Entrepreneurship

Entrepreneurship: The process of making money, earning profits and increasing wealth while posing characteristics such as risk taking, management, leadership and innovation.
Elements:

1. Innovation
2. Risk Taking
3. Vision
4. Organising skills 

Attaining economic development within the shortest possible time.

Characteristics of an entrepreneur:

1. Mental Ability 
2. Business Secrecy
3. Clear Objectives
4. Human Relations
5. Communication Ability

Intrapreneurship: A person within a large corporation who takes direct responsibility for turning an idea into a profitable finished product through assertive risk taking and innovation. Involves a combination of entrepreneurship and management skills.

Environment Scanning: Careful monitoring of an organization's internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans. 

Types of Environmental Scanning:

1. Passive scanning: Obscure, unspecified and continuously changing criteria - only ad hoc decisions can be taken.
2. Active scanning: Information resources scanned are specifically selected for their known or expected richness in the desired information. Involves conscious selection of continuous resources and supplementing of such resources with such other existing resources as needed.
3. Directed Scanning: The active scanning of an existing resource for a specific item. 

Tools for Environmental Scanning

SWOT Analysis: Analysis of a company's strengths, weaknesses, opportunities and threats to identify a strategic niche that the company could exploit. SWOT analysis merges external factors (OT) with internal factors (SW). 

This tool can be used as a simple icebreaker helping an entrepreneur analyse the plan and judge feasibility, or it can be used as a serious strategy tool wherein the entrepreneur checks SWOT every stage of his plan.

PESTLE Analysis: Political, Economic, Sociological, Technological, Legal and Environmental - an audit of environmental influences on the business idea to pre-ascertain factors likely to affect the project and guide strategic decision making. 

It is useful for understanding the big picture of the environment in which an entrepreneur is planning to operate.

Porter's Approach To Industry Analysis - Five Forces tool:

1. Supplier power 
2. Buyer power 
3. Competitive Rivalry
4. Threat of substitution
5. Threat of new entry 

Market assessment: Helps to prepare to enter a new market, launch a new product/ service or start a new business. The process can be divided into 6 steps:

1. Defining the problem 
2. Analysis of the situation 
3. Obtaining data that is specific to the problem 
4. Analysis and interpreting the data
5. Fostering ideas and problem solving
6. Designing 

Business Plan: The process of producing a business is in itself, a beneficial undertaking which facilitates management's focus on the future as well as the present. Should include goals, functional strategies, budget and cash flow projections and regular reviews. 

- Identification and evaluation of the opportunity 

- Development of the business plan 

- Determination of the required resources

- Management of the resulting enterprise.

The main objective of business planning is to provide and implement the formal and systematic business plan. 

Stages of entrepreneurial development

• Seed stage
• start up
• early growth 
• established 
• Corporate 

Formal and systematic business planning involves two elements - strategic planning and operational planning.

Strategic planning: Concentrates on opportunities and threats in long range plans - clear layout including vision, missions, objectives, competencies, managerial abilities, technical proficiencies and sources of funding. Involves strategic management and implementation. 

Operational planning: Practical implementation - conversion of strategic goals into managed execution. 

TYPES OF ENTREPRENEURSHIP:

1. Opportunity based - an active choice on the part of the entrepreneur.
2. Necessity based - an entrepreneur is left with no viable option. 

Indian Partnership Act, 1932

S. 4: Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Elements of Partnership:

1. At least two persons
2. A relationship arising out of an agreement between two or more persons to do a business.
3. The agreement must be to share the profits of a business.
4. The business must be carried on by all or any of them acting for all. Mutual agency can be said to be the true test to determine whether something is a partnership.

A partnership firm has no legal existence apart from its partners. It isn't a legal entity, nor does it have a separate personality as does a corporation - it merely represents the collective of its partners. A partnership arises through signing of the partnership deed by all partners. 

Classification:

1. Particular Partnership: S. 8: When two or more persons agree to do business in a particular adventure or undertaking or for a particular period.
2. Partnership at will: S. 7: Where no provision is made by contract between partners for the duration of the partnership or its determination. S. 43(1): The firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

S. 12(c): A change in the nature of business of a partnership can only be brought about with the consent of all the partners. A partnership formed for a definite purpose, agreed upon at the time of formation of the partnership, cannot depart from the agreed purpose without the consent of all the partners. S. 17 (c): Where a partnership is formed for a particular undertaking(s), it proceeds to carry on other undertaking(s) in the event that the mutual rights and duties of the partners in respect of other undertakings remain the same as those in respect of the original ones.

