Q 1. Type of company?

->There are 7 types of entities recognized under the Indian Law namely Private Limited Company, Public
Company, Sole Proprietorship, One Person Company, Partnership, Limited Liability Partnership (LLP).

Private Limited Company

A Private Limited Company is a company whose ownership is private. A private limited company can be
formed with a minimum of 2 and maximum of 200 members. It cannot issue a prospectus in the open
market nor can it make or accept deposits from the public. The shares in a private company are not
freely transferable. According to the Companies Act, 2013, an investor can choose between the
following types of a Private Limited Company in India;

Company Limited by shares

Company Limited by Guarantee

Unlimited Company

Public Company

Public Limited Company is a type of company whose securities are traded on a stock exchange. A Public
Limited Company can be formed with a minimum of 7 members. There is no restriction on the
transferability of shares. A Public Limited Company requires more public disclosures and compliances
from the government as well as other authorities like RBI(Reserve Bank of India), SEBI (Securities and
Exchange Board of India) etc.

Sole Proprietorship

The sole proprietorship is the simplest form of business under which one can operate. The sole
proprietorship is not a legal entity. The person who is the owner of the business becomes personally
liable for the debts of the business. For taxation and legal liability purpose, the owner and the business
are one and the same. The proprietorship is not taxed as separate entity.

One Person Company

The concept of One Person Company has been introduced by Companies Act, 2013 enabling a sole
proprietor form of business to enter into the corporate framework. This allows a sole investor to form a
company alone with limited liability. One Person Company structure is similar to that of a proprietorship
concern without the ills generally faced by the proprietors. One of the most important feature of One
Person Company is that the risks mitigated are limited to the extent of the value of shares held by such
person in the company.
Partnership

The Indian Partnership Act, 1932, Section 4, defined partnership as “the relation between persons who
have agreed to share the profits of a business carried on by all or any of them acting for all”. The
partnership is an association of two or more persons who have agreed to share the profits of a business
which they run together. This business may be carried on by all or any one of them acting for all. The
persons who own the partnership business are individually called ‘partners’ and collectively they are
called as ‘firm’ or ‘partnership firm’. The name under which partnership business is carried on is called
‘Firm Name’. In a way, the firm is nothing but an abbreviation for partners. Unlike a company, a
partnership is not a separate legal entity distinct from its members. It cannot own a property, incur
debts or sue any party in its own name. Moreover, the partners of a partnership firm shall be personally
and severally liable for the liabilities incurred by the firm.

Registration of Partnership Firm in India

Limited Liability Partnership (LLP)

Limited Liability Partnership Act, 2008 governs the principles of Limited Liability Partnership in India. It is
a combination of a company and a partnership firm. Unlike partnership, the liability of the partners in an
LLP is limited and no partner shall be held liable for the acts of the other. It is a separate legal entity,
having a distinct entity of its own separate from its members. The main disadvantage of an LLP is that it
cannot raise capital from public by issue of an IPO unlike a company.

Registration of Private Limited Company

A Public Limited Company (other than a Public Sector Undertaking) There must be at least seven persons
to form a public company. It is of the essence of a public company that its articles do not contain
provisions restricting the number of its members or excluding generally the transfer of its shares to the
public or prohibiting any invitation to the public to subscribe for its shares or debentures. Only the
shares of a public company are capable of being dealt in on a stock exchange.

Conversion of one person company into Private Limited Company

As per the Companies (Incorporation) Rules, 2014, One Person Company has to be compulsorily
converted into a private limited company within 6 months of the date of which the threshold limit of the
paid-up share capital increase INR 50 lakhs or the last date of relevant period during which its average
turnover exceeds INR 2 crores.

Q2. Feature of 2013 act ?

->Companies Act 2013 Highlights

The major highlights of the 2013 Act are given below:

The maximum number of shareholders for a private company is 200 (the previous cap was at 50).

The concept of a one-person company.

Company Law Appellate Tribunal & Company Law Tribunal

CSR made mandatory

Salient Features of the Companies Act 2013

It has introduced the concept of ‘Dormant Companies’. Dormant companies are those that have not
engaged in business for two years consecutively.

It introduced the National Company Law Tribunal. It is a quasi-judicial body in India adjudicating issues
concerning companies. It replaced the Company Law Board.

