introduction to company law

1. Company Law

2. History of Company Law in India
• First legislative enactment known as the Joint
Stock Companies Act, 1850 was passed in India in
1850. (this was based on the English Companies
Act of 1844).
• Amendment in 1857 (Joint Stock Companies Act,
1850)- The principle of limited liability was first
time recognised in Joint Stock Companies.
• This principle of limited liability was extended to
banking companies, insurance companies in
1860.

3. • In the meantime, various legislations like the Companies
Act, 1866 (repealing earlier Acts), Companies Consolidation
Act, 1882, Companies Amendment Act, 1910 were enacted.
• Later, Indian Companies Act, 1913 was enacted to
consolidate and amend the law relating to trading
Companies and other Associations in British India.
• Indian Companies (Amendment) Act, 1936 passed. As
Companies Act, 1913 was unsatisfactory and needed radial
changes.
• Since 1939, time of World War II, the management and
organisation of Joint Stock Companies witnessed
remarkable changes which altered the character of trade
and industry.

4. • As a result of the Cohen Committee Report,
1945- The UK Companies Act, 1948 was enacted
in England.
• This called for a review of the Indian Companies
Act. Also in the light if changed political and
administrative conditions in India due to partition
of India and the end of British rule in India.
• This lead to the passing of the Companies Act,
1956.

5. The Companies Act, 1956
• The Government of India appointed a
Committee under the Chairmanship of C.H.
Bhabha in October, 1950 which submitted its
Report in March, 1952.
• On the recommendations of this Committee,
Companies Act, 1956 was enacted which
came into force on 1st April, 1956.
• This repealed the earlier Companies Act,
1913.
• It consisted of 658 sections and 14 schedules.

6. • The main object of the was to provide
protection to investors, creditors and public at
large while at the same time, leaving
management free to utilize its resources and
energies for the optimum output.

7. Amendments to Companies Act,
1956
• Companies (Amendment) Act, 1960
• 1963 Amendment provided for the appointment of a
Companies Tribunal and constitution of the Board of Company
Law Administration by the Central Government.
• 1965 Amendment- annulled sections relating to directors.
Extended the Act to Nagaland.
• Companies Tribunal (Abolition) Act, 1969
• Companies (Amendment) Act, 1969- prohibited companies to
make contributions to political parties and imposed penalties
on companies committing the same.

8. Companies (Amendment) Act,
1974
• With Bank Nationalisation, abolition of Privy Purses
of the erstwhile Princely States and taking over of
insurance business and some major industries such
as coal, steel, etc. necessitated exercise of greater
governmental control over the activities of the
corporate sector.
• This introduced changes in provisions relating to
Deemed Public Limited Companies, Public Deposits,
unclaimed and unpaid dividends, company law
board, foreign companies, voting rights to preference
share holders, Managing Director, Whole-time
Director etc.

9. Sachar Committee
• To review the working of the Companies Act,
1956 and the Monopolies and Restrictive
Trade Practices Act, 1969, a committee under
the chairmanship of Mr. Justice Rajender
Sachar (Delhi High Court) was appointed.
• Certain amendments were made to both
these Acts on the recommendations of the
Committee.

10. Companies (Amendment) Act,
2000
• Main object- to restructure the working of Companies to cope
with the new challenges of globalisation and liberalisation in
the corporate world. Key highlights were-
• Secretarial Compliance Certificate
• Postal Ballot
• Audit Committee
• Board’s Report
• Private Placement of shares
• Shares in dematerialized form
• Types of shares- equity and preference share capital
• Power of SEBI
• Dividend

11. • Minimum Paid up capital
• Deemed Public Company
• Directorship
• Auditors Report
• Debenture Trust Deed
• Small share holders may have a director

12. Companies (Amendment) Act,
2002
• Definition of Producer Companies, its
objectives laid down
• Vacation of office of Director
• CEO’s appointment and responsibilities
• AGM and General meetings
• Resolution of disputes

13. Companies (Second Amendment)
Act, 2002
• The main object of the Act was the formation
of –
• National Company Law Tribunal (NCLT) and
• National Company Law Appellate Tribunal
(NCLAT) by abolishing the Company Law
Board.

