Definition of Company:

2(d) "company" means a company formed and registered

under this Act or an existing company;

The dictionary meaning of company is ‘assembly’-

gathering of a number of persons together

Ordinary and non-technical sense- a body of individuals

associated for a common objective, which may be a
business for profit or some charitable purpose,
accordingly, the word is employed to represent
associations formed to carry on some business not for
profit or to promote art, science, education or some
charitable purpose.
“A company is a voluntary association of persons
formed to achieve some common objectives, having a
separate legal entity, independent and separate from
its members with a perpetual succession and a
common seal and with capital divisible into
transferable shares.”

It’s an artificial person which has rights and duties at

law. Being an artificial legal person possesses similar
rights and owes similar obligations like natural
person.
Characteristics of a Company:
1.It has separate legal entity- capable of rights and duties.
a. Natural Persons
b. Artificial Persons-corporations- can purchase and
sell goods, hold property, file and defend suits and
other litigations, incur debts, lend money.
2.It has perpetual succession-continuous existence.
3. It has a different personality- it is at law a different person
altogether from the subscribers to the memo
Solomon V Solomon Company Ltd
3. It has a separate property.
4.It has capacity to sue and being sued.
5.It has a common seal.
6.Its shares are freely transferable.
Kinds of companies:
1. chartered companies, i.e. East-India Company
2. Statutory companies: is one which is incorporated
by a Special Act of the legislature (i.e. Parliament)
3. Registered companies: is one which is formed and
registered under the Companies Act, 1994
Registered companies can be divided into two
kinds-

A. Limited companies
B. Unlimited companies
A. Limited companies: is one in which the liability of
the members is limited i.e. the members are liable up
to a limited amount, and beyond that limit they
cannot be asked to contribute anything towards the
payment of company’s liabilities.
A limited company is required to add the word “Limited”
after its name.
A limited company further can be divided into two
kinds, namely-
Companies limited by shares
Companies limited by guarantee
a) Companies limited by shares: A company limited
by shares is one in which the liability of the members
is limited to the extent of nominal value of shares held
by them. If the shares are fully paid i.e. all amount of
share has already been paid, then the liability of the
member s is nil. And if the shares are partly paid then
the liability of the members is limited to the extent of
the amount which remains unpaid. The companies
limited by shares may be either ‘private’ or ‘public’
 b)Companies limited by Guarantee: A company
limited by guarantee is one in which the liability of the
members is limited to such amount as he undertakes
to contribute to the assets of the company in the event
of its being wound up. This liability can only be
enforced at the time of winding up of the company.

4. Unlimited Companies: An unlimited company is

one in which the liability of the members is unlimited
i.e. the members are also personally liable for the
payment of company’s liabilities.
5. Private Companies: Sec.2 (k) "private company" means a
company which by its articles--
(i) restricts the right to transfer its shares, if any;
(ii) prohibits any invitation to the public to subscribe for its
shares or debenture, if any; i.e. the issue of prospectus should
be prohibited.
(iii) Limits the number of its members to fifty (and minimum
two) not including persons who are in its employment;

Provided that where two or more persons hold one or more

shares in a company jointly, they shall, for the purposes of this
definition be treated as a single member.

In case a private company is a limited company, then, it must

add the words “private limited” at the end of its name.
A private company need not necessarily be a company
having share capital. Thus, in case of a private company
having no share capital, there is no question of
restrictions on member’s right to transfer their shares.

The legal positions of a private company is similar to that

of a public company i.e. it is a separate legal entity.