In the absence of any agreement to the contrary, partnership property would generally include:

1. all property, rights and interests which have been brought into the common stock for the purposes of the partnership by individual partners, whether at the commencement of the business or subsequently added thereto.
2. Those acquired in the course of the business with money belonging to the firm.
3. S. 14: The goodwill of the business.

The property of the firm belongs to the firm and not to individual partners - no partner can deal with these properties as though they were his own, nor do they possess any assignable interest in such property. (Narayanappa vs. Bhaskaia Krishnappa, AIR 1966 SC 1300)

What constitutes partnership property ultimately depends on the agreement between the partners, and their intention. (Lachhman Dass vs. Mrs. Gulab Devi, AIR 1936 All 270)

Kinds of Partners:

1. Active/ Actual/ Ostensible: Ordinary types of partners who invest money into the business of the firm, actively participate in the functioning and management of the business and share its profits or losses. S. 12(a) - subject to contract between the partners, every partner is entitled to take part in the conduct of the business of the firm. Such partner should give public notice of his retirement from the firm to absolve himself from liability for the acts of the other partners done after his retirement.
2. Sleeping/ Dormant: These partners invest money in the firm's business and take their share of profits but don't participate in the functioning and management of the business. Their liability is unlimited. A sleeping partner can retire from the firm without giving any public notice to this effect. His liability ceases soon after retirement. Such partners have no duties to perform but are entitled to have access to the books and accounts of the firm and can have a copy of them. 
3. Nominal: Partners who don't invest or participate in the management of the firm but only give their name to the business or firm. Liable to third parties for all acts of the firm. Unlike sleeping partner, they are known to outsiders as partners in the firm even though they are actually not, and therefore are required to give public notice at the time of being separate from the firm. 
4. Partner in Profits only: A partner who is entitled to share in the profits of a partnership without being liable to share the losses. In spite of this position, a partner in profits only is still liable to third parties for all acts of the firm.
5. Sub-Partner: Where a partner agrees to share his profits in the firm with a third person, that third person is called a sub-partner. A sub-partner isn't a partner in a firm, but a partner of a firm. He has neither rights nor duties towards the firm, and carries no liability towards its debts. 
6. Partner by Estoppel or Holding Out: If the behaviour of a person arouses misunderstanding that he is a partner in a firm when actually he isn't, such a person is estopped from later on denying the liabilities for the acts of the firm. Similarly, if a person declared to be a partner when he isn't doesn't deny that fact, he becomes liable for the business.
   The holding out partner becomes personally and individually liable for the acts of the firm, but can recover the amount from the partners of the firm under the doctrine of subrogation and/ or on the basis of quasi contract.
   Exceptions: The Doctrine of Holding out isn't applicable in these cases:?
   1. It doesn't apply to cases of torts committed by partners.
   2. Doesn't extend to bind the estate of a deceased partner, where firm business is continued after the partner's death in the old name.
   3. Doesn't apply where the Holding out partner has been adjudicated insolvent. 

Minor admitted to the Benefits of Partnership

S. 11, Indian Contract Act, 1872 r/w Mohri Bibi v. Dharmo Das Ghose, (1903) 30 IA 114: A minor's agreement is altogether void and not enforceable, and agreement being an essential element to partnership, a minor cannot be a partner. Under S. 5, Indian Partnership Act, A partner has to be competent to contract, BUT S. 30 allows a minor to be admitted into the benefits of a partnership with the consent of all partners for the time being.

Rights: U/S. 30(2), the minor is entitled to his agreed share and can inspect books of account of the firm. U/S. 30(4), he can bring a suit for account and his share when intends to sever his connections with the firm, but not otherwise. S. 30(5): A minor admitted to the benefits of a partnership during his minority can elect whether he wants to become a partner or sever connections with the firm within six months of attaining majority by giving public notice of his decision. If he fails to give public notice, he will be deemed to have become a partner. 

Liabilities: The minor's liable to the extent of his share in the firm: S. 30(3). When the minor elects to become partner upon minority, he will become liable as all partners are. 