14. Corporate Identification Number
(CIN)
• The decision of the Department of Company
Affairs, Ministry of Law, Justice and Company
Affairs resulted in the allotment of a 21 digit
Corporate Identification Number (CIN) to all
Companies incorporated/ registered on or
after November, 2000.

15. Companies Act, 2013
• Consists of 470 sections, 29 chapters and 7 schedules
• Main object- to provide free access to entrepreneurs to open global
market, ensure transparency and accountability in the working of
companies and to protect the interests of investors and
stakeholders.
• The Act focuses on stricter enforcement of the law ensuring
compliance and accountability in corporate dealings and company
management.
• Regulation of intercorporate loans and investments to private
companies
• This Act stresses on maintenance of accounting standards by
corporate entities and improve operational efficiency of companies.
• Under this Act, the quantum of punishment for the contravention
of provisions of company law has been enhanced many more times
than that prescribed in preceding Act of 1956.

16. Major features of this Act
• One –Person Company
• Addition of definitions to the Definition clause
• Uniform Financial year
• Number of members in Private companies increased to a maximum
of 200 members as against the maximum of 50 members
• Object Clause- Only one head and three sub-heads (main, ancillary
and other objects) done away with.
• Statement on lieu of Prospectus by Private Companies done away
with
• Provision relating to buy- back of shares by companies liberalised
• Holding of AGM within 9 months from the closure of its first
financial year.
• Corporate Social Responsibility- Section 135
• Women Director

17. Company- Meaning
• The word ‘company’ is derived from the combination of two Latin words,
namely, com and panis, where ‘com’ means ‘together’ and ‘panis’ means
‘bread’. Thus initially the word company referred to an association of
persons who took their meals together. The merchants in the leisurely
past, took advantage of these festive gatherings to discuss their business
matters.
• Companies can be used to accommodate the smallest, one-person
business to the largest, multi-national undertaking.
• The term ‘company’ implies an association of a number of people for
some common object or objects. In normal parlance, the word ‘company’
is reserved for those associated for economic purposes, i.e. to carry on
business for gain.
• However, to say that company law is concerned with those associations
which people use to carry on business for gain would be wrong. Since
companies can be incorporated under the Companies Act for carrying on
not-for-profit businesses (section 8 of Companies Act, 2013).

18. • Before the inception of company as a device for business enterprise, two modes of
carrying out business activities were commonly prevalent, namely – Monopoly and
Partnership.
• With the advance of time and impact of industrial revolution during 18th Century,
the business activities expanded tremendously bringing about a radical change in
the pattern commercial activities.
• In monopoly, it was seen that great risk was involved since the required
investment of capital by a single person who in the event of loss, had to bear the
entire burden himself.
• Partnership was a suitable device for small scale enterprises which could be
financed and managed by a limited number of persons called partners. These
partners would take mutual interest and there is also mutual trust and confidence
among them. However these devices were unsuited to large scale business
organisations which involved greater mobilisation of capital resources. Therefore, a
new device in the form of company has now become the most dominant mode of
carrying out business activities.

19. Definition of Company
• Section 2(20) of the Companies Act, 2013 defines company as “a company
incorporated under this Act or under any previous company law.”
• According to Lord Justice 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 in some trade or business, and who share the profit and loss arising therefrom.
The common stock so contributed is denoted in money and is the capital of the
company. The persons who contribute it or to whom it belongs, are members. The
proportion of capital to which each member is entitled is his share. Shares are
always transferable although the right to transfer them is often more or less
restricted.
• Chief Justice Marshal of Supreme Court of USA in Dormouth Cottege v. Woodward
(4 Wheat [US] 518) defines company as “a person, artificial, invisible, intangible
and existing only in the eyes of law. Being a mere creation of law, it possesses only
those properties which the charter of its creation confers upon it either expressly
or as incidental to its very existence, among the most important are immortality
and if the expression may be allowed, individuality, properties by which a
perpetual succession of many persons is considered as the same and may act as a
single individual.”