In case of private companies, it is only the number of

members that is limited to 50, and not the number of
debenture-holders. Thus, a private company may issue
debentures to any number of persons. However, the
debentures can be issued privately i.e. without inviting
the public to subscribe for the same.
6. Public Companies: A public company is one
which is not a private company-sec.2(r).
A public company is the company the articles of
association of which do not contain the restrictions to
make it a private company. Thus, in case of public
companies
1) There are no restrictions on the transfer of shares,
2)on maximum number of members and
3) On the invitation to the general public to subscribe
for its shares.
However, the minimum number of public company
must be seven.
Distinctions between a private company and a public
company
1. Maximum number- Private company- not more than
50- public company-unlimited
2. Minimum number- private co. 2- public co. 7
3. Restricted right of transfer of shares- unrestricted
right of transfer
4. As to public invitation
5. obligation as to issue of prospectus or statement in
lieu of prospectus
6. Minimum number of directors- pri 2, pub 3
7. Private company can commence business as soon as it
is registered, whereas public company can commence
business only after obtaining of certificate from the
registrar
7. Government companies:
Government company is one in which 51% or more of the paid up share
capital is held by the government.

Share-Section 2(s)- means a share in the capital of the company, and includes
stock except when a distinction between stock and shares is expressed or
implied

A definite portion of the capital of a company is called a share

Debenture- Section 2 (f)- includes debenture stock, bonds and any other
securities of a company, whether constituting a charge on the assets of a
company or not.

A debenture is a document by which a company acknowledges the debt to the

holder thereof under certain terms and conditions contained therein. Thus it
is an acknowledgement of a debt by a company. It is a form of bond given by
the company with a view to borrow money from the public.
 Formation of a Company

Stages of Formation:
1. Promotion of a company-promoter
2. Registration and incorporation of a company:
A company gets registered by filing an application
with the Registrar of companies of the area in which
registered office of the company is to be situated.
Before the company got registered the promoters must
have proposed name for the company from the
Registrar of Companies.
 Following document and papers should be submitted to
the Registrar of Companies:
1.the memorandum of association
2.the articles of association
3.The agreement which the company proposes to enter into with
any individual for appointment as company’s managing
director, or whole time directors or manager.
4.The declaration that all the requirements of the Companies
Act relating to the registration of the company have been
complied with.
5.A written consent of such directors to act as director of the
company.
6.A written undertaking by such directors to take and pay for
their qualification shares, if any.
7.A list of persons who have agreed to become the first directors
of the company.
Certificate of Incorporation: A certificate of
incorporation is one which certifies that the company
is incorporated. It contains the name of the company,
date of its issue and signature of the registrar with his
seal.
3. Commencement of business: A private company
may commence its business after getting the certificate
of incorporation. But, in case of a public company
limited by share, another certificate known as
“Certificate to commence business” from the Registrar
of the Company is necessary.
 Memorandum of Association
This is the first most important document which has
to be filed with the Registered office at the time of
presentation for registration. Memorandum of
Association is the ‘charter’ or ‘Constitution’ of the
company as it regulates the relations between the
company and outside world. It lays down the powers
and objects of a company, and the scope of the
operations of the company beyond which its actions
cannot go. The company is bound to act according to
the objects and powers as contained in its
memorandum.
Clauses (contents) of Memorandum of Association:
1. Name clause
2. Registered clause
3. Objects clause
4. Liability clause
5. Capital clause
6. Association clause or subscription clause
1. Name Clause:
1. Should not be undesirable in the opinion of the Government.
2. Should not be identical with the name of an already existing
company.
3. Must add the word at the end of its name “Private limited” if it is a
private company and the word “Limited” if it is a Public Company
with limited liability.
2. Registered Office Clause:
The name of the place where the Registered Office is situated.

