COMPANY LAW

Submitted By: Kuchibotla Venkata Sanchita

Roll No.: Bch/24/180
Submitted To: Prof. Manpreet Ghai
MEMORANDUM OF ASSOCIATION
AND ARTICLE OF ASSOCIATION
Basis Memorandum of Association (MOA) Articles of Association (AOA)

Defined in Section 2(56) and covered in Section 4 of the Defined in Section 2(5) and covered in Section 5 of the
Definition
Companies Act Companies Act

Contains basic info about the company, defines its objects, and Contains rules for achieving MOA objectives and managing
Purpose
lays down the permitted range of activities internal affairs

Nature Charter/constitution/principal document of the company Bylaws/internal regulations for the company’s management

Subordination Subordinate to the Companies Act Subordinate to the Companies Act and MOA

Filing not mandatory if ‘Table F’ is adopted for public

Filing Requirement Must be compulsorily filed with ROC during incorporation
companies limited by shares

Relationship Defined Defines relationship between company and outside world Defines relationship between company and its members

Model Forms Tables A–E of Schedule I (model MOA for various types) Tables F–J of Schedule I (model AOA for various types)

Entrenchment Clause No provision for entrenchment clause May contain an entrenchment clause

More complex; may require SR, and approvals from

Alteration Easier; can be altered by passing a Special Resolution (SR)
RD/CG/NCLT/creditors

Acts ultra vires AOA but intra vires MOA are irregular, not
Legal Effect of Ultra Vires Acts Acts ultra vires MOA are void and cannot be ratified
void, and can be ratified
SHARES AND STOCKS
Point of Distinction Shares Stocks
Has a nominal value, e.g., ₹10
1. Nominal Value Has no nominal value
or ₹100
Issued only in respect of fully
2. Paid-up Status May be partly paid-up
paid-up shares
All shares are always of equal Stocks may be of different
3. Denomination
denomination denominations
Cannot be issued directly;
Can be issued directly to the
4. Method of Issue only issued to existing
public
shareholders
Cannot be transferred in Can be transferred in small
5. Transferability
small fractions fractions
Have distinctive numbers Do not have distinctive
6. Distinctive Numbers
(except in demat form) numbers
RIGHT AND BONUS SHARES
Point of Distinction Rights Shares Bonus Shares
Offer of new shares to existing Conversion of undistributed profits
1. Meaning
members of the company and reserves into shares
Members must pay for the shares Issued free of charge to existing
2. Payment
subscribed under the rights offer members
3. Fully Paid/Partly Paid May be partly paid Always fully paid
Minimum subscription must be No condition of minimum
4. Minimum Subscription
raised subscription
Money received must be kept in a
5. Separate Bank A/C No such requirement
separate bank account

Can be renounced by a member in Cannot be renounced; treated as a

6. Right to Renounce
full or part in favor of another person gift

To capitalize undistributed profits

7. Purpose To raise fresh capital for the company
and reserves
Issue of rights shares is mandatory
8. Applicability No compulsion to issue bonus shares
in certain cases
FORFEITURE AND SURRENDER
Point of Distinction Forfeiture of Shares Surrender of Shares
Not a voluntary act; it is a
penalty imposed by the Voluntary act by the
1. Nature of Act
company on a defaulting shareholder
shareholder
Authorised by Table F, valid Not provided in the
2. Legal Provision only if procedure in Articles Companies Act or conferred
is followed by Table F
Valid in two cases: (a) non-
Valid only in case of non- payment of call money, (b)
3. Validity
payment of call money when share certificate is
damaged
TRANSFER AND TRANSMISSION
Point of Distinction Transfer of Securities Transmission of Securities
Involuntary act; occurs by
Voluntary and deliberate act
1. Nature of Act operation of law (e.g., death,
of the transferor
insolvency)
Requires execution of an
instrument of transfer by No instrument required; only
2. Instrument of Transfer
both transferor and proof of title is needed
transferee
Securities are transferred for Securities are passed without
3. Consideration
consideration consideration
Stamp duty is payable based
4. Stamp Duty No stamp duty is payable
on market value
MANAGING DIRECTOR AND
WHOLE-TIME DIRECTOR
Point of Distinction Managing Director Whole-time Director
May be given specific
Has substantial control over
responsibilities, not
1. Control of Management the management of the
necessarily substantial
company
control
Can be appointed as Can be appointed as Whole-
2. Number of Companies Managing Director in up to time Director in only one
two companies company
Cannot coexist with a Can coexist with a Managing
3. Co-existence with Other
Manager in the same Director or a Manager in the
Posts
company same company
ORDINARY RESOLUTION AND
SPECIAL RESOLUTION
Point of Distinction Ordinary Resolution Special Resolution
Usually used for ordinary Usually used for special
1. Nature of Business
business business
Passed by a 3/4th majority
2. Majority Passed by a simple majority (votes in favor must be 3
times the votes against)
Not required to be filed with Must be filed with the ROC
3. Filing with the ROC
the ROC within 30 days of passing
Required to be sent with the
Not required to be sent with
4. Explanatory Statement notice of the meeting,
the notice of the meeting
providing material facts
5. Casting Vote of The Chairman can give a The Chairman does not have
Chairman casting vote in case of a tie a casting vote
SHELF PROSPECTUS AND RED
HERRING PROSPECTUS
Point of Distinction Shelf Prospectus Red Herring Prospectus
A preliminary prospectus issued
A prospectus that allows a company
before a public offering, without
1. Definition to offer securities in a series of
complete details on the price and
offerings over time.
number of shares.
Used to gauge investor interest before
Used for multiple offerings, allowing
2. Purpose the final details of the offering are
companies to raise capital in stages.
confirmed.

Contains information on multiple Contains information on the company

3. Information offerings that the company intends to and the offering, but without finalized
make. price and share details.

Initially filed with the securities Filed with the securities regulator as
4. Filing Requirement regulator, and later supplemented a preliminary document before the
with details of each offering. final prospectus.
Eventually, a final prospectus is filed
Final prospectus is filed later with
5. Final Prospectus with complete and finalized
full details for each offering.
information.