20. Difference between Company, Partnership and Limited
Liability Partnership
Basis of distinction Company Partnership Limited Liability Partnership
Formation Governed by Companies Act, 2013 Indian Partnership Act, 1932 Limited Liability Partnership
Act, 2008
Registration Registration is compulsory Registration is optional Registration compulsory. If
unregistered, then it will be
considered as Indian
Partnership Act, 1932
Legal Status Separate legal entity It is not distinct from the
persons who form it. The
partners are collectively
known as a ‘firm’
Separate legal entity
Agreement The persons who want to form a
company prepare a Memorandum
of Association
The agreement to enter into
partnership may or may not
be in writing
Agreement must be in
writing. Section 23(2) requires
that the LLP agreement and
changes therein to be filed
with the Registrar of
Companies in the form and
manner and accompanied by
such fees as may be
prescribed. This is to be done
within 30 days of
incorporation.

21. Basis Company Partnership LLP
Members Private Limited Company-
minimum is 2 and maximum is 200
(One –person company- where a
private limited company can have
only one person as a member).
Public Limited Company- minimum
is 7 and maximum is unlimited
Minimum-2 maximum is 100
(section 464 of Companies Act.
2013)
Minimum- 2 and atleast one of
them is a resident of India. No
maximum limit
Liability Limited by share or limited by
guarantee
unlimited Limited to the contribution in the
LLP
Capital Can be altered by following the
procedure laid down by the
Companies Act, 2013
Capital contributed can be altered
by the partners freely in case of
partnership firm
The quantum of each partner of
an LLP is left to be decided by
them inter se. However, capital
contribution of a partner cannot
be nil but may be nominal.
Property Property of the company belongs
to the company
Belongs to all the partners Belongs to the LLP
Agency A director of a company may act as
an agent. A member is not an
agent of the company
Every partner is an agent of the
firm and of every other partner of
the firm
Partner is an agent of LLP but not
of other partners.
Management Board of directors Every partner Every partner may take part in
management if there is no cause
to the contrary in the LLP
agreement. But LLP Act makes
designated partners wholly
responsible and accountable for
the compliance with the
provisions of the Act

22. Basis Company Partnership LLP
Transfer of shares Shares of public limited
company are freely
transferable. Shares of private
limited company can be
transferred subject to
restriction imposed on them
Partner cannot transfer his
interest to any other person
without the consent of other
partners so as to make him
the partner. If such transfer
made then other partners can
file suit for dissolution of the
firm
The rights of a partner to a
share of the profits and losses
of the LLP and to receive
distributions in accordance
with LLP agreement are
transferable either wholly or
in part.
Dissolution Perpetual existence. Does not
dissolve on death or
insolvency of a member
Dissolved by death and or
insolvency of partner
Not dissolved by death and
insolvency
Nature of document MoU and AoA are public
documents
Partnership deed is a private
document
LLP agreement is public
document
Name Companies Act, 2013 make it
mandatory to use words
“Limited” or “Private Limited”
NO such provision in Act Every limited liability shall
have either the words
“limited liability partnership”
or “LLP” as the last words
Winding up Section 271 of the Act sets
out the grounds on which the
Court / Tribunal may wind up
a company.
Dissolution takes place as per
the agreement, or by the
consent of the partners or by
notice by a partner or on the
happening of certain events.
Winding up may be voluntary
or by the Tribunal.

