CORPORATE LAW

Class code: 4hexmw4i

Subject code: 24bcpec04

 SYLABBUS

Unit – I
Introduction to Corporate Law
Introduction – Development of Concept of
Corporate law in India – Company Definition,
Meaning – Nature and its characteristics, Forms
of Business – Company vis-à-vis other forms of
business – The Companies Act 2013 – Formation
of Companies – Incorporation, Certificate of
incorporation, On-line Registration of Companies.
 CORPORATE LAW
Meaning
 Corporate law is also known as company law, is a
branch of law that governs the formation, operation,
management and dissolution of corporations.

 It defines the rights, duties, and obligations of various

stakeholders : shareholders, directors, employees, and
creditors.

 It provides the framework for how businesses can

operate legally and successfully, covering everything
from initial incorporation to mergers and acquisitions.
DEVELOPMENT OF CL IN INDIA
Origin of Corporate law
 In Roman law- concept of the company has been sourced,

In England - modern form of corporate regulation began

 The Act of 1844 brought a Joint Stock Companies Act.

That allowed the companies to register with the government and become
separate legal entities.

 Later on, the Limited Liability Act of 1855 helped the shareholders as it made
them free from personal liability, thus encouraging numerous investments.

 In India, this legislative idea was imported from Britain by the British
Colonial administration.
HISTORY OF CL IN INDIA
Pre- independence
(1850 -1947)

Post – Independence (1947 – 1956)

Liberalization and Reform (1991 – 2013)

Companies Act 2013

1. PRE – INDEPENDENCE PERIOD
CA 1850
•Modelled after English Companies act of 1844
•Gain only juridical personality not offered limited liability

1857 •Granted Limited liability which attracted investments

1866 •Consolidating statute – earlier enactments was re-styled to bring clarity and uniformity

1913 •It took full charge of co., incorporation, management and winding-up
2. POST- INDEPENDENCE (1947 -
1956)
 1956 act replaced Features
law of 1913 which
highlighted india’sCorporate
socialistic model of the
governance Provisions for -
economy.
Co., formation,
sharecapital and
standards – merger,
Directors, acquisition and
management
auditors and windingup
shareholders
3. LIBERALIZATION AND REFORMS (1991 -2013)

 India invites foreign investment which led

to changes under the companies act 1956
 2000 amendments:

1. In keeping with International

considerations, rules of corporate
governance were strengthened
2. SEBI introduced rules which have been
designed to safeguard the interest of
investors and bring about fair practice
among traders
4. COMPANIES ACT 2013
 This act replace the act of 1956.
Features
 Incorporation process made easy

 CSR obligations

 Related party transactions tightened norms

 Transparency and corporate governance on the

front-burner
 One-person companies introduced to encourage

entrepreneurship
 Easier norms regarding start-up and small

enterprises.
COMPANY
 A company is a legal entity formed by a group of
individuals to engage in business or trade with the
intention of earning profits or achieving specific
objectives.

 Companies exist as separate legal entities, meaning

they are distinct from the people who own or manage
them.

 corporate entity recognized by law, capable of

entering contracts, owning property, and conducting
business activities in its name.
DEFINITON
Prof. Haney:
“A company is an artificial person created by law,
having a separate legal entity with perpetual
succession and a common seal.”

 Lord Lindley:
“By a company is meant an association of many
persons who contribute money or money’s worth to a
common stock and employ it for some common
purpose. The common stock so contributed is
denoted in money and is the capital of the company.”
CHARACTERISTICS
1. Artificial legal person
2. Separate legal Entity
3. Limited Liability
4. Perpectual succession
5. Transferability of shares
6. Common seal – optional under CA 2013.
7. Respective Management
8. Voluntary Association for profit
9. Capacity to sue.
FORMS OF BUSINESS
Forms of Business

Sole proprietorship

Partnership

Corporation

Limited Liability company

Co-operative

Hindu Undivided family

One person company

SOLE PROPRIETORSHIP

A business owned and operated by one

individual, with no legal distinctions between
the owner and the business. It is favourable
Types

for small-scale entrepreneurs.

Service based

Ex: consulting, tutoring, event planning

Retail based

Boutiques, online store

Technology based

Web design, IT consulting

Manufacturing based

crafts maker, custom production shop

FEATURES OF SOLE
PROPRIETORSHIP
 Lack of legal formalities
 unlimited presonal liability – all debts
 Exclusive control over risks and profits
 No separte legal identity
 Continutiy issues
 No public disclousure required – annual
report
 Low start-up costs
PARTNERSHIP
A business owned and operated by two or more
individuals who agree to share in the profit and losses.