It provides for self-regulation concerning disclosures and transparency rather than having a government-
approval based regime.

Documents have to be maintained in electronic form.

Official liquidators have adjudicatory powers for companies having net assets of up to Rs.1 crore.

The procedure for mergers and amalgamations have been made faster and simpler.

Cross-border mergers are allowed by this Act (foreign company merging with an Indian company and
reverse) but with the permission of the Reserve Bank of India.

The concept of a one-person company has been introduced. This is a new type of private company
which may have only one director and one shareholder. The 1956 Act required at least two directors and
two shareholders for a private company.

Having independent directors has been made a statutory requirement for public companies.

For a prescribed class of companies, women directors are mandatory.

All companies should have at least one director who has been a resident of India for not less than 182
days in the last calendar year.

The Act provides for entrenchment (apply extra-legal safeguards) of the articles of association.

The Act mandates at least 7 days of notice for calling board meetings.
In this Act, the duties of a Director has been defined. It has also defined the duties of ‘Key Managerial
Personnel’ and ‘Promoter’.

For public companies, there should be a rotation of audit firms and auditors. The Act also prevents
auditors from performing non-audit services to the company. In case of non-compliance, there is
substantial criminal and civil liability for an auditor.

The whole process of rehabilitation and liquidation of the companies in the case of the financial crisis
has been made time-bound.

The Act makes it mandatory for companies to form CSR committees, and formulate CSR policies. For
certain companies, mandatory disclosures have been made with regard to CSR.

Listed companies ought to have one director to represent small shareholders as well.

There is provision for search and seizure of documents, during the investigation, without an order from
a magistrate.

Norms have been made stringent for accepting deposits from the public.

Setting up of the National Financial Reporting Authority (NFRA) has been provided for. It engages in the
establishment and enforcement of accounting and auditing standards and oversight of the work of
auditors. (Due to notification of NFRA, India is now eligible for membership of the International Forum
of Independent Audit Regulators (IFIAR).)

The Act bans key managerial personnel and directors from purchasing call and put options of shares of
the company if such person is reasonably expected to have access to price-sensitive information.

The Act offers more power to shareholders in that it provides for shareholders’ approval for many major
transactions.

Q3. Private and public difference ?

Private vs. Public Company: An Overview

Privately held companies are—no surprise here—privately held. This means that, in most cases, the
company is owned by its founders, management, or a group of private investors. A publicly traded
company, on the other hand, is a company that has sold all or a portion of itself to the public via an
initial public offering (IPO), meaning shareholders have a claim to part of the company's assets and
profits.

KEY TAKEAWAYS

In most cases, a private company is owned by the company's founders, management, or a group of
private investors.
A public company is a company that has sold all or a portion of itself to the public via an initial public
offering.

The main advantage public companies have is their ability to tap the financial markets by selling stock
(equity) or bonds (debt) to raise capital (i.e., cash) for expansion and other projects.

Private Companies

The popular misconception is that privately held companies are small and of little interest. In fact, there
are many big-name companies that are also privately held—check out the Forbes list of America's
largest private companies, which includes big-name brands like Mars, Cargill, Fidelity Investments, Koch
Industries, and Bloomberg.

While a privately held company can’t rely on selling stocks or bonds on the public market in order to
raise cash to fund its growth, it may still be able to sell a limited number of shares without registering
with the SEC, under Regulation D.

This way, privately held companies can use shares of equity to attract investors. Of course, privately held
companies can also borrow money, either from banks or venture capitalists, or rely on profits to fund
growth.

The main advantage of private companies is that management doesn't have to answer to stockholders
and isn't required to file disclosure statements with the SEC.

However, a private company can't dip into the public capital markets and must, therefore, turn to
private funding. It has been said often that private companies seek to minimize the tax bite, while public
companies seek to increase profits for shareholders.

Public Companies

The main advantage publicly traded companies have is their ability to tap the financial markets by selling
stock (equity) or bonds (debt) to raise capital (i.e., cash) for expansion and other projects. Bonds are a
form of a loan that a publicly traded company can take from an investor. It will have to repay this loan
with interest, but it won’t have to surrender any shares of ownership in the company to the investor.
Bonds are a good option for public companies seeking to raise money in a depressed stock market.
Stocks, however, allow company founders and owners to liquidate some of their equity in the company,
and relieve growing companies of the burden of repaying bonds.