Mutual Agency: S. 18: Each partner is an agent of the firm and of the other partners for the purpose of the business of the firm. Exceptions:

1. The partner so acting has no authority to act for the firm in that matter; and

2. The person with whom he is dealing knows he has no authority; or 

3. Doesn't know or believe him to be a partner.

Authority of a Partner: The capacity of a partner to bind the firm by his act. May be express or implied.

1. Express Authority: When given by words, spoken or written. The firm is bound by all acts of a partner done within the scope of his express authority even if the acts aren't within the scope of the partnership business.
2. Implied Authority: Authority inferred from the conduct of the parties, nature of business, circumstances, customs and usage. Ss. 19 and 22.

Liability of Incoming and Outgoing Partners

S. 31(2): An incoming partner isn't liable for the debts incurred before he joined the firm. However, he may assume liability for past debts by novation - tripartite agreement between the creditor of the firm, partners existing at the time the debt was incurred, and the incoming partner.

An outgoing partner remains liable for the debts contracted while he was a partner, but may be discharged by novation. 

Dissolution - S. 39: Dissolution of partnership between all the partners of a firm - doesn't necessarily occur because partnership has ceased to do business as the partnership may continue for the purpose of realising assets.

Dissolution of partnership vs. dissolution of firm - the latter is where the relationship between all partners comes to an end. The former is where there is an extinction of relationship between some of the partners only. 

Dissolution of Partnership:

1. By expiry of the fixed term for which the partnership was formed. S. 42(a)
2. By the completion of the adventure S. 42(b)
3. By the death of a partner S. 42(c)
4. By insolvency of a partner S. 42(d)
5. By retirement of a partner S. 42(e)

Dissolution of the Firm

1. By mutual agreement S. 40
2. By insolvency of all partners except one S. 41(a)
3. By business becoming illegal S. 41(b)
4. By notice of dissolution S. 43

A partnership for a fixed period cannot be dissolved by a notice, unlike a partnership of will. Therefore u/S. 44, the court may order dissolution under the following circumstances:

1. When a partner becomes of unsound mind
2. Permanent incapacity of partner 
3. Misconduct of a partner affecting the business
4. Persistent regard of partnership agreement by a partner.
5. Transfer of interest or share by a partner 
6. Business working at a loss
7. Any just and equitable ground 

Effect of Dissolution:

Authority of the partners to bind the firm continues as long as is necessary to wind up the business, provided that the firm is in no case bound by the acts of a partner who has been adjudged insolvent except on the principle of holding out. S. 47. The partners continue to be liable to outsiders for any act done by any of them which would have been the act of the firm if done before the dissolution, unless a public notice is given of the dissolution. 

Right to return of premium:

To buy entry into an existing firm, a new partner sometimes has to pay a premium to the existing partners in addition to any investment of capital. On dissolution, he's entitled to demand the return of a proportion of the premium if the partnership was for a fixed term and dissolved before its expiry, unless the the dissolution was caused by a) agreement, b) misconduct of the party seeking return of premium c) death of a partner. S. 51

Garner vs. Murray, 1904 73 LJ Ch 66 prescribes the principle to be used in case a partner is insolvent and unable to contribute towards the deficiency:

a) The solvent partners will contribute only their share of deficiency.

b) The available assets should be distributed among the solvent partners in proportion to their capital.

c) The deficiency of the capital of the insolvent partners will be distributed among the solvent partners in the ratio of their respective capitals.

Goodwill: A partnership asset - the benefit arising from the firm's business connections or reputation - the advantage acquired by a business beyond the mere value of the capital, stock fund and property employed therein, in consequence of general public patronage and encouragement. 

Unless otherwise agreed upon, the goodwill must be sold upon dissolution and the proceeds distributed as capital in the same manner as sharing of profits and losses. If the goodwill is sold and there's no agreement as to its disposal, any partner can carry on the business provided that by doing so he doesn't expose former partners to liability. 

Company Law VIII: General Meetings

Though a company is an entity distinct from its members, it is also composed of its members. These members express the will of the company through resolutions passed at validly held meetings.
Members Meetings are of three types:

1. Annual General Meeting (AGM): An annual event where members get an opportunity to discuss the activities of the company. S. 96: Every company other than OPC is required to hold an AGM every year.  
2. Extraordinary General Meeting: All general meetings other than AGMs - shall be called by
1. the board
2. the board on requisition of shareholders 
3. requisitionists
4. tribunal
   All business items can be transacted at extraordinary general meetings - special business. S. 100: Provisions for holding and calling such meetings. 
3. Class Meeting: Held by holders of a particular class of shares/ debentures/ or by creditors.