Types:
 general partnership, - Each partner is liable for every

other partner’s action

 limited partnership – Have one general partner who

manages operation of co., and there also limited partners
who is liable only as per financial stake in business.

 limited liability partnership (LLP). – LLPs are not

personally responsible for actions of other partners or the
debts of the business.
FEATURES OF PARTNERSHIP
 Registration - not mandatory
 Partnership agreement
 Decision making
 Flexibility
 Capital contribution
 unlimited liability
 Profit sharing
 Combine expertise
 Distribute workload
EXAMPLES OF PARTNERSHIP CO.
 Spotify and uber
 Unicef and target
 Apple pay app and mastercard
 Nike and apple
 airbnb and times group.
CORPORATION
A legal entity separate owned by shareholders, separate from its
managers and owners with its own rights and responsbilities. It is a
popular business structure, particulary for large businesses, due to
benefits like limited liability, ease in raising funds and potential tax
advantages.

3 Types of Corporation:

 C Corporation – it is common form where corporation is taxed as

business entity and owners profits that are then also taxed individualy.

 S Corporation – It consist of upto 100 shareholders. Profits are not

taxed twice which means corps can elect a pass-through tax system,
where profits and losses are passed directly to shareholders personal
income taxes.

 Non- Profit Corporation – It is a charitable organization and are tax

exempt.
FEATURES
 Separate legal entity
 Limited liability
 Perpetual existence
 Quick capital through stocks
 Management structure.
LIMITED LIABILITY COMPANY
 It is a hybrid business structure that
combines features of both partnership
and companies.
 It prevents owners (called members)
from being liable for company’s
financial loss and debt liabilities.
 If LLC go bankrupt, creditors can only
go after the assets of the business and
not of the owners
FEATURES
 Limited liability
 Pass-through taxation
 Flexible management
 Separate legal entity
 Ease of formation

Ex: Google, Amazon, Pepsico and nike.

CO-OPERATIVE
 A business owned and operated by its
members, often for a specific purpose
like providing goods or services at
affordable prices.
 These members are typically users or
producers of the goods and services
the cooperative provides.
FEATURES
 Members owned
 Democratic structure – one member
one vote
 Less disruption – join and leave
 Shared benefit
 Voluntary and open membership
 Autonomous and independence
TYPES OF CO-OPERATIVE
 Consumer Co-ops: Business owned and managed by people who consume
goods and services.
Ex: co-operative stores, National cooperative consumers federation

 Workers co-op: Business owned and managed by the workers who are
employed by the co-op
Ex: Indian coffee House
 Producer co-op: Business were producers pool their resources and effects for
mutual benefit such as agricultural co-op
EX: Amul

 Housing co-op: Businesses that provide housing to their members.

 Financial co-op: Business that provide financial services to their members,

such as credit union.
Ex: Navy federal credit union , suryoday credit co-operative society ltd.

 Health care co-ops: Provides health care services, which focuses on affordable
and accessible care for members.
 Ex: Indira Gandhi co-operative Hospital in Kerala.
HINDU UNDIVIDED FAMILY (HUF)
 A specific form of business ownership
in India, where family members jointly
own and operate a business.

 HUF is treated as separate entity for

taxation purposes, allowing to hold
assets, earn income and file tax returns
independently from its individual.
FEATURES
 Joint family structure – multiple
generations
 Distinct legal entity
 Karta
 Membership – coparceners, wife and
unmarried daughter
 PAN and tax return

Ex: Reliance Industries limited.

ONE – PERSON COMPANY
 A one person company (OPC) in India
is a business structure allowed under
the Companies Act, 2013, where a single
individual can incorporate a company.

 This structure offers the benefits of

limited liability and separate legal entity,
similar to a private limited company, but
with only one member and director.
FEATURES OF ONE- PERSON CO.,
 Single member and Director
 Limited Liability
 Separate Legal Entity
 Perpetual sucession
 Nominee
 Benefits of Incorporation – capital,
expansion, tax benefit
 Eligibility for MSME
PARTNERSHIP VS COMPANY
Particulars Partnership firm Company
Persons No separate legal Distinct legal person
entity
Property Firms property is Property belongs to
Individuals property company
Creditors Creditors of a Creditors of co.. Can
partnership firm are proceed against co.,
creditors of individual only
partners
Agents Partners are the agents Members of co., are
of the firm – Dispose not its agents. – cannot
property dispose property
Contract A partner cannot Members can contract
contract with his firm with his co.,
Transfer of shares Require permission Can ordinarily be
from other partners to transferred
transfer share
Particulars Partnership firm Company
Death/ Insolvency Dissolved unless Perpetual succession
otherwise provided in
deed
Audit Audited at discretion Necessary to get
of the partnerrs audited
HUF VS COMPANY
HUF company