Q4. Promoter functions ?

->Functions of a Promoter

A promoter plays many functions in the formation of a company, from conceiving the business idea to
taking all the required steps to make the idea a reality. Below are some of the functions of a promoter:

A promoter needs to comprehend/conceive the idea of company formation.

A promoter looks into the feasibility and viability of the business idea. He/she assesses whether the
company formation will be practicable or profitable.

Once the idea is conceived, the promoter organises and collects the available resources to convert the
business idea into a reality.

The promoter decides the company name and settles the contents of the company’s Memorandum of
Association and Articles of Association.

The promoter decides the location of the company’s head office.

The promoter nominates associations or people for vital company posts, such as appointing the
auditors, bankers and the company’s first directors.

The promoter prepares all the necessary documents required to incorporate a company.

The promoter decides the company’s funding sources and capital requirements.

A promoter cannot be considered a trustee, employee or agent of a company. The role of the promoter
ceases when the company is established and is handled by the board of directors and the company
management.

Q5. Moa clause ?

-> A memorandum of association contains a name clause, registered office clause, object (or objective
clause), objects clause, liability clause, capital clause, and association clause. An MOA is a type of legal
paper that is prepared when forming and registering a limited liability company (LLC).

The MOA's purpose is to explain the LLC's relationship with its shareholders. The articles of Association
and MOA make up the company's constitution. An MOA isn't required in the United States, but limited
liability companies that are based in European countries, which include the U.K., the Netherlands,
France, and some Commonwealth Nations do require MOAs.
Name Clause

This clause states the company's proposed name.

It must end in the word "limited" if it's a public company or "private limited" if it's a private company.

It can't be identical to any existing company's name.

It can't allude to the new company doing the business of an existing company.

It should not be misleading in any way.

Registered Office Clause

The registered office clause lists the name of the state where the company's registered office is
physically located.

The registered office's physical location determines which jurisdiction the Registrar of Companies and
which court the company would fall under.

It also confirms the company's nationality.

The registered office's full address must be provided to the Registrar of Companies to simplify further
communications.

Objects or Objective Clause

The objects clause, also called the objective clause, is considered the most important in the MOA.

It defines and limits the scope of the company's operations.

It details the company's scope of activity for the members and explains how the members' capital will be
used.

It protects shareholders funds and ensures the funds will be used for the specific business purposes for
which they were raised and that they won't be risked in other endeavors.

Object Clause

The object clause explained why the company is establishing. Companies aren't legally allowed to do any
kind of business other than the kind of business that is specifically stated in this clause. An object clause
should contain:

A list of the main objects the company will be pursuing after it's Incorporated

Incidental objects that are necessary to achieve the main object

Any other objects that aren't included in the main objects or incidental object

Nothing illegal

Nothing that's against the public interest

Nothing that's against the country's general rule of law

Liability Clause

The liability clause explains what liability each of the company's members faces. If the company is
limited by shares, the liability that each member faces can be no more than the face value of shares that
he or she holds. If it's a company that's limited by guarantee, this clause must define how much liability
each individual company member holds. If it's an unlimited company, this particular clause would not be
included in the MOA.

Capital Clause

The capital clause lists information about the total capital held by the proposed company. This amount is
called the company's authorized capital. Companies aren't permitted to collect more money than the
amount listed under authorized capital. The way the capital is divided into equity share capital and
preference share capital also needs to be listed in the capital clause. The number of shares the company
puts in equity share capital and preference share capital, alongside their value, needs to be included in
the MOA.

Association Clause

The association clause explains that any individual signing the bottom of the MOA wants to be part of
the association that's being formed by the memorandum. The MOA has to be signed by at least seven
people or more if it's a public company. It has to be signed by at least two or more people if it's a private
company. The signatures also have to be affirmed by witnesses. There can be one witness for all of the
signatures, but none of the subscribers can witness the signatures of the others. All subscribers and
witnesses must provide their addresses and occupations in writing.