Notice of Meeting:

• Not less than 21 days' clear notice either in writing or electronically. 
• Short notice - if consent is given in writing or electronically by 95% of members entitled to vote.
• Notice should contain place, day, time of meeting, the agenda, and a proxy clause with reasonable prominence - i.e. where a member entitled to attend and vote is entitled to appoint a proxy (who needn't be a member).   

The Company Secretary

S. 2(24), Companies Act, 2013: Company Secretary as defined u/S. 2(1)(c), Company Secretaries Act, 1980 - "Company Secretary" means a person who is a member of the Institute.

Functions:
S. 205: a) to report to the Board about compliance with the provisions of the Companies Act, the rules made thereunder, and other laws applicable to the company.
b) To ensure that the company complies with the applicable secretarial standards (as issued by the Institute of Company Secretaries of India, u/S. 3 of the Company Secretaries Act, 1980 and approved by the Central Government).
c) To discharge such other duties as may be prescribed:
i) To provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers.
ii) To facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings.
iii) To obtain approvals from the Board, general meetings, the Government and such other authorities as required under the provisions of the Act.
iv) To represent before various regulators, Tribunal and other authorities under the Act in connection with discharge of various functions under the Act.
v) To assist the Board in the conduct of the affairs of the company.
vi) To assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices
vii) To discharge such other duties as may be assigned by the Board from time to time
viii) Such other duties as have been prescribed under the Act and the Rules.

S. 205(2): Provisions contained in S. 204 and S. 205 shall not affect the duties and functions of the BOD, the chairperson of the company, managing director or wholetime director under this Act, or any other law in force for the time being.

Role:

1. Statutory officer (KMP)
2. Co-ordinator - To maintain relationships with other functionaries including trade unions, shareholders, the government and the community. 
3. Administrative Officer - Principal duty of the secretary as an administrator is to ensure that the activities of a company are in conformity with the company's policy.
1. Organizational administration
2. Financial adminisgtration
3. Office administration
4. Personnel administration 
5. Properties administration 
6. Corporate records
7. Personnel 

Company Law VII: Key Managerial Personnel

The term key managerial personnel is used to define the executive management - they are the point of first contact between the company and its stakeholders. Chapter XIII, Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 deal with the legal and procedural aspects of appointment of Key Managerial Personnel.
S. 2(51):
1. Chief Executive Officer/ Managing Director/ Manager
2. Company Secretary
3. Whole time director
4. Chief Financial Officer
5. Any other officer as may be prescribed.

Managing Director
S. 2(54): entrusted with substantial powers of management of the affairs of the company. (Excluding administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of hte company to any document or to draw and endorse any cheque on account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, from the substantial powers of management.

Whole Time Director
S. 2(94): Director in the whole time employ of the company.

Manager
S. 2(53): Individual subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole of the affairs of a company, and includes a director or any other person occupying the position of a manger, by whatever name called, whether under a contract of service or not.

Chief Executive Officer
S. 2(18): Officer of the company so designated.

Chief Financial Officer
S. 2(19): Officer appointed as such

Company Secretary
S. 2(24): As defined under S. 2(1)(c), Company Secretaries Act, 1980 

Appointment of Key Managerial Personnel is mandated under S. 203, Companies Act, 2013 r/w R. 8, Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:
a) managing director/ CEO/ manager/ whole time director
b) Company secretary
c) CFO

Every whole time KMP is to be appointed by Board Resolution containing terms of appointment including remuneration. Such personnel shall not hold office in more than one company at the same time (with the exception of subsidiaries).

Company Law VI: Directorship

S. 2(34), Companies Act, 2013: A director appointed to the Board of a company - person appointed to perform the duties and functions of director of a company in accordance with provisions of the Companies Act, 2013.

S. 2(10): Board of Directors: Collective body of the directors of the company.

S. 149(1): A minimum of 1 director in case of a One Person Company, 2 in case of a private company, and a maximum of 15 directors. More directors may be appointed after a special resolution in General Meeting. There should be at least one female director appointed.

S. 165: Maximum number of directorships (including alternate directorships) held by a single person is 20. In addition, the number of directorships in public or private companies that are either holding or subsidiary companies of a public company shall be limited to 10. This limit may further reduced through a special resolution.