Consists of Homogenous members Homogenous or heterogeneous

members

Karta (manager) has sole authority No such system

to contract debts for business

Person becomes a member of HUF No provision

by virtue of birth

No registration compulsory for Registration compulsory

carrying on business
LIMITED LIABILITY PARTERSHIP VS
CO.,
LLP company

Regulated by contractual Regulated by companies act

agreement between partners

Management – ownership inherent Management – ownership divide

is not there in LLP inherent in a company

It is more flexible It is not flexible

Lesser Compliance required Comparatively higher than LLP

COMPANIES ACT 2013
 The Companies Act 2013 regulates the formation
and functioning of corporations or companies in
India.
 The first companies act after independence was
passed in 1956, which governed business entities
in the country.
 The 1956 act was based on the recommendations
of the Bhabha committee.
 This Act was amended multiple times, and in 2013,
major changes were introduced.
 By Section 135 of the 2013 Act, India became
the first country to make corporate social
responsibility (CSR) spending mandatory by law.
 Companies bill 2012 was passed in Lok
Sabha on 18th December 2012 and by Rajya
sabha on 8th August 2013 and assented by
the president of india on 29th August 2013
and notified on 30th August 2013.

 It comprises of 470 sections and seven

schedules.
 282 sections have been notified and
made effective from September 2013 and
1-4-2014.
OBJECTIVES OF COMPANIES ACT
2013
1) To achieve transparency, accountability and high standards of
corporate governance/management.

2) To enforce stricter action against fraud and gross non-

compliance with latest company law provisions.

3) to set up institutional structures in the form of various

authorities, bodies and panels as well as by recognition of
various roles for professionals and other experts

4) To implement more effective and time bound approvals and

compliance requirements.

5) To recognize various new concepts and procedures to protect

interest of all the stakeholders: shareholders, debenture
holders, company personnel, creditors, financial institution,
FORMATION OF COMPANIES

The formation of a company is a structured process that

transforms an initial idea into a legally recognised entity. This
process involves multiple stages, ensuring the business
1.complies with the 2. in the Companies 4.
regulations outlined3. Act,

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1. PROMOTION STAGE
 The promotion stage marks the initial phase in the formation of a
company. This is where an idea evolves into an actionable business plan.

Key Steps in the Promotion Stage:

 Identifying a Business Opportunity: Evaluate market demands and

decide on the type of business to establish.

 Feasibility Study: Conduct a thorough analysis of economic, technical,

and legal aspects to ensure the viability of the business idea.

 Role of Promoters: Promoters play a crucial role in executing the idea

by securing the required capital, preparing essential documents, and
taking the initial steps to establish the business
2. REGISTRATION STAGE
The registration stage is when the company becomes a legally recognised entity
under the Companies Act, 2013.
Steps Involved in the Registration Stage:

 Memorandum of Association (MoA): Founders must prepare and sign the MoA,
which outlines the company’s objectives.

 Articles of Association (AoA): Defines the internal rules of the company. All
MoA signatories must also sign the AoA.

 List of Directors: Submit a complete list of the company’s directors to the

Registrar of Companies (RoC).

 Consent of Directors: Directors must provide written consent to act in their

roles, which is then submitted to the RoC.
 Registered Office Address: Notify the RoC of the company’s official address.

 Statutory Declaration: A declaration by a qualified professional (advocate,

secretary, or director) stating that all requirements have been fulfilled must be
filed with the RoC. When all documents are in order, the RoC issues a Certificate
of Incorporation, officially bringing the company into existence.
3. INCORPORATION STAGE

The incorporation stage validates the company’s formation

through the issuance of a Certificate of Incorporation. This
certificate acts as proof that the company is legally established.

Key Points to Note

 A private company can commence business activities
immediately after receiving the Certificate of Incorporation.
 A public company, however, needs to proceed to the next stage:
Commencement of Business.
4. COMMENCEMENT OF BUSINESS
STAGE
The commencement of business stage is critical for public companies, as
they require an additional certificate to start operations.

Steps for Commencement:

 Issuance of Prospectus: Public companies issue a prospectus inviting the
public to subscribe to shares for raising capital.

 Minimum Subscription Requirement: The company must ensure the

minimum required shares are subscribed to and collect the corresponding
funds.

 Registrar Verification: Submit proof of subscription and collected funds to

the RoC.

 Certificate of Commencement of Business: Once satisfied, the RoC

issues this certificate, allowing the company to officially begin its operations .
INCORPORATION OF COMPANY (SEC
7)
 Section 7 of the Companies Act, 2013, deals with
the incorporation of a company.