3. Objects Clause:

This clause contains the objects for which the proposed company is
going to be formed.
1.Should not be illegal or against the public policy
2.Should not be against the provisions of the Company Act.
3.Should not be against the General Law of the country.
4. Liability Clause:
1. By Share.
2. By Guarantee
5. Capital Clause:
It contains the amount of share capital with which the
company is to be registered. It also states the number
and value of shares into which the capital of the
company is divided. The effect of this clause is that the
company cannot issue more shares than are
authorized by its memorandum of association.
6. Association or Subscription clause:
This clause contains the names of the persons who
sign the memorandum and states that they are willing
to form themselves into a company. These persons are
called “subscribers”. They will sign a declaration in the
presence of at least one witness who must attest the
signatures. Every subscriber will write his name,
designation, address, occupation etc. and also the
number of shares which he takes. Every subscriber
must take at least one share. In case of a Public
company, the memorandum must be signed by at least
seven subscribers and in case of a Private company by
at least two subscribers.
 Articles of Association
This is the second document which has to be filed with the
Registrar at the time of registration of the company. This
document contains the rules, regulations and bye laws for the
internal management of the company. These rules and
regulations are framed for the purpose of carrying out the
objects of the company as stated in the Memorandum of
association. This is subordinate to and controlled by the
memorandum of association.
The articles of association constitute a contract between the
company in the one hand and the share-holders individually
on the other, and also between the members inter se.
The articles of association bind the company and its share-
holders as if these had been accepted by each of them. These
also bind the share-holders of the company, both in existing
and future
This document lays down the modes in which the
objects of the company are to be carried out by the
members as stated in the memo. The articles of
association contain the rules and regulations which are
framed for the internal management of the company.
An “Article of association” is obligatory for the
following types of companies:
Private limited companies.
Unlimited companies.
Public companies limited by guarantee.
 Contents of Articles of Association

Definitions of important terms and phrases

Adoption or execution of pre-incorporation contracts.
Share capital and the rights of the share holders
Allotment of shares
Procedure as to forfeiture of share
Transfer of share
Share certificate
Alteration of share certificate
Appointment of managerial personnel e.g. directors etc.
Meetings
Borrowing power
Accounts and audits
Common seal of the company
Voting rights and proxies
Winding up of the company etc.
Distinctions between Memorandum of Association and
Articles of Association
1. The memo contains the conditions upon which a company is
granted, whereas the articles contain the internal regulations of
the internal administration of the company
2. Memo limits the activities which the company can undertake
whereas the articles set forth the rules or by-laws wherewith
those activities can best be carried out from the very birth of the
company till its death
3. The memo is an unalterable document except in so far as is
provided by the section 12 of the Act, whereas the articles can be
changed as many times as the share-holders may choose by
special resolution
4. A company must provide itself with its memo which are usually
framed in a statutory way, whereas a company may provide with
its articles by fully adopting Schedule 1 of the Act.
 Prospectus
“A prospectus means any document described or
issued as Prospectus and includes any notice or
circular, advertisement or other document inviting
deposits from the public or inviting offers from the
public for the subscription or purchase of any shares
in, or debentures of, a body corporate.”
Prospectus is issued by the “Public Company” to the
Public for the purpose of raising sufficient money for
initiation or conducting business.
 Management
Directors: for carrying the business properly members
elect some persons from among themselves to look after the
general administration of the company. These persons are
known as “Directors” and collectively “Board of Directors”.
The directors manage and control the overall affairs of the
company. They generally confine themselves to the general
business policies and overall supervision of the management
of the company. The day to day working of the company is
left to the other managerial personnel.
Number of directors:

1.Private-2
2.Public-3
 Appointment of Directors:
Section-91 1. Appointment of first directors by the promoters- the
first directors are usually named in company’s ‘articles of association’
and are appointed by promoters in the manner laid down in the articles
of association’. In case the articles of association’ are silent, the
subscribers of the memorandum of association shall be considered as
directors until the directors are appointed in the first annual general
meeting.

2. Appointment of directors at general meeting:2/3 will be appointed

as temporary directors, 1/3 will be appointed as permanent directors.
2/3 of the total number of directors shall be liable to retire by rotation.

3.Appointment of directors by the Board of Directors:

4.Appointment of directors by the third party: ‘articles of
association’-loan
5.Appointment of directors by government:
Section-94 Disqualifications of Directors:
1. Unsound mind
2. Undischarged insolvent
3. Declared by court as insolvent
4. six months imprisonments for an offence involving moral turpitude and five
years have not been elapsed from the date of the expiry of the sentence.
5. Has not paid for six months any calls on his shares.
6. Declared as incompetent by the court.
7. Cannot hold the post of directors of 20 companies at a time.
8. Minor
9. Additional grounds mentioned in articles
Section-97 Qualifications of Directors:
1. Individual
2. Share qualification
3. Sound mind
4. Must not suffer any Disqualifications.
5. Obtains qualifications within 60 days or such shorter time fixed by the
articles
Section-106 Removal:
1. Removal by the company: extraordinary resolution at
general meeting of the share holders- by ordinary
resolution appoint another one.
2. Removal by the Govt.
3. Removal by the Company Law Board.
4. Resignation
 Secretary
A secretary is an officer of the company who is
appointed to perform the ministerial or
administrative duties. His duty is not to manage the
affairs of the company, but, to ensure that the affairs of
the company are conducted in accordance with the
provisions of the Companies Act and Articles of
Association of the company i.e. he should ensure that
company’s affairs are conducted according to law.
 Meetings and Resolutions
Meetings:
the directors take decisions by calling their meetings. There are also share
holders of the company. The shareholders also decide the matters by
calling their meetings from time to time. The matters are decided by
passing resolutions.
Kinds of Meetings:
Broadly 2 kinds-
1.Meetings of members (shareholders)
2.Other meetings.

Meetings of members (shareholders):

4 kinds-
1.Statutory meeting.
2.Annual general meeting
3.Extra- ordinary general meeting.
4.Class meeting
 Statutory Meeting: it is the first meeting of the
members of the company after its incorporation.
It must be held within a period of not less than 1 month
and not more than 6 months from the date at which the
company is entitled to start business. This meeting is
held only once in the life time of the company.
The purpose of this meeting is to acquaint the
members with all the important facts relating to the
company to enable them to know the position and
future prospectus of the company.
Legal provisions relating to Statutory Meeting:
1. The board of directors is required to prepare a report, called the
‘Statutory Report’ and it must be sent to every member of the
company at least 21 days before the day on which the meeting is
to be held. This time bar may be condoned if the members are
agreed to do so.
2. Statutory report must contain the following matters:
The total number of shares allotted giving their all details.
The total amount of cash received by the company.
An abstract of receipts and payments of the company.
An estimate of company’s preliminary expenses.
The particulars of directors, secretary etc.

3. The statutory report must be certified by 2 directors.

4. Copy of this report has to be sent to the registrar of companies.
5. The members present at the meeting shall be at liberty to discuss
any matter relating to the formation of the company.
Annual General Meeting:
It is the regular meeting of the members. It must be held in
each year in addition to any other meeting. The purpose of this
meeting is to provide an opportunity to the members to express their
views on the management of company’s affairs. Thus, this meeting
enables the shareholders to exercise control over the company.
Legal provisions relating to Annual Statutory Meeting:
It must be held once in each year in addition to any other meetings and
gap between the meeting and the next should not be more than
15 months. Registrar of companies may extend this time for
another 3 months.
It must be held within 18 months from the incorporation and this
time cannot be extended even by the registrar.
14 days notice is necessary for calling this meeting.
Must be held during the business hours and on a day which is not a
public holiday.
Must be held at the registered office of the company
 Extra-Ordinary General Meeting:
This meeting is called for dealing with some urgent special
business which cannot be postponed till the next annual general
meeting.
Legal provisions relating to Extra-ordinary General Meeting:
May be called by the directors at any time on their own motion.
It becomes necessary on the requisition of members. Then,
directors are bound to call this meeting.
The requisition for calling this meeting must be signed by
1/10 member who has voting right or who hold the 1/10 paid
up capital of the company.
The requisition must set out the matters for the consideration of
which the meeting is to be called.
The directors then must move to call a meeting within 21 days
and the meeting must be held within 45 days from the date
of deposition of requisition
 Class Meeting:
It is the meeting of a particular class of shareholders.
In this meeting only the particular class of
shareholders are entitled to present.
Other meetings:
Meetings of directors: once in every 3 month, 4 in a
year.
Meetings of creditors-
Meetings of debenture-holders
Essentials and Legal Rules for a Valid Meeting:
Proper Authority- board of directors. Shall pass a
resolution in directors meeting for calling a meeting.
Proper notice- before 21 days and in written.
Contents of notice-
Quorum of meeting-
Public-5
Private-2
Only who presents, not the “Proxies”
Chairman of the meeting-
 Voting at Meetings
The business of the meeting is conducted in the form
of resolution passé at the meeting. And the resolutions
proposed in the meeting are decided on the votes of
the members of the company. Every member has the
right to vote. The members also have the right to
discuss the proposed resolution.
 The voting may take place3 in either of the following
2 ways-
Voting by show of hands-
Voting by poll-
Voting by show of hands:
The voting at the general meeting takes place by show
of hands and the resolutions are decided by counting
the hands held up in favor of the resolution. On a
voting by show of hands one member has one vote and
a proxy cannot vote unless the articles of association
provide otherwise. After counting the hands for or
against the resolution, the chairman declares the result
and it conclusive.
Voting by poll:
Sometimes, there is dissatisfaction about the result of
voting by show of hands. In such cases, a poll can be
demanded. Such poll can also be demanded before
voting by show of hands. On a poll, voting right of a
member shall be in proportion to his shares of the
paid up capital of the company.
 Resolutions
Ordinary Resolution:
It is the resolution which is passed, at a validly
called general meeting, by simple majority of the
members i.e. where the votes cast in favor of the
resolution exceed the votes cast against it. The
voting may be either by show of hands or by polls. In
determining the simple majority, all the votes cast
by the members whether personally or by proxy are
considered. The casting vote of the chairman is also
taken into account. The casting vote means the
deciding vote in the members are equally divided.
 Special Resolution:
It is the resolution which is passed, at a validly called general meeting,
by special majority of the members i.e. by the support of 3/4 th
majority of the members present and entitled to vote at the meeting.
The voting may be either by show of hands or by polls. In
determining the 3/4th majority, all the votes cast by the members,
whether personally or by proxy, are considered.

