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INTRODUCTIONCherished child of English parentsFirst passed in India in 1850First amendment in the year 1857Amended several times later

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THE COMPANIES ACT 1956Came into force on 1st april 1956Based largely on the recommendations of

company law committee (Bhabha committee)Largest piece of legislation (658 sections and 15

schedules)

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FEATURESFull and fair disclosure of various matters in the

prospectusDetailed information of financial affairs of the

company to be disclosed in its accountsProvision for intervention and investigations by

the government into the affairs of the company

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FEATURES (Contd…)Restrictions on powers of managing agents and

other managerial personnelEnforcement of proper performance of their duties

by company managementProtection of minority shareholders

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FORMATION OF COMPANY

Documents to be filed MOA (Memorandum Of Association) AOA (Articles Of Association) A statement of the normal / authorized capital A notice of address of the registered office of

the company List of directors* An undertaking* A declaration

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FORMATION OF COMPANY ( contd… )

Certificate of IncorporationCertificate of Commencement of BusinessPromoter

Liability of Promoters Remuneration of Promoters

Preliminary or Pre-Incorporation contractsProvisional contracts

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KINDS OF COMPANIES

BASED ON “MEMBERSHIP” Private Company

-Min no. of members: 2 -Max no. of members: 50 -Restricts right to transfer its shares -Prohibits public issue of shares or

debentures Public Company

-Min no. of members: 7 -Max no. of members: Unlimited -Doesn’t restrict right to transfer its shares -Doesn’t Prohibit public issue of shares or

debentures

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KINDS OF COMPANIES ( contd…)

• BASED ON “INCORPORATION” Chartered companies -companies which are

incorporated under a special charter granted by the king or queen in exercise of royal power.

-East India Company(1600) Statutory Companies -which are created by

special act of parliament or state legislature at central or state govt. level

-Reserve Bank of India Registered Companies – are companies which

are registered under the co.’s act of 1956

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KINDS OF COMPANIES ( contd…) BASED ON “LIABILITIES”

Co.’s limited by SHARES –companies in which the liability of its members is limited to the extent of the amount unpaid on the shares held by a particular member.

Co.’s limited by GUARENTEE -the liability of members is limited to a fixed amount which members undertake to contribute to the assets of the company in case of its winding up.

Unlimited Co.’s –wherein members are liable for the debts of the company irrespective of their interest in the company

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BASED ON “CONTROL” Holding Company -51% of the share capital Subsidiary Company –less that 51% Govt. Companies – MNTC, ONGC Foreign Companies – IBM, MICROSOFT

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A)

B)

PUBLIC CO. VS. PRIVATE CO.

Number of membersCommencement of businessInvitation to publicTransferability of sharesNumber of directorsStatutory meetingRestrictions on appointment of directorsManagerial remunerationFurther issue of capital

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PARTNERSHIP VS. COMPANY

RegistrationNumber of membersLegal statusProperty ContractsManagementLife duration

LiabilityCreditorsDissolution on deathAgency relationshipTransfer of interestStatutory obligations

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MERGERS AND ACQUISITIONS

MERGER: Combination of two companies to form

new company or to run business under any one of the merging companies’ name.

Eg.:1. NBC Universal; NBC and Vivendi Universal Entertainment 2. US Airways; with America West Airways 3. Sony Ericson; Sony and Ericson 4. NSN; Nokia and Siemens

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ACQUISITION:

Purchase of one company by another with no new company being formed.

Eg.:1. P&G buys Gillette 2. Tata steel acquires Corus 3. Google buys Youtube 4.Vodafone acquires Hutch

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MOTIVES AND BENEFITS OF M&A

Economies of scaleImproved market reachReduction in Tax liabilityDiversification of riskLimit competitionEliminating the financial constraintsSynergy

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TYPES OF MERGES

Horizontal mergerVertical mergerMarket-extension mergerProduct-extension mergerConglomerate merger

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M&A -ITS FINANCING

All Shares DealsCashHybrids

DEMERGER/SPIN-OFF/SPIN-OUT: -Effective opposite of a merger -One Co. splits into two

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