Com.docx

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partnership firm should not be more than 100 in case of partnerships. As per the previous Companies Act 1956, the maximum limit in case of partnerships was 10 and 20 for banking business and other businesses respectively

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In case of private companies, the maximum limit has been increased by the new Companies Act,2013 from 50 to 200. There is however no maximum limit on the no. of members in a public company

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. The minimum number of members in case of a public company is seven and in case of a privatecompany is 2. In case of a partnership, the minimum number of partners is 2

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A Partnership Firm has no separate legal entity distinct from its partners. A Company, on the other hand, is a separate legal entity different from its members

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A Partnership Firm has no separate legal entity distinct from its partners. A Company, on the otherhand, is a separate legal entity different from its membersIn partnership each partner has unlimited liability and is personally liable for all the debts of thefirm. In a company, on the other hand, a shareholder has limited liability – limited to the extent ofthe share capital.

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All the partners in a partnership firm are entitled to take part in the management of a business(unless stated otherwise); but in the case of a company the right to control and manage the business is vested in the hands of the Board of Directors elected by the shareholders A partner cannot transfer his interest in the firm without the consent of all the partners In case of a private company also the transfer of shares requires the prior permission of the Board of Directors. But, in case of a public company a shareholder can transfer his shares freely without restriction and the transferee succeeds to all rights of membership In case of companies, annual audits of accounts are a necessity. However, in case of PartnershipFirms, audit of accounts is required to be conducted only if the turnover exceeds Rs. 25 Lakhs/ Rs.1 Crore A Partnership Firm may or may not be registered. However, in case of a company – registration isessential There is no minimum prescribed capital in case of a Partnership Firm. However, in case of aPrivate Company, the minimum paid up capital is Rs. 1 Lakh and in case of a Public Company, theminimum paid up capital is Rs. 5 Lakhs In a partnership firm, the profits are distributed among the partners as per the partnership deed.However in a company, the members get a share in profits only when dividend is declared by theBoard of Directors and approved by all the members. A Partnership Firm can be wound up any time by any partner if it is ‘at will’ without legal formalities.In the case of company, no one member can require it to be wound up at will and winding upinvolves legal formalities

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According to Companies Act 1956, a report is prepared by the board of directors of every public limited company and forward the same to its every shareholder, called statutory report, at least 21 days before the day on which the statutory meeting is to be held. A copy of statutory report should be submitted before the Registrar of Joint Stock Companies. Resources of Buy Back A Company can purchase its own shares from (i) free reserves; Where a company purchases its own shares out of free reserves, then a sum equal to the nominal value of the share so purchased shall be transferred to the capital redemption reserve and details of such transfer shall be disclosed in the balance-sheet or (ii) securities premium account; or (iii) proceeds of any shares or other specified securities. A Company cannot buyback its shares or other specified securities out of the proceeds of an earlier issue of the same kind of shares or specified securities.

2. Permissible Securities 2.1 A company can buy-back the following securities a. Own shares, b. Other specified securities - includes employees’ stock options or other securities as may be notified 3. Methods of buy-back 3.1 The buy-back may be— a. from the existing shareholders or security holders on a proportionate basis; b. from the open market c. by purchasing the securities issued to employees of the company pursuant to a scheme of stock option or sweat equity. 4. Modesof the Buy-back [Sec. 68(1)] 4.1 The buy-back is permitted out of: a. Free reserves; b. Securities premium account; or c. Proceeds of the issue of any shares or other specified securities. 4.2 No buy-back is permitted out of the proceeds of earlier issue of the same kind of shares or other specified securities. [Proviso to sec. 68(1)] 5. Maximum Quantum of the Buy-back5.1 25% or less of the aggregate of the paid-up capital and free reserves of the company. [Sec 68(2)(c)].For the purpose of buy-back of equity shares in any financial year, 25% shall be construed with regards to total paid-up equity capital in that financial year.

6. Conditions of the Buy-back 6.1 The buy-back of securities under sub-section (1) of section 68 of the new act shall be subject to following conditions [Sec. 68(2)]: a. It should be authorised by the Articles of Association of the Company. b. A special resolution must be passed at the general meeting of the company. Special resolution is not required, provided [proviso to sec. 68(2)(b)]: i. buy-back is 10% or less of the total paid-up equity capital and free reserves of the company; and ii. buy-back is authorised by a board resolution passed at its meeting. c. The debt-equity ratio of the company, after buy-back is completed should not more than 2:1 [sec. 68(2)(d)].  