Special resolution is necessary in following cases-

1. To alter the articles of association.
2. To change the name of the company.
3. To alter the memorandum of association.
4. To issue further shares.
5. To reduce the share capital.
6. To commence a new business.
7. To determine the remuneration payable to the directors, managing
director, etc.
8. To obtain an order from the court for winding up of the company.
9. To wind up the company voluntarily etc.
Winding Up
 The term ‘winding up’ of a company may be defined as
the proceedings by which a company is dissolved.
According to Prof. Gower- “winding up is the process
whereby its life is ended and its property is
administered for the benefit of its creditors and
members. And an administrator, called a liquidator, is
appointed and he takes control of the company, collects
its assets, pays its debts and finally distributes any
surplus among the members with their rights.”
The winding up of the company called the
‘liquidation’ of the company.
Modes of Winding up: Sec 234
1. Compulsory winding up by the court. 241-254
2. Voluntary winding up without the intervention
of the court (by the members themselves and
voluntary winding up by the creditors). 286-315
3. Voluntary winding up with the intervention of
the court i.e. under the supervision of the court. 315-
321
Section-241-Compulsory Winding Up by the
Court: The winding up of a company by an order
of the court is called the compulsory winding up.
The court may wound up the company on a petition
submitted to it on any of the following grounds.
Special resolution by the company
Default in holding statutory meeting or in filing
the statutory report
Failure to commence business within a year or
suspends for a whole year
Reduction in members
Inability to pay debt
Just and equitable
Special Resolution by the Company:
Sometimes, the company passes a special resolution to
the effect that the company be wound up by the court.
In such cases, the court may order the winding up of
the company on a petition presented to it by the
company or contributory.
A contributory is a person who is liable to
contribute to the assets of the company in the
event of its being wound up. On filing of the
winding up petition, company’s shareholders are
called contributories.
Passing of special resolution by the company
itself is a ground for presenting a petition to the
court. A winding up petition under this clause can be
presented by the company or the contributory.
Default in holding statutory meeting:
A company must hold its statutory meeting within
6 months from the date on which the company is
entitled to commence its business. And before the
holding of the meeting, the statutory report must be
delivered to the Registrar for Registration. If default
is made in delivering the report to the Registrar,
or in holding the statutory meeting, the court may
order the winding up of the company on petition
presented to it by the Registrar or Contributory.
Failure to Commence Business:
Sometimes the company fails to commence the
business within one year from its incorporation,
or suspends its business for the whole year. In such
cases, the court may order the winding up of the
company on a petition presented to it by the Registrar
or Contributory. However, the court will exercise its
power only where there is a fair indication that there is
no intention to carry on the business or that it is not
possible for the company to carry on its business.
Reduction in Members:
 A Private Company must have at least 2 members and
a Public Company must have at least 7 members. If the
membership of any Company is reduced below limit,
the court may order the winding up of the company.
A winding up petition, under this clause, can be
presented by the Registrar of companies or
Contributories.
Inability to pay debt:
Sometimes, the company is unable to pay its debts. In
such cases, the court may order the winding up of the
company. The term ‘debt’ here means a definite sum of
money which is due and immediately payable by the
company.
A winding up petition, under this clause, can be
presented by the Registrar of companies, creditors or
Contributories.
Just and equitable:
 Sometimes the court is of the opinion that it is just and
equitable that the company should be wound up. In such
a case, the court may order the winding up of the
company. This clause gives a very wide discretionary
power to the court to order the winding up whenever it
appears desirable. Under this clause, the court may
order winding up on any ground. However, there must
be strong ground for winding up of the company. The
court may give due weight to the interest of the company,
its employees, creditors and shareholders. The interest of
general public should also be considered.
 A winding up petition, under this clause, can be presented
by the Registrar of companies, by a person appointed by the
Govt. or Contributories.
Legal provisions Applicable to Compulsory