If you need help with the contents of an MOA, you can post your legal need on UpCounsel's
marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel
come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience,
including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Q6. Aoa contents ?

-> When a company is formed, certain rules and regulations are laid down along with the objectives of
the company’s operations and its purpose. These laws regulate the internal affairs of a company. There
are two important sets of documents that define these objectives and govern the functioning of the
company and its directors or internal affairs. These documents are Articles of Association (AOA) and
Memorandum of Association (MOA). Here, we will discuss in detail the Articles of association.

Articles of Association contain the by-laws that regulate the operations and functioning of the company
like the appointment of directors and handling of financial records to name a few. Let’s imagine the
company as a machine. The articles of association then can be considered the user’s manual for this
machine. It defines the operations that the machine is supposed to perform and how to do that on a
day-to-day basis.

Definition of Articles of Association of a Company

As per Section 2 (5) of the Companies Act, 2013, Articles of Association have been defined as

“The Articles of Association (AOA) of a company originally framed or altered or applied in pursuance of
any previous company law or this Act.”

Objectives of the Articles of Association

Sec 5 of the Companies Act, 2103 states that the Articles of association:

Must include the regulations for the management of the company

Include matters that have been prescribed under the rules

They do not prevent a company from including additional matters in the AOA or from doing any
alterations as may be considered necessary for the functioning of the company affairs.

Contents of the Articles of Association

The AOA contains the rules and by-laws for the following;

Share capital:

Rights of various shareholders, share certificates, payment of a commission, etc.

Lien of shares

Calls on shares

The process for the transfer of shares

Transmission of shares

Forfeiture of shares

Surrender of shares

Process for conversion of shares to stocks

Share warrants

Alteration of capital: Increase, decrease, or rearrangement of capital

General meetings and proceedings

Voting rights of members

The appointment, remuneration, qualifications, powers of directors, etc.

Proceedings of the boards of directors’ meetings

Dividends and reserves

Accounts and Audits

Borrowing Powers of the company

Provisions relating to the winding up of the company

Forms of Articles of Association (AOA)

The forms for Articles of Association (AOA) in tables F, G, H, I, and J for different types of companies
have been mentioned under Schedule I of the Companies Act, 2013. AOA must be in the respective
form.

Q7. Moa and aoa difference ?

-> Comparison Chart

BASIS FOR COMPARISON MEMORANDUM OF ASSOCIATION ARTICLES OF ASSOCIATION

Meaning Memorandum of Association is a document that contains all the fundamental

information which are required for the incorporation of the company. Articles of Association is a
document containing all the rules and regulations that governs the company.

Type of Information contained Powers and objects of the company. Rules of the company.

Status It is subordinate to the Companies Act. It is subordinate to the memorandum.

Retrospective Effect The memorandum of association of the company cannot be amended

retrospectively. The articles of association can be amended retrospectively.

Major contents A memorandum must contain six clauses. The articles can be drafted as per the
choice of the company.

Q11. Types of share capital ?

->Authorised Capital: Authorised capital is the amount of the share capital in which a company is
allowed to issue its Memorandum of Association. The company is not supposed to raise more than the
amount of capital as mentioned in the Memorandum of Association. It is also known as Registered or
Nominal capital. The authorised capital can be either decreased or increased as per the process
furnished in the Companies Act. It should be understood that the company need not issue the complete
authorised capital for public subscription at one time. Relying upon its necessity, it may circulate share
capital but in any scenario, it should not cross more than the amount of authorised capital.

Issued Capital: It is that portion of the authorised capital which is usually circulated to the public for
subscription comprising the shares assigned to the merchants and the endorsers to the enterprise’s
memorandum. The authorised capital which is not proffered for public consent is called as ‘unissued
capital’.

Subscribed Capital: The subscribed capital is referred to as that part of issued capital that is subscribed
by the company investors. It is the actual amount of capital that the investors have taken.

Called up Capital : The amount of share capital that the shareholders owe and are yet to be paid is
known as called up capital. It is that part of the share capital that the company calls for payment.

Obligatory Yes, for all companies. Only a private company is required to frame its articles while a
public company limited by shares can adopt Table F in place of articles.

Compulsory filing at the time of Registration Required Not required at all.

