K.R. Mangalam University: Company Law-1

K.R.
MANGALAM UNIVERSITY
COMPANY LAW-1
SUBMITTED TO
MS. PALKI VATS
SUBMITTED BY
NEHA VATS
BALLB 6TH SEMESTER
1805170023
INTRODUCTION
A company is a voluntary association of individuals formed to carry on
business to earn profits or for non profit purposes. These persons
contribute towards the capital by buying its shares in which it is divided. A
company is an association of individuals incorporated as a company
possessing a common capital i.e. share capital contributed by the members
comprising it for the purpose of employing it in some business to earn
profit. As per Companies Act 1956, a company is formed and registered
under the Companies Act or an existing company registered under any
other Act”.
Characteristics of a Company Following are the main

characteristics of a company:
 Artificial legal person: A company is an artficial person as it is

created by law. It has almost all the rights and powers of a natural
person. It can enter into contract. It can sue in its own name and can
be sued.
 Incorporated body: A company must be registered under

Companies Act. By virtue of this, it is vested with corporate
personality. It has an identity of its own. Although the capital is
contributed by its members called shareholders yet the property
purchased out of the capital belongs to the company and not to its
shareholders.
 Capital divisible into shares: The capital of the company is

divided into shares. A share is an indivisible unit of capital. The face
value of a share is generally of a small denomination which may be of
Rs 10, Rs 25 or Rs 100.
 Transferability of shares: The shares of the company are easily
transferable. The shares can be bought and sold in the stock market.
 Perpetual existence: A company has an independent and separate

existence distinct from its share holders. Changes in its membership
due to death, insolvency etc. does not affect its existence and its
continuity
 Limited Liability: The liablity of the shareholders of a company is

limited to the extent of face value of shares held by them. No
shareholder can be called upon to pay more than the face value of the
shares held by them. At the most the shareholders may be asked to
pay the unpaid value of shares. l
 Representative Management: The number of shareholders is so

large and scattered that they cannot manage the affairs of the
company collectively. Therefore they elect some persons among
themselves to manage and administer the company. These elected
representatives of shareholders are individually called the ‘directors’
of the company and collectively the Board of Directors.
 Common seal: A common seal is the official signature of the

company. Any document bearing the common seal of the company is
legally binding on the company.
(a) Private Company

A private company is one which by its Articles of Association :
(i) restricts the right of members to transfer its shares;
(ii) limits the number of its members to fifty (excluding its past and
present employees);
(iii) prohibits any invitation to the public to subscribe to its shares,
debentures.
(iv) The minimum paid up value of the company is one lakh rupees (Rs
100000). The minimum number of shareholders in such a company is two
and the company is to add the words ‘private limited’ at the end of its name.
Private companies do not involve participation of public in general.
(b) Public Copmpany

A company which is not a private company is a public company. Its Articles
of association does not contain the above mentioned restrictions.
Main features of a public company are :
(i) The minimum number of members is seven.
(ii) There is no restriction on the maximum number of members.
(iii) It can invite public for subscription to its shares.
(iv) Its shares are freely tansferable.
(v) It has to add the word ‘Limited’ at the end of its name.
(vi) Its minimum paid up capital is five lakhs rupees (Rs 500,000).
1.Meaning:
The public company refers to a company that is listed on a recognized

stock exchange and its securities are traded publicly. A private
company is one that is not listed on a stock exchange and its securities
are held privately by its members.
2. Name:
A public company need not include the word “private” in its name. But
for a private company, it is mandatory to write the words “private
limited” at the end of its name.
3. Number of Members:
There must be at least seven members to start a public company. But
on the contrary, the private company can be started with a minimum
of two members. There is no ceiling on the maximum number of
members in a public company. Conversely, a private company can
have a maximum of 50 members, including its past and present
employees.
4. Number of Directors:
A public company should have at least three directors, whereas a
private company can have a minimum of 2 directors.
5. Quorum:
It is compulsory to call a statutory general meeting of members, in the
case of a public company. Presence of two members is an adequate
quorum for the general meeting in case of a private company. On the
other hand, there must be at least five members, personally present at
the annual general meeting for constituting the requisite quorum in
case of a public company.
6. Capital:
A public company must have a paid-up capital of rupees five lakh.
Conversely, a private company must have a paid-up capital of rupees
one lakh.
7. Commencement of Business:
To start a business, the public company needs a certificate of
commencement of business after it is incorporated. On the contrary, a
private company can start its business just after receiving a certificate
of incorporation.
8. Articles of Association:
A public company can adopt the model Articles of Association given in
the Companies Act. On the other hand, a private company must
prepare and file its own Articles of Association.
9. Transferability of Shares:
The transferability of shares of a private company is completely

restricted. On the contrary, the shareholders of a public company can
freely transfer their shares.
10. Restrictions on the Appointment of Directors:
A director of a public company shall file with the registrar consent to

act as such. He/she shall sign the memorandum and enter into a
contact for qualification shares. He/she cannot vote or take part in the
discussion on a contract in which he/she is interested. Two-thirds of
the directors of a public company must retire by rotation. These
restrictions do not apply to a private company.

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Characteristics of a Company Following are the main

 Artificial legal person: A company is an artficial person as it is

 Incorporated body: A company must be registered under

 Capital divisible into shares: The capital of the company is

 Perpetual existence: A company has an independent and separate

 Limited Liability: The liablity of the shareholders of a company is

 Representative Management: The number of shareholders is so

 Common seal: A common seal is the official signature of the

(a) Private Company

(i) restricts the right of members to transfer its shares;

(b) Public Copmpany

Main features of a public company are :

(i) The minimum number of members is seven.

(ii) There is no restriction on the maximum number of members.

(iii) It can invite public for subscription to its shares.

(iv) Its shares are freely tansferable.

The public company refers to a company that is listed on a recognized

The transferability of shares of a private company is completely

10. Restrictions on the Appointment of Directors:

A director of a public company shall file with the registrar consent to

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