S. 149(3): Residence of a director in India is compulsory. 

S. 2(47): Independent director as under S. 149(5) - A director other than a managing or whole-time or nominee director who does not have any material or pecuniary relationship with the company/ directors. Criteria for independent directors prescribed under S. 149(6).

Every listed public company must have at least 1/3 of its total number of direcors as independent directors. Intermittent vacancies should be filled by the Board of Directors within 3 months from the date of such vacancy, or no later than the next board meeting (whichever is later).

S. 151: Every listed company may have a director elected by small shareholders (i.e. those holding shares of nominal value of Rs. 20,000/- or less or other prescribed sum).

First director:

First directors are usually named in the articles of association. If unnamed, then individuals who are subscribers to the memorandum shall be deemed first directors until appointment of directors. In case of OPC, an individual that is a member will be deemed first director until director is appointed under S. 152.

Duties of Directors covered under S. 166:

• Act in accordance with the articles
• Act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, shareholders, community and for the protection of the environment.
• Exercise duties with due and reasonable care, skill and diligence and to exercise independent judgment. 
• Avoid direct or indirect conflicts of interest.
• Avoid attempting to achieve undue gain or advantage through his position. 
• Not assign his office. 

Powers of the board are dealt with under S. 179:

For very small or very large companies, typically, the BOD will have power vested in it to do all such acts and things for which the company is authorised. However, in most other cases, the powers of the company may be divided between the BOD and the General Meeting. In such cases, the powers of the BOD extend to whatever powers are not vested in the GM.

Board Meetings:

The BOD generally oversees the management of the company, and ensures that the interest of non controlling shareholders is protected. S. 173 deals with board meetings and requires the first to be within 30 days of the date of incorporation. In addition, there should be a minimum of 4 meetings per year, and not more than 120 days between consecutive meetings. For OPCs, small companies and dormant companies, at least 1 Board meeting should be conducted in each half of the calender year, and the gap between two meetings shouldn't be more than 90 days. 

Notice of board meetings is required in writing 7 days in advance to the registered address of every director. 

Requisite quorum shall be one third of the total strength, or two directors, whichever is higher. If total number of directors falls below the quorum (as fixed by the AOA), the continuing directors may act to increase the number to fulfill quorum, or to summon a general meeting. 

Company Law V: Process of Company Formation

The process of company formation can be divided into three stages:

1. Promotion
2. Incorporation by Registration
3. Commencement of Business

Promotion: The process of conceiving an idea and developing it into a concrete proposition or project to be accomplished by the incorporation and floatation of the company. The person taking the necessary steps to accomplish these objectives is known as promoter. [S. 2(69), Indian Companies Act, 2013] People in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act are also treated as promoters. A director/ officer/ employee who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise is considered a promoter.
In Kelner vs. Baxter LR (1886) 2 CP 174, it was held that the company couldn't ratify contracts made by a promoter before incorporation.

However, specific performance of a contract may be enforced against a company in respect of contracts entered into by promoters on behalf of the company, if such a contract is warranted by the terms of incorporation and the company has accepted the contract and communicated the acceptance to the other party. [S. 15, Specific Relief Act, 1963]

Legal Position of a Promoter
A promoter is neither an agent of, nor a trustee for, the company because it's not in existence yet. But he occupies a fiduciary position in relation to the company and therefore requires to make full disclosure of the relevant facts, including any profit made by him.

Corollary: The promoter may not make either directly or indirectly any profit at the expense of the company he promotes without the knowledge and consent of the company, and that if he does make secret profit in disregard of this rule, the company can compel him to account for it and surrender the secret profit. 

Incorporation by registration
Procedural Aspects

Application for availability of name of company - S. 4(2-5), Indian Companies Act, 2013

Preparation of Memorandum and Articles of Association:
MOA - Sets out the constitution of a company - foundation on which the structure of the company is built. Defines the scope of the company's activities and its relations with the outside world. S. 2(56), 4, Companies Act, 2013
AOA - S. 2(5), 5(1); and Ashbury Railway Carriage and Iron Co. Ltd. vs Riche, (1875) LR 7 HL 653.
Contain the regulations for management of the company - bye-laws or rules nad regulations that govern the management of internal affairs and conduct of business of a company.
Subsidiary role to that of MOA.
The MOA lays down the scope and powers of the company and the articles govern the ways in which the objects of the company are to be carried out and can be framed and altered by the members. They must keep within the limits marked out by the memorandum and the Companies Act. 