23. Lifting of corporate veil
• A company is a distinct personality by fiction of law. A company is an artificial or juristic
person which can act only through natural persons.
• The theory of corporate entity of a company is still the basic principle on which the whole
law of corporations is based. The separate personality of the company being a statutory
privilege, it must always be used for legitimate business purposes only.
• Where the legal entity of a corporate body is misused for fraudulent and dishonest
purposes, the individuals concerned will not be allowed to take shelter behind the corporate
personality. In such cases, the Court will break through the corporate shell and apply the
principle of what is known as “lifting or piercing the corporate veil”
• Cases of tax evasion have become so common that the Courts have actively used the
doctrine of piercing of corporate veil to probe into transactions and decide the actual
entities responsible behind the facade of the company. Recently, in the case of Richter
Holding v. The Assistant Director of Income Tax (Writ Petition No. 7716/2011 decided on
24.03.2011), the Hon’ble Karnataka High Court used this doctrine to take the view that it
may be necessary for the courts to lift the corporate veil to look into the real nature of the
transaction and ascertain the virtual facts.
• Main aim is to make sure that the players behind the corporate veil maintain the sanctity of
the company’s affairs and do not malign the same by injecting personal motive. Therefore,
sometimes a situation may warrant that the legal identity of the company as a juristic person
be seen in separation with the identity of the person causing the tax evasion, fraud, etc.

24. Salomon v. Salomon & Company Ltd.
(1897) AC 22
• Salomon was in shoe and leather business. In 1892, he decided to convert the
business into a company and for that purpose Salomon & Co. Ltd. was formed. The
seven shareholders who were subscribers to the memorandum of this company
were Salomon, his wife, his daughter and his four sons as members and Salomon
was the Managing Director. Salomon’s wife and his five children held one share
each in the company and all the shares were held by Salomon himself.
• The business was transferred to company for 40,000 pounds. Salomon took 20,000
shares of 1 pound each debentures worth 10,000 pounds.
• Later, the company went into losses. Assets were 6,000 pounds and liabilities
worth 10,000 (debentures) and 70,000 (unsecured debts). Thus, assets were
insufficient to pay the debenture holders and ordinary creditors.
• The liquidator sought to have the debentures cancelled on the ground that the
company was only an agent of Salomon. The unsecured creditors contended that
though incorporated under the Act, the Salomon & Co. Ltd. had no independent
existence and it was in fact only Salomon who was the sole person behind it, he
was the managing director , the other directors being his sons, were under his
control. Thus, in effect the company was a one-man’s show and therefore its
existence was contrary to the spirit and meaning of the company law.

25. Held
• The House of Lords rejected the contention of the liquidator that all the shares
were bought by Salomon and his family members and that the company was
nothing but one man show, House of Lords held that the provisions of the Act did
not require that the persons subscribing shall not be related to each other or that
holding of a single share shall not afford a sufficient qualification for membership.
Whether the capital of the company is owned by seven persons in equal share,
with the right to equal share in profits, it does not concern a creditor of the
company.
• The company does not lose its identity if the bulk of its capital is held by one
person. The company at law is altogether different person from its subscribers. The
House of Lords further stated that the Act said nothing about the subscribers
being independent of that they should take substantial interest in the undertaking,
or that they should have a mind and will of their own.
• “ The company is at law a different person altogether from its subbscribers…and
though it may be that after incorporation the business is precisely the same as it
was before and the same persons are managers, and the same hands receive the
profits the company is not in law agent of the subscribers or trustee for them. Nor
are the subscribers, as members, liable in any shape or form, except to the extent
and in the manner provided in the Act.”

26. Daimler Co. Ltd. v. Continental Tyre & Rubber
Co.
(1916) 2 AC 307
• Facts- in a company incorporated in England for the purpose
of selling tyres manufactured in Germany by a German
company, all the shares except one were held by the German
subjects residing in Germany. The remaining one share was
held by a British subject who was the Secretary of the
company. The real control of the English company was in
German hands. During World War I, the company commenced
an action to recover trade debts. The question therefore was
whether company had become an enemy company
consequent to World War I.

27. Held
• The House of Lords held “A company incorporated in
United Kingdom is a legal entity, a creation of law
with the status and capacity which the law confers. It
is not a natural person with mind or conscience. It
can neither be loyal nor disloyal. It can be neither
friend nor enemy. But it can assume enemy character
when persons in de facto control of its affairs are
residents in any enemy country or, wherever
resident, are acting under the control of enemies.

