Company Law Archives

December 26, 2018December 29, 2018

All about shares and share capital: company law simplified

Share Capital would be our next topic of discussion.So by now we have a concept of what company is as per the law in our mind.If you have still not developed that concept kindly stop here , read the previous posts and come back. With this understanding we will dive deeper into the law to understand shares and share capital.

What do you understand by the word share capital ?

The entire capital of the company is divided into small units where each unit represents a part ownership interest in the company. The sum total of value of these small unit is the share capital of the company. These individual units are referred to as shares of the company.

The company issues these shares to raise capital for running the business. Now let us learn this concept with an example. Suppose a company wants to raise a sum of Rs. 1,00,000/- by issuing shares of Rs.10/- each. Here it is clearly understood that the company has to issue 1000 shares (100000 /10). Now each share will represent the ownership right of the shareholder in the company.

Company Law has classified Share Capital

The classification of share capital as per company law is done as given below

Nominal / Authorized / Registered Capital
Issued Capital
Subscribed Capital
Called up Capital
Paid - up Share Capital

Nominal Capital- (Relevant law -section 2(8) of Companies Act,2018) Such capital is the maximum amount of share capital the company is authorized by the Memorandum of Association to raise.

Issued Capital-(Relevant law- Section 2(50) of Companies Act,2013) This is the capital which the company issue from time to time for subscription and allotment.

Subscribed Capital - (Relevant law is section 2(86) of Companies Act,2013) It is the part of the issued capital which is subscribed by the subscriber of the shares of the company. All the issued share may not be subscribed.

Called-up capital - (Relevant law is section 2(15) of the Companies Act, 2013) It is the part of subscribed capital called up for payment by the company

Paid-up capital- (Relevant law is section 2(64) of the Companies Act,2013) Paid-up Capital is the part of issued capital which has been paid-up. It is the amount credited as amount paid-up in respect of shares issued.

Diagram to show relationship between the above discussed capital

Types of Share Capital and its relationship

Let us have a glance at the the table below to recap the concept

Terms	Brief
Authorized /Nominal Capital	Maximum amount of share capital the company is authorized by the Memorandum of Association
Issued Capital	Capital which the company issue from time to time for subscription and allotment
Subscribed Capital	Part of the issued capital which is subscribed by the subscriber of the shares of the company.
Called-up Capital	Part of subscribed capital called up for payment by the company.
Paid-up Capital	Part of issued capital which has been paid-up. It is the amount credited as amount paid-up in respect of shares issued.

By now you have got a grasp of the following

Concept of Share Capital
Types of Capital
Relationship between the capitals

Now we have made the momentum of learning the shares. We will keep this momentum going in the next post with the same topic discussed in more details

to be contd…

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December 20, 2018December 29, 2018

Forms of Business : Different types of Business

Now when you have already read about what is a company and characteristics of a company it is time to know about other types of business and differences with company form of business. If you have still not read about the features of a company kindly check out the previous page before proceeding further.

There are mainly the following types of business

Company
Partnership firm
Hindu Undivided family
Limited liability firm

1.Company - You have already acquainted yourself with this form of business. Kindly read the previous page to read in details and come back soon to read further.

2.Partnership firm- In partnership firm the firm is not distinct from the partners who have promoted the business. In other words a partnership firm is not a distinct legal person and all the liability and assets are attached to the partners unlike the company form of business where the assets and liabilities are attached to the the company itself.

3. Hindu Undivided Family(HUF)- This form of business is formed by the a group of homogeneous persons who belongs to the same joint family. The Karta (manager) is the sole authority to enter into any contract for the purpose of business.

4.Limited Liability Partnership(LLP) - In Limited Liability Partnership form of business the firm will get the benefit of partnership and limited liability. LLP is a separate legal entity which means that the firm continues to have its existence even if the partners of the company changes. Besides the liability of the partners is limited to the extent of contribution of respective partners.

Let us now tabulate the differences of the above mentioned form of business to get a crystal clear understanding of the above.