Equity includes paid-up capital and its free reserves Debt includes secured and unsecured debts owed by the company.

d. Buy-back of only fully paid-up shares and securities is permitted. e. No offer of buy-back shall be made within a period of 1year reckoned from the date of the closure of the preceding offer of buy-back. f. The company is not permitted to utilize any money borrowed from banks or financial institutions for the purposeof buying back its shares; 7. Notice for the Buy-back The notice for general meeting pursuant to Sec. 102 of the new Act at which a special resolution u/s. 68(2)(b) is proposed to be passed is required to be accompanied by an explanatory statement giving full and complete details of buy-back. [S. 68(3) of the new act read with Rule 17(1) of the Rules]. 8. Offer for the Buy-back and the Time-period 8.1 The letter of offer is required to be dispatched to the shareholders or security holders immediately after filing the same with the Registrar of Companies (Registrar) but not later than 21 days from its filing with the Registrar. 8.2 The period during which the offer for buy-back has to remain open should be not less than 15 days noexceed 30 days from the date of dispatch of the letter of offer. 8.3 The acceptance per shareholder has to be on proportionate basis in case the number of shares or other specified securities offered by the shareholders or security holders exceeds the number of shares or securities to be bought back by the company. 8.4 The company shall complete the verifications of the offers received within 15 days from the date of closure of the offer and the shares or other securities lodged shall be deemed to be accepted unless a communication of rejection is made within 21 days from the date of closure of the offer. 8.5 The buy-back must be completed within 1year from the date of passing of a special resolution at the general meeting or a board resolution.

9. Opening of New Bank Account and payment of consideration 9.1 Immediately after the date of closure of the offer, the company is required to open a separate bank account and deposit therein, such sum, as would make up the entire sum due and payable as consideration for the shares tendered for buy-back in terms of the Rules. 9.2 The company, within 7 days of the expiry of 21 days from the date of closure of the offer, has to: make payment of consideration in cash to those shareholders or security holders whose securities have been accepted; or

a. return the share certificates to the shareholders or security holders whose securities have not been accepted at all or the balance of securities in case of part acceptance. 10. Extinguishment of certificate The Company has to extinguish and physically destroy the shares or securities so bought back within 7 days of the last date of completion of buy-back Circumstances when a private ltd company becomes a public ltd company a. Conversion by default b. Conversion by operation of law c. Conversion by choice or by option Once a private company becomes a public company under any of the above mentioned circumstances, it would lose the privileges it enjoyed as a private company. On conversion, the rules and regulations applicable to public limited companies would become applicable. 1. Conversion by default A private company:restricts the right to transfer shares, i. limits the maximum number of members to 50 and ii. prohibits invitation to the public for subscription of shares or debentures. If any of these conditions are violated, a private company would become a public Company by default. 2. Conversion by operation of law In the following cases, a private company becomes a public company by the operation of law: i.

When not less than 25% of the paid up share capital of a private company is held by one or more public companies, ii. When the average total turnover of the private company is not less than Rs.25 crores for three consecutive years, iii. When the private company holds not less than 25% of the paid up share capital of a public company. iv. When the private company invites, accepts or renews deposits from the public. The Companies Amendment Act, 2000 has given an option to these companies, either to continue as public limited companies or convert themselves into private limited companies by making the necessary changes in their Articles.

3. Conversion by Choice or Option A private company out of its own free will can choose to convert itself into a public company. Generally, when private companies plan to expand and require more capital resources, they would convert themselves into public companies. By becoming public companies they can issue shares or debentures to the public and get the required amount of capital. In India, many organizations which commenced operations as private companies have got themselves converted into public limited companies in order to expand and diversify. Any private company which desires to get converted into a public company should make the necessary changes in the Articles and follow the below mentioned steps: a. It should convene a general meeting and pass a special resolution duly altering the Articles. b. The copy of the resolution along with the amended Articles should be filed with the Registrar within 30 days of passing the special resolution. c. The number of members should be increased to 7. d. The company has to apply to the Registrar for obtaining a fresh certificate of incorporation with the words ‘Private’ deleted from its name.  As per the provision of section 96 of companies Act 2013, Company shall hold its first AGM within 9 months from the closure of first Financial year.  Every Company, other than One Person Company (OPC), must hold a general meeting in each year apart from other meetings as Annual General Meeting (AGM). The AGM must be held within six months from the closing date of financial year. A notice of 21 days has to be sent to all members.  Every Company, apart from OPC, must have to hold in addition to other meetings, by giving a notice about the meeting, not more than 15 months in between the date of AGM to the next. A Company may hold its first AGM within the period of 9 months from closing of its first financial year otherwise in other cases within the period of 6 months. [Section 96(1) of the Companies Act,2013]. As per the above, if a company holds its meeting, then it has no need to call an AGM

in the year of its incorporation Who are all required to constitute the Audit Committee? The following companies are required to constitute the Audit Committee: 

All Listed Companies

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All Public Company who satisfy the following conditions:

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Paid up capital of Rs. 10 Crores or exceeds Rs. 10 crores;

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Turnover of Rs. 100 Crores or exceeds Rs. 100 Crores;

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Outstanding loads or borrowings or debentures or deposits aggregate of Rs 50 crores or exceeds Rs 50 crores.

DONE

The composition of the Audit Committee

The Audit Committee shall be constituted with a minimum number of 3 directors out of which majority directors should be Independent Directors. All the Members of the Committee shall be eligible to read and understand financial Statement.