Definitions of " Company"
“Company” means a company formed and registered under the Act or an existing company as defined in clause (ii):
Meaning of “holding company” and “subsidiary”
For the purposes of this Act, a company shall subject to the provisions of sub-section (3), be deemed to be a subsidiary of another if, but only if—
- that other controls the composition of its Board of directors; or “that other-
- Where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company;
- where the first-mentioned company is any other company, holds more than half in nominal value of its equity share capital; or
- The first mentioned company is a subsidiary of any company which is that other’s subsidiary.
Formation of Company: The Company shall be registered under the Companies Act whether it is private or public.
WINDING UP
Winding up of a company is the stage, where by the company takes its last breath. It is a process by which business of the company is wound up, and the company ceases to exist anymore. All the assets of the company are sold, and the proceedings collected are used to discharge the liabilities on a priority basis.
MODES OF WINDING UP
There are three ways, in which a company may be wound up. They are:
- Winding up by the court.
- Voluntary winding up
Winding up subject to supervision of the court
WHO CAN APPLY TO COURT, FOR WINDING UP PETITION?
Following persons can apply to the court, for petition for winding up:
- The company itself.
- The creditor.
- Any Contributory.
- Registrar.
- Any person authorized by central government, in case of oppression or mismanagement (397).
VOLUNTARY WINDING UP
A company may, voluntary wind up its affairs, if it is unable to carry on its business, or if it was formed only for a limited purpose, or if it is unable to meet its financial obligation, and etc. A company may voluntary wind up itself, under any of the two modes:
- Members voluntarily winding up
- Creditors voluntarily winding up
A company may voluntarily wind up itself, either by passing:
An ordinary resolution,
Or
By way of special resolution
Both types of resolution shall be passed in the general meeting of the company. Once the resolution of voluntarily winding up is passed, then the company may be wound up, either through:
- members voluntarily winding up, or
- creditors voluntarily winding up
The only difference between the two is that in case of members voluntarily winding up, Board of Directors has to make a declaration to the effect, that company has no debts.
MEMBERS VOLUNTARILY WINDING UP
Directors of the company shall call for a Board of Directors Meeting, and make a declaration for winding up, accompanied by an Affidavit, stating that;
- the company has no debts to pay, or
the company will repay it's debts; if any, within 3 years from the commencement of winding up, as specified in declaration
CREDITORS VOLUNTARILY WINING UP:
Where the resolution for winding up has been passed, but the Board of Directors are not in a position to give a declaration on the liability of company, they may call a meeting of creditors, for the purpose of winding up. It is the duty of Board of Directors, to present a full statement of company’s affairs, and list of creditors along with their dues, before the meeting of creditors.
Whatever is the resolution the company passes in creditor's meeting shall be given to the Registrar within ten days of its passing.
WINDING UP BY THE COURT
A company may be wound up by the court in following situations. Here, the court means "High Court".
- If the company itself, has passed a special resolution in the general meeting to wound up its affairs. Special resolution means, resolution passed by three-fourth (3/4") of the members present.
- If there is a default, in holding the statutory meeting or in delivering the statutory report to the Registrar.
A company which is limited by shares, and a company limited by guarantee having share capital, is required to hold a " statutory meeting" of its members, within six months, and after one month, from the date of commencement of it's business. A statutory report of the meeting so held shall also be forwarded to the registrar If the company fails to commence its business within one year from the date of its incorporation, or suspends its business for a whole year. A company limited by shares, has to obtain a "certificate of commencement" of business from the registrar. Unless it obtains such certificate, it cannot carry on its business operation.
- If the number of members in a public company is reduced to less than seven, and in case of private company less than two. The statutory requirement of minimum number of members in a public company is seven, and in case of private company, it is two (sec 12).
- If the company is unable to pay its debits; where the financial position of the company is, such, that it has more liabilities than assets, and after disposing off the assets, it is still unable to extinguish its liabilities, it means that company is unable to pay it's debts.
- If the court, itself is of the opinion that the company should be wound up.
The court may form such an opinion, if it comes to the knowledge of court that, the company is mismanaged, or financially unsound, or carrying an illegal operations etc.
APPEAL:
An appeal from the decision of court will lie before that court, before whom, appeals lie from any order or decision of the former court in cases within its ordinary jurisdiction.
Business combination:
The bringing together of separate entities into one economic entity as a result of one entity uniting with, or obtaining control over the net assets and operations of another Equity Shares:- Shares other than non-equity shares.
Group Reconstruction:
Any of the following arrangements:
- The transfer of a shareholding in a subsidiary undertaking from one Group Company to another:
- The addition of a new parent company to a group:
- The transfer of shares in one or more subsidiary undertakings of a group to a new company that is not a group company but whose shareholders are the same to those of the group’s parent:
- The combination into a group of two or more companies that before the combination had the same shareholders. MERGER: A business combination that results in the creation of a new reporting entity formed from the combining parties in which the shareholders of the combining entities come together in a partnership for the mutual sharing of the risks and benefits of the combined entity, and in which no party to the combination in substance obtains control over any other, or is otherwise seem to be dominant, whether by virtue of the proportion of the shareholders’ rights in the combined entity, the influence of its directors or otherwise.
Non-equity shares:
Shares possessing any of the following characteristics: -
- Any of the rights of the shares to receive payments (whether in respect of dividends, in respect of redemption or otherwise) are for a limited amount that is not calc8ulated by reference to the company’s assets or profits or the dividends on any class of equity share:
- Any of their rights to participate in surplus in a winding up are limited to a specific amount that is not calculated by reference to the company’s assets or profits and such limitation had a commercial effect in practice at the time the shares were issued or, if later, at the time the limitation was introduced.
- The shares are redeemable, either according to their terms or because the holder or any party other than the issuer, can require their redemption.
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