28. Sir Dinshaw Maneckjee Petit, Re.
AIR 1927 Bom 371
• The assessee, Sir Dinshaw Maneckjee Petit, was a wealthy man enjoying
huge income from dividends and interests. He formed four private
companies and agreed with each to hold a block of the investment as an
agent for it. He credited the income received by him in the accounts of the
companies and took it back in the form of a pretended loan. The whole
idea was to split his income into four parts with a view to evade taxes.
• Held- “The company was formed by the asessee purely and simply as a
means of avoiding super-tax and the company was nothing more than the
assessee himself. It did no business, but was created simply as a legal
entity to ostensibly receive the dividends and interests and to hand them
over to the assessee as pretended loan.”
• Whether a company is duly incorporated under the Companies Act, the
court should start with a presumption that it is a separate entity from any
individual although that individual may practically hold all the shares of
the company. But it would not necessarily follow that every alleged
transaction between such individual and the company would be valid and
genuine.

29. • The court is empowered to go into the question as to whether the so called one
man company is really a business carried on by the assessee himself for the
purpose of avoiding payment of tax.
• It was held by Marten CJ that “the company was formed by the assessee purely
and simply as a means of avoiding supertax and the company was nothing more
than the assessee himself. It did not make any business but was created simply as
a legal entity to ostensibly receive the dividends and interests and to hand them
over to the assessee as pretended loans.”
• The company was created him merely so that he could make entries in the
company’s books suggesting that it received the interests and dividends and paid
them as loans while in reality the receipt of dividends and interest, if it can be
called the busiess of the compnay, was its only business and was infact the
business of the assessee himself.
• Under given circumstances company cannot be regarded as carrying on its
business separate from that of the assessee. The money received by the assessee
be regarded as dividends paid by the company. There were no genuine loans but
merely withdrawals of income disguised as loans.
• It was held that the company was not a genuine company at all but merely he
assessee himself disguised under the legal entity of a limited company. The
business was not the business of the company but of the assessee himself, and
that the alleged loans were not genuine loans.

30. Types of CompanyThe Companies Act, 2013 provides for the kinds of companies that can be promoted and registered under
the Act. They are:-
(a) Private Companies;
(b) Public Companies; and
(c) One Person Company
These companies may be-
(a) a company limited by shares; or
(b) a company limited by guarantee; or
(c) an unlimited company.
Section 3 (1) of the Companies Act 2013 states that a company may be formed for any lawful purpose by—
(a) seven or more persons, where the company to be formed is to be a public company;
(b) two or more persons, where the company to be formed is to be a private company; or
(c) one person, where the company to be formed is to be One Person Company that is to say, a private
company, by subscribing their names or his name to a memorandum and complying with the requirements
of this Act in respect of registration
Section 3A as introduced by the Companies (Amendment) Act, 2017 reads “If at any time the number of
members of a company is reduced, in the case of a public company, below seven, in the case of a private
company, below two, and the company carries on business for more than six months while the number of
members is so reduced, every person who is a member of the company during the time that it so carries on
business after those six months and is cognisant of the fact that it is carrying on business with less than
seven members or two members, as the case may be, shall be severally liable for the payment of the whole
debts of the company contracted during that time, and may be severally sued therefor.”