Filing of documents with ROC - S. 7(1), Companies Act, 2013; also see Companies (Incorporation) Rules, 2014

S. 7(2), Companies Act, 2013
The CIN given by the Registrar in respect of any association shall by conclusive evidence that everything is in order - that all the requirements of the Act have been complied with in respect of registration and matters precedent and incidental thereto, and that the association is a company authorised to be registered and duly registered under the Act. The validity of registration can't be questioned after issue of the certificate. - Jubilee Cotton Mills Ltd. vs. Lewis, (1924) AC 958.

Note: The CIN cannot legalize illegal objective contained in the Memorandum. Performing Right Society Ltd. vs. London Theatre of Varieties (1992) 2 KB 433.

S. 7(3), Companies Act, 2013 deals with the allotment of Corporate Identity Number (CIN). Each Indian company (whether listed or unlisted) has a unique 21 digit CIN which is required to be quoted on all forms. The CIN is made up of an alpha-numeric code with six parts.

Commencement of business - Under the Companies (Amendment) Act, 2015, S.11 of the Companies Act, 2013, which deals with the certificate of commencement of business has been omitted. As a result, every company commences its business immediately after the incorporation of business.

Company Law IV: Classification

Companies can be classified by the manner in which they are limited into:

• Shares: A registered company, whether public or private, having the liability of its members limited by memorandum to the amount, if any, unpaid on the shares respectively held by them.
• Guarantee: A registered company having the liability of its members limited by its memorandum to such an amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up. Liability here arises only upon winding up, and not while the company is a going concern.
• Unlimited: A company not having any limit on the liability of its members. Maximum liability in such cases can be to the full extent of their properties, to meet the obligations of the company by contributing to its assets. The members are not directly liable to creditors of the firm, unlike in a partnership, but to the company itself. A company registered as such may always convert itself into a limited company, subject to the proviso that previous obligations are not affected by such change. 

They can also be classified as follows:

• Private: S. 2(68), Indian Companies Act, 2013 Company having minimum paid up share capital as prescribed, and which restricts the right to transfer its shares, and limits the number of members to 200. Such company should also prohibit public invitations to subscribe for any securities of the company.
• Public: S. 2(71), Indian Companies Act, 2013 Any company that isn't a private company and has a minimum paid up share capital as prescribed. A private company that is the subsidiary of a public company is also a private company.
• One Person Company: S. 2(62), Indian Companies Act, 2013 Introduced for the first time in the 2013 Act, this move is supposed to encourage corporatisation of micro businesses and entrepreneurs. An OPC is a company that has only one person as a member. 
• Charitable Object: S. 8, Indian Companies Act, 2013 A registered company that has as its object the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, etc. Its profits and other income are to be used in promotion of its object, and there is no payment of any dividend to members. 
• Small Company: Introduced under the 2013 Act, such companies are classified based on their size (paid up capital and turnover). Such companies may enjoy certain privileges not available to private or public companies. S. 2(85), Companies Act, 2013
• Government: S. 2(45), Companies Act, 2013 Any company in which not less than 51% of the paid up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.
• Foreign: S. 2(42), Companies Act, 2013 - Any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner. 
• Holding: S. 2(46), Companies Act, 2013 - a company of which other companies are subsidiary companies.
• Subsidiary: S. 2(87), Companies Act, 2013 - A company in which the holding company controls the composition of Board of Directors, or exercises or controls more than one half of the total share capital either at its own or together with one or more of its subsidiary companies.
  S. 2(27), Companies Act, 2013 - definition of control - include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholding agreements or voting agreements or in any other manner. 
• Producer: S. 465(1), Companies Act, 2013 - Body corporate having objects or activities specified in S. 581B and which is registered as such under the provisions of the Act. 

Company Law III: Incorporation

The concept of incorporation involves giving a commercial entity a separate legal personality. In the eyes of the law, a company is considered an individual entity with its own agency, ability to own property, and generally conduct itself in matters of business as though it were a human person. 