Winding Up:
1. Commencement of winding up
2. Powers of the court on the presentation of the petition
3. Consequence of winding up orders
4. Procedure for compulsory winding up
5. Appointment of official liquidator
6. Statement of affairs
7. Report by official liquidator
Commencement of winding up: the winding up of
the company shall be deemed to commence from the
time of the presentation of the petition and not
from the date of the winding up order by the court.
Powers of the court on the presentation of the
petition: the court has the following powers:
A. Stay of proceedings against the company.
B. Making order on the petition-
1. May dismiss
2. May adjourn
3. May make any interim order
4. May make an order for winding up
5. May make any order as it thinks fit.
 3. Consequence of Winding Up:
a) On making the winding up order, the court must
immediately send the intimation of the order to the
official liquidator and the Registrar.
 b) The certified copy of the order must be filed with
the Registrar within 30 days of the order.
 c) The order shall be deemed to be a notice of
discharge to the officers and employees and
employees.
d) After a winding up order has been made, no suit or
other legal proceeding shall be commenced
against the company without the leave of the
court. And if any suit or legal proceeding is pending at
the date of the order, it shall not be proceeded with
except with the permission of the court.
4. Procedure for Compulsory winding up: The
winding up proceedings are conducted by an official to
be known as the official Liquidator. Thereafter, the
procedure involves the appointment of Official
Liquidator, and the conduct of proceedings by him.
5. Appointment of official liquidator: an official
liquidator is an officer who helps the court in
conducting and completing the winding up
proceedings.
6. Statement of Affairs: on the making of the
winding up order by the court or on appointment of
the official liquidator as the provisional liquidator, a
statement as to the affairs of the company must be
made out and submitted to the official liquidator. The
statement of affairs should contain the following
matters-
a) The assets of the company
b) The debts and liabilities of the company
c) The names, residence and occupations of
company’s creditors
d) The debts due to the company
e) Such further or other information as may be
required by the official liquidator.
7. Report by official liquidator: after receiving the
statement of affairs, as soon as practicable, the official
liquidator is required to submit a preliminary report to
the court stating the following information’s-
a) The amount of issued, subscribed and paid up
capital of the company. And the estimated amount of
the assets and liabilities.
b) Where the company has failed, the causes of the
failure.
c) Whether in his opinion, further enquiry is desirable
as to any matter relating to the promotion, formation
or failure of the company or the conduct of its
business.
General Powers of the court in case of Compulsory winding up:
1. Stay of winding up proceedings: the court may
make such on order on an application made by the
liquidator, or any creditor or contributory.
2. Settlement of list of contributories:
3. Delivery of property: court may order to transfer
the property in possession to the liquidator.
Payment of money by the contributory and
allowing set off: sometimes, after the making of a
winding up order, some money is due from a
contributory to the company apart from his liability as a
shareholder (i.e. other than the money payable by way
of calls of shares). In such cases, the court may order
the contributory to pay the money due to the company.
Making the calls i.e. calling the money due on
shares: the court may order the contributories to pay
the due amount to the extent of their liability.
Adjustment of rights of contributories: the court
has the power to adjust the rights of the contributories
among themselves, and to distribute any surplus among
the persons who are entitled to it.
Arrest of absconding contributories
Voluntary winding up without the intervention of the court:
the voluntary winding up means the winding up by
the members or creditors themselves without the
intervention of the court. Thus, the members and the
creditors are left free to settle their affairs without
going to the court of law.
By ordinary resolution: sometimes, the article of the
company fixes the period for the duration of the
company, or provides that the company shall be
dissolved on the occurrence of some event. In such
cases, when that time expires of that event occurs, the
company may pass an ordinary resolution in its
general meeting for its voluntary winding up.
By special resolution: the company may, at any time
pass a special resolution that the company be wound
up voluntarily. In that case, no reason is necessary.
Kinds of voluntary winding up:
1. Members voluntary winding up
2. Creditors voluntary winding up
 