31. • Companies limited by shares-Section 2(22) -A company that has the liability of its members limited by the
memorandum to the amount, if any, unpaid on the shares respectively held by them is termed as a
company limited by shares. Companies limited by shares are by far the most common and may be either
public or private.
• Companies limited by guarantee- Section 2(21)- A company that has the liability of its members limited to
such amount as the members may respectively undertake, by the memorandum, to contribute to the
assets of the company in the event of its being wound-up, is known as a company limited by guarantee.
The members of a guarantee company are, in effect, placed in the position of guarantors of the company's
debts up to the agreed amount.
• Unlimited Liability Companies-Section 2(92)- In this type of company, the members are liable for the
company's debts in proportion to their respective interests in the company and their liability is unlimited.
Such companies may or may not have share capital. They may be either a public company or a private
company.
• On the basis of Incorporation, companies may be classified as:
(a) Chartered Companies: These companies are incorporated by way of a Charter. Eg. The East India
Company was incorporated under the Charter of Queen Elizabeth in 1600. But this mode of incorporation
was adopted in earlier times for the creation of trading and non-trading companies. In modern times,
companies are incorporated by registration under the Companies Act or as statutory companies created
by special statutes.
(b)Statutory Companies: constituted by a special Act of Parliament or State Legislature. The provisions of
the Companies Act, 2013 do not apply to them. Examples of these types of companies are Reserve Bank of
India, Life Insurance Corporation of India, etc.
(c) Registered Companies: The companies which are incorporated under the Companies Act, 2013 or
under any previous company law, with ROC fall under this category.

32. PRIVATE COMPANY
• According to Section 2(68) – a private company is defined as a company which has a minimum paid up
capital of [one lakh rupees or such higher paid up capital- omitted by the Companies (Amendment) Act,
2015] as may be prescribed, and by its articles-
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the
purposes of this definition, be treated as a single member:
Provided further that the following persons shall not be included in the number of members;—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company
while in that employment and have continued to be members after the employment ceased, and
(iii) prohibits any invitation to the public to subscribe for any securities of the company;

33. One Person Company
• As per section 2(62) of the Companies Act, 2013, “One Person Company” means a company which has only one
person as a member. Section 3(1)(c) lays down that a company may be formed for any lawful purpose by one
person, where the company to be formed is to be One Person Company that is to say, a private company. In
other words, one person company is a kind of private company.
• As per section 3(2), an OPC may be formed either as a company limited by shares or a company limited by
guarantee; or an unlimited liability company.
• The Central Government is empowered to provide for simpler compliance regimes for such kinds of
companies. This would exempt OPCs to devote considerable time, energy and resources on compliance legal
compliances.
• In OPC, unlike sole proprietorship, legal and financial liability is limited to the company only. In sole
proprietorship, the liability extends to the individual and his or her entire assets. A One person company shall
have a minimum of one director. Therefore, a One Person Company will be registered as a private company
with one member and one director.
• The concept of One person company is quite revolutionary. It gives the individual entrepreneurs all the
benefits of a company, which means they will get credit, bank loans, access to market, limited liability, and
legal protection available to companies. Prior to the new Companies Act, 2013 coming into effect, at least two
shareholders were required to start a company. But now the concept of One Person Company (OPC) would
provide tremendous opportunities for small businessmen and traders, including those working in areas like
handloom, handicrafts and pottery. Earlier they were working as artisans and weavers on their own, so they
did not have a legal entity of a company. But now the OPC would help them do business as an enterprise and
give them an opportunity to start their own ventures with a formal business structure,
• Further, the amount of compliance by a one person company is much lesser in terms of filing returns, balance
sheets, audit etc. Also, rather than the middlemen usurping profits, the one person company will have direct
access to the market and the wholesale retailers. The new concept would also boost the confidence of small
entrepreneurs.

34. Small Company
• As recommended by the Dr. JJ Irani Committee, the concept of small companies has been introduced in
the Companies, Act, 2013:
“The Committee sees no reason why small companies should suffer the consequences of regulation that
may be designed to ensure balancing of interests of stakeholders of large, widely held corporates.
Company law should enable simplified decision making procedures by relieving such companies from select
statutory internal administrative procedures. Such companies should also be subjected to reduced financial
reporting and audit requirements and simplified capital maintenance regimes. Essentially the regime for
small companies should enable them to achieve transparency at a low cost through simplified
requirements. Such a framework may be applied to small companies through exemptions, consolidated in
the form of a Schedule to the Act.”
• Small company is a new form of private company under the Companies Act, 2013. A classification of a
private company into a small company is based on its size i.e. paid up capital and turnover. In other words,
such companies are small sized private companies.
• As per section 2(85) ‘‘small company’’ means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be
prescribed which shall not be more than five crore rupees; and [term ‘or’ substituted by ‘and’ by
Companies (Removal of Difficulties) Order, 2015]
(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such
higher amount as may be prescribed which shall not be more than twenty crore rupees:
Provided that nothing in this defintion shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;