Difference between a partnership firm and a company

[Partnership firm]	[Company]
Partnership firm is not distinct from different persons who form the partnership	A company is a distinct legal person
In partnership firm the property of the firm is property of the individual partners	In a company the property of the firm is in the name of the company
Creditors of the partnership firm are the creditors of the partners. The creditors of the company proceed against the partners in case of default.	The creditors to a company can proceed against the company in case of default and not against the members.
Partners are the agents of the firm.They can dispose assets or incur liabilities in the course of business	Members of the company are not the agents. A member cannot incurr liability or dispose assets of a company.
A partner cannot contract with the firm	A member can enter into contract with the firm
The death or insolvency of partners dissolves the firms	The company continues to exists even if any members dies or parts away from the company
The accounts of the firm are audited at the discreation of the partners.	The company has to get its account audited annually by a chartered accountant
A partnership firm is created by its partners and can be dissolved any time by agreement between partners	A company is formed by law and can be dissolved only by the process mentioned in the law.

Difference between Hindu Undivided Family(HUF) business and a company form of business

[Hindu Undivided Family] business	[Company]
Consists of homogeneous group of persons belonging to the same joint family	Consists of heterogeneous group of members
Karta is the manager who takes all decisions to incur liability for the business	There is no such system in a company
A person becomes member by the virtue of birth.	There is no such provision.
No registration is necessary for carrying out business.	Registration of company is necessary.

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December 16, 2018December 20, 2018

What is a company? Know meaning and definition

Let us know the meaning of the company. A company is defined in section 2(20) of the Companies Act,2013. A company is any company incorporated under this Act or any previous company law.

Origin of word company- Word company is made up of two words- ‘com’ and ‘panis’. ‘Com’ means bread and ‘panis’ means together. People who breaks their bread together. The merchants who sit together and had their meals together discuss business. This was the root for the origin of the word company

Com means	Bread
Panies means	Together

Nature of a company

Corporate personality
Company as an artificial person
A Company is not a citizen
Company has nationality and residence
Limited Liability
Perpetual Succession
Separate property
Capacity to sue or be sued
Transferability of Shares
Contractual Rights
Limitation of Action
Separate Management
Voluntary Association of Profit
Termination of Existence

Corporate personality

The company has its own name, act under name, has a distinct seal of its own and has its own assets which is distinct from its members. It is in a way distinct from the person who has composed it and hence said to bear a distinct corporate personality.

2. Company as an Artificial Person

It is not a human being but acts like a human being. It can enter into contract, possess property in its own name, sue and be sued.

3.Company is not a citizen

A Company though an artificial legal person is not recognized as a citizen under the Citizen Act,1955. However certain fundamental rights which are available in the constitution for the protection of a person is available to a company. For example , Right to equality (Article 14)

4.Company has nationality and residence

A company has a nationality , domicile and residence which is the place of registration.

5. Limited Liability

The company is a distinct legal person and is the owner of its assets and liability. The liability of the members of a company extends to the contribution to the capital of the company. In other words the liability of the members is limited.

6.Perpetual Succession

An company never dies except when it is wound up as per law.The members of the company my die or leave the company but the company continues to exist.

7.Separate property

The company being a legal person is capable of owning a property and deposing it as and when required.

8. Transferability of Shares

The capital of a company is divided into shares. The shares are movable property and hence freely transferable subject to certain condition. Section 44 of the Company Act, 2013 clearly states that the shares are movable and can be transferred from one person to other.

9. Capacity to sue or be sued

A company is a legal person. Hence it can sue or be sued in a court of law.

10. Contractual Rights

A company can enter into legal contract for the conduct of its business with another legal person

11.Limitation of Action

A company cannot go beyond the powers defined in the Memorandum of Association. The MoA fixes the objective of a company and regulates its power.

12. Separate Management

The members derive their profit without being burdened by the management of the company. The manage the company by electing their representative i.e. the Director of the company.

13.Termination of Existence

A company does not die a natural death. It is created by law and gets terminated by the process of winding up in accordance to the law

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