The Companies Act of 2013 in India defines company in the Section 2(20) as “a company incorporated under this actor under any previous company law”. This means that any corporation which is incorporated and registered under this Act or under other previous company Act will be called as a company.
A company is considered to be an artificial legal person according to the Indian Constitution which has an independent legal entity and a common legal seal for its signatures.
Nature of Company :
- 1. Separate Legal Entity
- 2.Limited liability
- 3.Perpetual Existence.
- 4. Separate Property:
- 5. Shares:
- 6.Capacity to Sue and Be Sued
- 7. Common Seal
Kinds Of Company :
According to section 3(1) of the Companies Act, 2013, there are three types of companies which can be registered. They are:
- Public Company – When the company is formed by seven or more than seven persons.
- Private Company – When the company is formed by two or more than two persons.
- One Person Company – When the company has only one person as its member and he/she is the only shareholder of that company.
The company formed under this Subsection can be classified into three types:
- A company limited by shares.
- A company limited by guarantee.
- An unlimited company.
Classification of Companies
On the basis of classification of incorporation, there are two types of companies. They are:
- Statutory Companies – The companies which are constituted by the special act of the Parliament or state legislatures. The companies act, 2013 is not applicable to them. Some of the examples are Life Insurance Corporation, etc.
- Registered Companies – The companies which are incorporated according to the procedure of the Companies Act, 2013 and the Act is applicable to them. Some of the examples are Hindustan Unilever Limited, etc.
A company can get incorporated as various types of businesses which generally depends on the need and the capital of the business owner. These various types include one person companies, public limited companies, private limited companies, limited liability partnerships, foreign companies etc. Barring a few minor differences, all these various forms are incorporated in more or less the same way.
According to Section 33 of the Companies Act, 2013, the registration of a company is obtained by filing an application with the Registrar of Companies. Other than the application, the following documents should also be submitted. These include the Memorandum of Associations and the Articles of Association (if necessary).
Articles of Association are deemed necessary only for unlimited companies. A copy of the agreement which the company proposes to enter into with any individual for his or her appointment as a director or a manager also needs to be given if at all someone has been appointed. Lastly, a declaration that all the requirements of the Act have been complied with also needs to be given.
The preparation of a document known as Memorandum of Association is the first step in the formation of a company. This document contains the constitution of the company. According to Section 12 & 13 of the Companies Act of 2013, the document is divided into five clauses:
● Name Clause
● Registered Office Clause
● Objects Clause
● Liability Clause
● Capital Clause
● Certificate of Incorporation
● Effects of Pre-incorporation Contracts
● Commencement of Business
Prospectus meaning
- The prospectus is a legal document, which outlines the company’s financial securities for sale to the investors.
- According to the companies act 2013, there are four types of the prospectus, abridged prospectus, deemed prospectus, red herring prospectus, and shelf prospectus.
The prospectus is a legal document for market participants and investors to pursue, detailing the features, prospects, and promise of a financial product.
It is mandated by the law to be supplied to prospective customers.
The company provides prospectus with capital raising intention. Prospectus helps the investors to make a well-informed decision because of the prospectus all the required information of the securities which are offered to the public for sale.
Whenever the company issues the prospectus, the company must file it with the regulator. The prospectus includes the details of the company’s business, financial statements.
- To notify the public of the issue
- To put the company on record with regards to the terms of the issue and allotment process
- To establish accountability on the part of the directors and promoters of the company
Types of prospectus
According to Companies Act 2013, there are four types of prospectus.
Deemed Prospectus – Deemed prospectus has been mentioned under Companies Act, 2013 Section 25 (1). When a company allows or agrees to allot any securities of the company, the document is considered as a deemed prospectus via which the offer is made to investors. Any document which offers the sale of securities to the public is deemed to be a prospectus by implication of law.
Red Herring Prospectus – Red herring prospectus does not contain all information about the prices of securities offered and the number of securities to be issued. According to the act, the firm should issue this prospectus to the registrar at least three times before the opening of the offer and subscription list.
Shelf prospectus – Shelf prospectus is stated under section 31 of the Companies Act, 2013. Shelf prospectus is issued when a company or any public financial institution offers one or more securities to the public. A company shall provide a validity period of the prospectus, which should not be more than one year. The validity period starts with the commencement of the first offer. There is no need for a prospectus on further offers. The organisation must provide an information memorandum when filing the shelf prospectus.
Abridged Prospectus – Abridged prospectus is a memorandum, containing all salient features of the prospectus as specified by SEBI. This type of prospectus includes all the information in brief, which gives a summary to the investor to make further decisions. A company cannot issue an application form for the purchase of securities unless an abridged prospectus accompanies such a form.
What is a prospectus and its contents?
The prospectus contents are specified in the Companies Act. The prospectus must touch over the following content points:
- Details of the company, such as name, registered office address, and objects
- Details of signatories to the Memorandum and their shareholding particulars
- Details of the directors
- Details of shares offered and the class of the issue as well as voting rights
- Minimum subscription amount
- The amount payable on application, on allotment, and on further calls
- Underwriters of the issue
- Auditors of the company
- Audited reports regarded profit and losses of the company
Article Of Association