 It outlines the process and documents required

for registering a company with the
Registrar of Companies.

 This section specifies that the

memorandum and articles of association, along
with a declaration from a professional and the
first directors, must be filed with the Registrar.
1) There shall be filed with the Registrar within whose
jurisdiction the registered office of a company is
proposed to be situated, the following documents and
information for registration, namely:—

 Memorandum and Article of co., duly signed by all subscribes

to the memorandum
 Declaration in prescribed form by professional (auditor, ca, cost
a/c, cs) and management
 Affidavit from each of the subscribers to the memorandum
 Address for correspondence till its registered office is
established
 Particulars about subscribers (name, address, nationality) along
withits proof of identity
 First director name his particulars along with DIN (Director
Identification number) with proof
 Particulars of interest and consent to act as director in format
2) Registrar register the documents under sub
section(1) and issue certificate of incorporation
3) Registrar allot the company corporate identity
number which also included in the certificate. CIN –
unique 21 digit alpha numeric
4) Co., maintains copies all documents filled under
sub-sec 1 with its registered office till the dissolution
under the act.
5) Any person furnishes false or incorrect particulars or
any information or document filed with registrar
shall be liable under sec 447.
6) If co., furnishing false information or document for
incorporation and got proved in that case promoters,
first director and person making declaration shall
each be liable for action under sec 447.
7) Tribunals may, on application made to
it, on being satisfied that situation so
warrants,
a) Pass such orders it may think fit for
the regulation of the management of
co.,
changers in MOA & AOA.
b) Direct liability of members shall be
unlimited
c) Direct removal of name of co., form
the register of co., or pass order for
windingup
Before making order under this sub-
section:

a) The co., shall be given a opportunity of

being heard in the matter
b) Tribunal shall take into consideration
the transactions entered into by the
co., including the obligations if any,
contracted or payment of any liability.
CERTIFICATE OF INCORPORATION
 Section 7 of the Companies Act 2013 deals
with the procedure for the incorporation of a
company which sets out Certificate of
Incorporation (issued by the Ministry of
Corporate Affairs or the State Government)
as the final step to the incorporation of a
company.

 It provides legal identity to the company

and a license to commence business.
CONTENTS OF CERTIFICATE OF
INCOP
 The name of the company and its abbreviated
form.
 A statement specifying the business purpose.

 The registered office address and the name of the

registered agent for the address.

 The number of shares that are authorized to be

issued and the description of the different types of
stock that can be issued if there is more than one
type.
OBTAINING CERTIFICATE OF INCOP
 Obtain Digital signature Certificate (DSC) & Directors
Identification Number (DIN)

 Application for name approval – registrar – 14 day

 Preparation of MOA and AOA

 Filing the e-form and payment of fees with the registrar

 Issuance of Certificate of Incorporation – Registrar to

director of co., through mail
ONLINE REGISTRATION OF
COMPANIES
 Startups and company owners in India are choosing to register
their companies online as a corporate market advancement.

 Creating your business as an independent legal entity grants you

reliability and opens up a host of benefits, including tax savings,
transfers of shares, and capital growth.

 Online company registration in India, as per the Companies Act,

involves submitting the SPICe+ form on the Ministry of Corporate
Affairs (MCA) portal.

 This form requires obtaining Director Identification Number (DIN)

and a Digital Signature Certificate (DSC) for each director. The
process also includes reserving a company name, drafting
Memorandum of Association (MoA) and Articles of Association (
AoA), and fulfilling other statutory requirements
STEPS FOR ONLINE CO.,
REGISTRATION
1. Choose a business structure •Public, private, one person business, LLP

•Digital Signature Certificate – Class 2 or 3

2. Obtain DIN & DSC •Director Identification Number – Section 153 – 8 digit uniqueno.
•DIN – 30 days

3. Name & Spice + Form A •To reserve the name fill spice + Part A Form
 •Within 20 days of name reservation file next application spice + part B.
4. File form Spice + Part B •Form – details about shareholders and organizational setup

•Checks all the information as well document provided

5. Verification of the application •If all ok authority will grant registration to your entity

•Draft AOA, MOA

6. After Certification •Apply Tax Deduction & Collection Account number (TAN) & PAM
ADVANTAGES OF ONLINE COMPANY INCORPORATION

 Online registration of companies protects both

energy and time with simple steps. Anyone can
finish the procedure at a low cost from any place
they want.
 Users can monitor the current state of their
requests online, and the entire process is
visible.
 Registering online does not require in-person
visits or documentation.
 Digital signatures facilitate the safe uploading of
files.