Advantages of incorporation

1. Corporate personality: A partnership firm has no existence aside from that of its members, but a company is a distinct legal or juristic person independent of its members.
2. Limited Liability: In a partnership, each partner is liable to the full extent of their assets for the debts of the partnership. In the case of companies limited by shares, no member is bound to contribute anything more than the nominal value of the shares held by him which remains unpaid. 
3. Perpetual Succession: The existence or continuity of the company isn't affected by the death or insolvency of individual members.
4. Transferable Shares: The shares or other interest of any member in a company is movable property, transferable according to what is provided by the articles of the company. - S. 44, Companies Act, 2013.
5. Separate Property: The company as a legal entity is capable of owning its own funds and other assets, and the property of the company isn't the property of the shareholders. - Gramophone & Typewriter Co. vs. Stanley, [(1906) 2 KB 856, at 869].
6. Capacity to Sue: Since it is a juristic legal person, a company can sue in its name and be sued by others. 
7. Flexibility and Autonomy: The Key Managerial Personnel can carry on the business activities with freedom, authority and accountability in accordance with the Company Law.
1. Chief Executive Officer
2. Company Secretary 
3. Whole-time director
4. Chief Financial Officer 
5. Other officer as may be prescribed.

Disadvantages of Incorporation

1. Formalities and expenses: The legal formalities involved are complex and cumbersome.
2. Corporate disclosures: Members of a company have comparatively restricted accessibility to internal management and day to day administration of corporate working.
3. Separation of control from ownership: Especially in bigger companies, where the number of members are far too high, members cannot exercise effective control over the company's working. 
4. Greater social responsibility: Companies are called upon to show greater social responsibility in their working, and are subject to greater control and regulation than that by which forms of business organization are governed and regulated. 
5. Greater tax burden in certain cases: A company is liable to tax without any minimum taxable limit as is prescribed in the cases of registered partnership firms and others. Also, it has to pay income tax on the whole of its income at a flat rate whereas others are taxed on graduated slab system. Tax implications may therefore have a crucial bearing on decisions of business organization.
6. Detailed winding up procedure: The procedure provided for in the Companies Act is more expensive and time consuming than that which is applicable to other forms of business organization.

Lifting or Piercing of the Veil: This concept refers to exceptions provided to the concept of separate legal personality of the company, and limited liability of its members. Even though the corporation has a distinct personality under law, it remains in reality an association of persons who are the beneficial owners of the property of the body corporate.

As the separate personality of the company is a statutory privilege, it must be used for legitimate business purposes only.  Where fraudulent or dishonest use is made of the legal entity, the individuals concerned won't be allowed to take shelter behind the corporate personality. The court will then break through the corporate shell and apply the concept of lifting or piercing of the corporate veil - taking action as though no entity exists separate from the members. Members or controlling persons will be thus made liable for debts and obligations of the company. 

For example, it can be lifted when in defence proceedings, an entity relies on its corporate personality as a shield to cover its wrongdoings, like tax evasion. - BSN (UK) Ltd. vs. Janardan Mohandas Rajan Pillai [1996] 86 Comp Cas 371 (Bom).

Company Law II: Differentiations

Company vs Partnership

Company	Partnership
Distinct legal person	Not distinct from persons who compose it
Property belongs to company	Property belongs to partners
Creditors can proceed against company only	Creditors can proceed against partners
Members not agents of the company or each other	Partners agents of the company and inter se
Member of company can contract with firm	Partner can’t contract with his firm
Shares freely and ordinarily transferable	Partner can’t transfer shares without consent of other partners
Restrictions in articles bind the public	Restrictions on partner’s authority in partnership contract don’t bind outsiders
Liability limited by shares or by guarantee	Unlimited liability
Perpetual succession	Death or insolvency of partner dissolves firm unless otherwise provided
Any number of members. Private co – 2 – 50 members. Public company – min. 7 members	Can’t have more than 100 members
Legally required to have account audited annually.	Audited at partners’ discretion

Company vs LLP (Limited Liability Partnership)

LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. It can continue its existence irrespective of changes in partners and is capable of entering into contracts and holding propety in its own name. Has SLP.
Basic difference between the two lies in the fact that the internal governance structure of a company is regulated by the Companies Act, whereas for a LLP it would be by contractual agreement between partners.

Company Law I

Company: An association of like minded persons formed for the purpose of carrying on same business or undertaking. May be incorporated or unincorporated.
o Incorporated – separate person distinct from the individuals constituting it.
o Unincorporated – mere aggregation of individuals
- Body corporate – persons composing it are made into one body by incorporation, clothing it with legal personality and turning it into a corporation.
- Owes its existence to special act of parliament or companies law
- Association of both natural and artificial persons incorporated under the existing law of a country.
- Association not for profit acquires corporate life if givens a license.