35. • As per Companies Act, 2013 a company may be treated as a ‘small company’ if it meets either of the conditions (1) or
(2) provided above. However, most companies were being classified as small company since they meet criteria one
but exceeded the monetary limit in respect of second criteria excessively. Therefore, in an effort to curb too many
from being classified as a small company, the Ministry of Corporate Affairs changed “OR” at the end of condition 1
to “AND”. The update to definition was published in The Gazette of India on February, 13, 2015.
• This was done by the Companies (Removal of difficulties) Order, 2015.
• Advantages for Small Company
• A private limited company that can be classified as a small company enjoys a number of benefits under the
Companies Act, 2013 and lesser compliance formalities. Some of the advantages enjoyed are:
• Filing Annual Return
– The annual return of a private limited company classified as a small company, can be signed by a Company
Secretary or by a Director of the private limited company.
– The annual return of a private limited company NOT classified as a small company must be signed by a Director
AND a Company Secretary.
• Board Meeting
– It is sufficient for a small company to conduct only two Board Meetings in a financial year.
– Private limited company NOT classified as a small company are required to conduct four Board Meetings in a
financial year.
• Cash Flow Statement
– A private limited company classified as a small company need NOT prepare cash flow statement as a part of the
financial statement.
– Private limited company NOT classified as a small company MUST prepare cash flow statement as a part of the
financial statement.
• Rotation of Auditors
– Private limited company classified as a small company are NOT required to rotate Auditors.
– Private limited company NOT classified as a small company MUST rotate Auditors every 5 or 10 years as per the
Act.

36. PUBLIC COMPANY
• By virtue of Section 2(71), a public company means a company which:
(a) is not a private company;
(b) has a minimum paid-up share capital of [five lakh rupees or such higher paid-up capital- omitted by
the Companies (Amendment) Act, 2015], as may be prescribed.
Provided that a company which is a subsidiary of a company, not being a private company, shall be
deemed to be public company for the purposes of this Act even where such subsidiary company continues
to be a private company in its articles
As per section 3 (1) (a), a public company may be formed for any lawful purpose by seven or more persons,
by subscribing their names or his name to a memorandum and complying with the requirements of this
Act in respect of registration.
As per section 58(2), the securities or other interest of any member in a public company shall be freely
transferable. However, any contract or arrangement between two or more persons in respect of transfer of
securities shall be enforceable as a contract.
Western Maharashtra Development Corpn. Ltd. V. Bajaj Auto Ltd [2010] 154 Com Cases 593 (Bom)-
In the case of a public company, the Act provides that the shares or debentures and any interest therein,
of a company, shall be freely transferable. The provision contained in the law for the free transferability of
shares in a public company is founded on the principle that members of the public must have the freedom
to purchase and, every shareholder the freedom to transfer. The incorporation of a company in the public,
as distinguished from the private, realm leads to specific consequences and the imposition of obligations
envisaged in law. Those who promote and manage public companies assume those obligations.
Corresponding to those obligations are rights, which the law recognizes as inherent in the members of the
public who subscribe to shares.

37. Other forms of Companies
1. Association not for Profit – Section 8
2. Government Company- Section 2(45)
3. Foreign Companies – Section 2(42)
4. Holding, Subsidiary and Associate Companies- Section 2 (46), 2(87)
and 2(6). To be read with the Companies (Amendment) Act, 2017
5. Investment Companies - Explanation (a) to section 186
6. Producer Companies- Section 465(1)
7. Dormant Companies- section 455 (1)