletion there from of the word ‘Private’
consequent on the conversion of a public Company to a private Company.
·
The application for change
of name may be made by a registered proprietor of a trade mark, if in the
opinion of the central govt., the name is identical with or nearly resembles a
regd. TM of such proprietor under TM Act, 1999.
·
Case Law: Kothari Products Ltd. Vs
ROC (All HC). The appellant Company was marketing edible items under the regd.
TM ‘Parag’. One ‘Parag Intl.’ was registered without the consent of the appellant.
Held: name held to be undesirable and
court ordered change thereof.
2. Registered Office Clause
·
This is necessary for fixing the domicile of the Company.
·
The domicile is the place of registration and Residence is
the place of management and control.
·
A Company must have, from the date of commencement of
business or within 30 days of incorporation, whichever is earlier, a registered
office to which all communication and notice must be addressed.
ALTERATION
(1) Change within the same
state
(i) Change within one city, town or village: By passing a special resolution to that effect.
(ii)
change from one city, town or village: By special resolution, notice to registrar within 30 days.
(2) Change from one state
to another:
·
Requires alteration of MOA
of Company.
·
By special resolution
filed with the Registrar within 30 days.
·
With the approval of the
central govt.
·
If any creditor objects to
the alteration, either his consent must be obtained or his debt must be
satisfied.
·
Certified copy of the
central govt’s confirmation order with altered MOA be filed within 3 months
thereof with the Registrar of Companies of both the states.
·
Certificate of
registration of transfer from registrar of both the states to be obtained.
·
Notice of new registered office
be given to the Registrar of state to which office shifted within 309 days
after the change.
Case Law: In Re Mackinnan Mackerzie & Company. 1967 (Cal HC)
The Company having registered office
at Calcutta passed a resolution at its GM that registered office of the Company
will be situated within the state of Maharashtra and applied to the Court for
confirmation of change of registered office. The state opposed to it.
Held: the expression
‘public’ used in section 17 includes creditors and shareholders only and not
the state, unless it stands in the capacity of the creditor. ‘the state has no
locus standi’ and has no statutory right to intervene in application under
section 17 of Company’s act.
The Court further held that UOI was
to be considered as an entity and it would be unfair and partial to speak of
loss of revenue to any particular State, because in ultimate analysis, loss to
one State would be gain to another State and loss would be neutralized by gain.
The Court overruled the decision of
Orissa HC in orient paper mills case and concluded that Petitioner Company was
entitled to success.
Case Law: Minerva
Mills V/s State of Maharashtra 1975 (Bom
HC)
The Company having registered office
at Bombay passed a special resolution in its GM that registered office of
Company would be situated in the State of Mysore. Company’s mills were already
in Mysore and that shifting would be helpful in carrying on its activities
economically and efficiently.
The Company filed a petition for
confirmation of the Court. The Court observed that where strong ground exists
for sanctioning the transfer of registered office from one State to another,
the mere fact that some of the shareholders may be different from the
shareholders who passed the resolution cannot be a ground for refusing the
confirmation of alteration of MOA.
The State cannot assume to itself the
role of a guardian of shareholders’’ interest or interfere with the management
of the Company. The vague considerations of impact of transfer on general
economy of the State are no ground for rejecting the confirmation of the
transfer of registered office. The Court
confirmed the transfer of registered office of Company but subject to condition
that Company furnishes to the State a bank guarantee of the amount claimed as
arrears of sales tax by the State.
3. Object Clause
The most important clause. The objects for which the proposed Co. is to
be established r stated. Divided in sub clauses
(1) Main objects: Main objects and objects incidental or
ancillary to the main objects.
(2) Other objects: objects not included in the above clause.
(3) States to whom the objects extend: in case objects not
confined to one State
Purpose of
object clause
·
Protects investors of Company by making known the objects of
the Company
·
Ensures the investor that their money not risked in another
adventure
·
Protects creditors by ensuring that the Company’s funds not
dissipated in unauthorized activities,
·
Serves publi8c interest by preventing diversification of
Company’s activities not closely connected with the interests of the Company
·
Prevents concentration of economic power.
ALTERATION
Substantive
limits Section S. 17(1)
By special resolution to enable it –
a. To
carry on its activities more economically and efficiently or
Case Law: Straw products Vs ROC. (Orissa
HC) Company was allowed to make alterations in its MOA to enable it to make
contributions to political parties.
b. To attain its main purpose by new improved means, or
c. To enlarge or change local area of its o0peration or
d. To carry on some business conveniently/ advantageously
combined with the Company.
The expression some
business may include new business not destructive or inconsistent with existing
business.
Case Law: In Re United Collieries (Cal HC) when the
business of a Company is nationalized and can no longer be carried on it can be
allowed to alter its MOA to venture into entirely new field.
e. To restrict or abandon any of the objects in MOA
f.
Case Law: In re Mafatlal Consultancy Services (CLB) Held
: A Company cannot shift objects from other objects to main objects.
g. To sell or dispose of the whole or any part of undertaking
h. To amalgamate with any other Company.
Such
special resolution to be filed with the ROC within one month from the date
thereof.
4.
Liability Clause
Company
limited by shares: Liability = nominal value of shares held or amount of unpaid
capital. Of shares fully paid up, NILL
Company
limited by guarantee: Liability = amount
undertaken to contribute to the assets of the Company in the event of winding
up.
ALTERATION : liability cannot be
increased unless members consent in writing, whether before or after the
alteration.
5. Capital Clause
Company with share capital = amount of share
capital, division of capital into shares of a fixed amount.
ALTERATION : if articles authorize,
a Company limited by shares by ordinary resolution passed in GM to
i.
Increase/ decrease the
authorized share capital
ii.
Consolidate or sub divide
shares.
iii.
Convert stock into shares
and vice versa
iv.
Cancel the shares not
taken or agreed to be taken.
6. Subscription Clause
(i)
Declaration that persons subscribing with signature to MOA
desirous of forming an association
(ii)
Each subscriber must sign in presence of at least one
witness, attesting the signatures.