Characteristics

1. Corporate personality- Once a company has been validly constituted under the Companies Act, it becomes a legal person distinct from its members, and it is immaterial whether any member has a large or small proportion of the shares, and whether he holds those shares beneficially or as a mere trustee.

- Separate legal entity
- Bears its own corporate name and acts under it.
- Seal of its own
- Assets separate and distinct from those of its members
- Can incur debts, borrow money, have a bank account, employ people, enter into contracts and sue or be sued
- Members can also be creditors
- Shareholder can’t be held liable for its acts

- Members not liable for debts of the company due to SLP
- Liability limited to the extent of the nominal value of the shares held by them.
That too only when company goes into liquidation.

2. Perpetual succession
- Variation in members doesn’t affect legal existence and identity of a company.
- Can be dissolved only under law as it is a creation of law.

3. Transferability of shares

- Capital of company divided into parts called shares – movable property which is freely transferable subject to certain conditions
- No shareholder is permanently or necessarily wedded to the company.
- Every member owning paid up shares is at liberty to dispose of them according to his choice but subject to the articles of the company.
- Any absolute restriction on the right to transfer shares is void.
o Joint stock – freely transferable
o Private co – limited restrictions

4. Separate property
- Company entitled to own and hold property in its own name
- No member can claim ownership of any item of the company’s assets

5. Common seal
- SLP with perpetual succession and common seal
- Since the company has no physical existence; must act through its agents.
- Common seal acts as the company’s signature – giving validity to actions of agents.
- Requirement of common seal has been dispensed with, as long as authorization by two directors or a director and company secretary, wherever such has been appointed.

6. Capacity to sue and be sued
- All legal proceedings against company in its own name
- Can bring action in its own name

Legal Terminology and Maxims

1	Ab initio	From the beginning
2	Ad hoc	Not intended to be able to be adapted to other purposes
3	Ad idem	To the same thing
4	Ad infinitum	To infinity
5	Ad valorem	According to value
6	Alter ego	A second identity living within a person
7	Amicus curiae	Friend of the court
8	Audi alteram partem	Hear the other side
9	Bona fide	In good faith
10	De facto	In fact
11	De jure	In law
12	De novo	A new
13	Dehors	Outside of
14	Ex gratia	As a matter of grace or favor
15	Ex officio	By virtue of an office
16	Ex parte	Expression used to signify something done or said by a person not in presence of his opponent
17	Fait accompli	An accomplished fact
18	actus reus	Guilty act
19	In personam	Against the person
20	In rem	Act done or directed with reference to no specific person or with reference to all whom it might concern
21	Inter alia	Among other things
22	Inter vivos	Between living persons
23	Intestate	Deemed to die intestate in respect of property of which they haven’t made a testamentary disposition capable of taking effect
24	Intra vires	Within the powers
25	Ipso facto	By the mere fact
26	Ipso jure	By the law itself
27	Lis pendens	A pending suit
28	Locus standi	Signifies a right to be heard
29	Mens rea	A guilty mind
30	Mesne profits	Intermediate profits, the profits which a person in wrongful possession of property actually received or might with ordinary diligence have received therefrom together with interest on such profits excluding the profits due to improvement made by person in wrongful possession.
31	Modus operandi	Mode of operating
32	Mutatis mutandis	With the necessary changes in points of detail, with such change as may be necessary
33	Obiter dictum	An opinion of law not necessary to the decision – expression by the judge on a question immaterial to the ratio decidendi and unnecessary for deciding the particular case. Not binding on any court, but maybe considered an opinion of high authority.
34	Pendente lite	During litigation
35	Quid pro quo	The giving of one thing of value for another thing of value – one for the other  - thing given as compensation
36	Ratio decidendi	Reasons for deciding; grounds of decision
37	Res integra	An untouched matter; a point without precedent; a case of novel impression
38	Res judicata	A case or suit already decided
39	Rule nisi	A rule to show cause why a party shouldn’t do a certain act, or why the object of the rule shouldn’t be enforced
40	Sine die	Without day
41	Sine qua non	An indispensable requisite
42	Stare decisis	To stand by things decided, to abide by precedents where the same points come again in litigation
43	Status quo	Existing condition
44	Sub judice	Before a judge or court; pending decision of a competent court
45	Ultra vires	Beyond one’s powers