Alteration Alteration can be done, after passing Special Resolution (SR) in Annual General Meeting
(AGM) and previous approval of Central Government (CG) or Company Law Board (CLB) is required.
Alteration can be done in the Articles by passing Special Resolution (SR) at Annual General
Meeting (AGM)

Relation Defines the relation between company and outsider. Regulates the relationship
between company and its members and also between the members inter se.

Acts done beyond the scope Absolutely void Can be ratified by sharehold

Q12.Borrowing powers of directors ?

May borrow money for a period not less than six months and not more than 36 months. Provided that
the company may, for its short term requirements may borrow money for a period less than six months
but not less than 3 months and the amount so borrowed shall not exceed ten per cent. of the aggregate
of the paid-up share capital, free reserves and securities premium account of the company.

The amount so borrowed shall not exceed 100% of aggregate of the paid up share capital, free reserves
and securities premium account.

Shall file the details of monies so accepted in form DPT-03.

Company shall not borrow money at a rate of interest exceeding the maximum rate of interest
prescribed by the Reserve Bank of India for acceptance of deposits by non-banking financial companies.

Q15. Types of meetings ?

->Meaning of company meetings

This is when two or more persons (shareholders or the directors or the debenture holder or of the
contributories), get together at one place, at a specific time, for lawful purposes, to discuss any common
issue.

Types of meetings

a. Public meetings

These are the meetings that consider matters of public concern and to which all members of the public
have access, subject to physical limitations of the place where the meeting is held or conditions imposed
by any law.

b. Private meetings

These are meetings attended by people who have a specific right to attend. For example, Committees
members of a welfare group or of a registered company. Therefore, company meetings fall under this
category.

The eight main types of company meetings

Statutory Meeting

Annual General Meeting

Extra ordinary General Meeting

Class Meeting

Meeting of Debenture Holders

Meeting of the Board of Directors

Meeting of Creditors

Meeting of Creditors and Contributories.

Q16 . Winding of a company compulsay?

-> Compulsory Winding Up

Compulsory winding up takes place when a creditor of an insolvent company asks the court for a wind
up. If the company goes into liquidation, the court of law appoints a liquidator for the liquidation.
The primary objective of the liquidator is to raise as much funds as needed to pay the creditors.

The company will then be dissolved and its name will be struck off from the list of companies in the
registrar’s office.

Any surplus money left will be distributed amongst the shareholders of the company.

This legal process ends with the company’s name struck off from the list of companies in the registrar’s
office.

After the name is struck off, the company ceases to exist anymore.

Winding up involves the following −

Every contract of the company, including individual contracts are completed, transferred or ended. The
company is no more able to do business.

Any outstanding legal disputes are settled.

All the assets of the company are sold.

Money owed to the company, if any, is collected.

Funds raised are distributed to the creditors.

Surplus funds left after all the transactions are distributed amongst shareholders.

Consequences of Winding Up

The most important consequences of the winding up of a company are as follows −

As Regards the Company Itself

Winding up doesn’t take away the existence of the company completely.

The company continues to exist as a corporate entity till its dissolution.

All the ongoing business of the company is administered by the liquidator during the phase of
liquidation.

Q17. voliantarry ?

-> Creditors' voluntary liquidation

This is when the shareholders of the company decide to put the company into liquidation, but there
aren't enough assets to pay the creditors in full. ie. the company is insolvent. The liquidation begins from
the time the resolution to wind up is passed.
If the majority of directors do not make a declaration of solvency, or the company is insolvent, the
shareholders can still vote for a voluntary liquidation. This type of liquidation is called a creditors'
voluntary liquidation.

To vote for a voluntary liquidation, the shareholders must:

hold a general meeting of the company

pass a resolution for voluntary winding up (as for members' voluntary liquidation)

The company can nominate an authorised insolvency practitioner as liquidator. It must also call a
meeting of creditors (usually on the same day as the shareholders' meeting) at which they receive
details of its financial affairs. The creditors can nominate a liquidator and their nomination will usually
override that of the shareholders, if different.

What happens when a company goes into voluntary liquidation?

The liquidator takes control of the company's affairs and almost all powers of the directors cease.

The liquidator disposes of all the company's assets and, after paying the costs and expenses of the
liquidation, distributes any remaining money to the creditors.