Member’s voluntary winding up: It is the winding
up in the case of which a ‘declaration of solvency’ is
made and delivered to the Registrar in accordance with
the provision of Companies Act. The ‘declaration of
solvency’ is the declaration made by the directors
stating that the company has no debts, or that it will
be in a position to pay its debts in full.
Legal Rules-
1. The ‘declaration of solvency’ has to be made by the
majority of directors at a meeting of the board of
directors, and verified by an affidavit.
2. The directors have to declare in it that they have
made a full enquiry into the affairs of the company
and have formed the opinion about the following-
a) That the company has no debts,
 b) That the company will be able to pay its debts in
full.
3. The declaration must be made within 5 weeks
immediately before the passing of the resolution
for winding up and must be delivered to the registrar
for Registration before that date.
4. The declaration must be accompanied by a copy of
the report of company’s auditors on the profit and
loss account. And the balance sheet of the company
prepared up to the latest practicable date before the
making of the declaration.
5. The declaration must also contain a statement of the
assets and liabilities of the company as at the latest
practicable date before the making of the declaration.
Creditor’s voluntary winding up:
It is the winding up in the case of which a declaration
of solvency has not been made and delivered to the
registrar. Thus, the question of creditors voluntary
winding up arises where the company is unable to pay
its debts in full.
Voluntary winding up with the intervention
of the court:
It is the voluntary winding up, but under the
supervision of the court. At any time after a
company has passed a resolution for voluntary
winding up, the court may make an order that the
voluntary winding up shall continue but, subject to
the supervision of the court. The order may be made
by the court on such terms and conditions as it thinks
fit and the court may also determine the extent of the
supervision. The application for courts supervision
may be made by creditors, contributories, or by the
others as the court think just.
Conversion of private company
into public company
 Have at least 7 members
Alteration of articles of association
Ceasing to be a private company
 filing with the Registrar either a
prospectus or a statement in lieu of
prospectus containing the particulars
required.
Conversion of public company into private
company
Have not more than 50 members
Pass a special resolution altering its articles excluding
provisions applicable to public company and including
therein provisions applicable to a private company
Minority Protection
Any member or debenture holder individually or jointly
bring to the notice of the court that-
Affairs of the company prejudicial to one or more of them
Discriminatory action of the company
Resolution passed is discriminatory
The court may pass necessary order including a direction
 cancel or modify any resolution or transaction
 regulate the conduct of the company in such manner as is
specified therein
 amend any provisions of the memo or articles