Company Law – Core Commerce (B.Com (Hons))
Study Notes – Exam‑oriented (IIT–JEE / Competitive)
Goal: Understand the structure and functions of a company, the legal framework governing it (India’s Companies Act, 2013), and the key responsibilities of its members (directors, shareholders, officers).
Why Exam‑oriented?
The notes are designed to help you:
- Memorise important provisions (Sections) quickly.
- Derive formulae used in corporate finance (e.g., dividend per share).
- Spot tricky points that often appear in exam questions.
- Practice with a hard scenario that demands application of multiple sections.
1. Overview
| Term | Definition |
|---|---|
| Company | A legal entity incorporated under the Companies Act, 2013; separate from its members. |
| Incorporation | Process of forming a company by filing documents with the Registrar of Companies (RoC). |
| Articles of Association (AOA) | Statutory rules for internal management. |
| Memorandum of Association (MOA) | Defines the company’s external relations. |
| Directors | Persons appointed to manage the company. |
| Shareholders | Owners of shares; enjoy voting rights. |
| Corporate Governance | System of rules, practices, and processes by which a company is directed. |
2. Legal Framework – Companies Act, 2013
| Section | Key Provisions | Practical Implication |
|---|---|---|
| Section 2(g) | Defines “company”. | All subsequent provisions apply only to incorporated entities. |
| Section 3 | Company must have a minimum of 2 members. | Minimum shareholder count. |
| Section 8 | Non‑profit companies. | No dividends, profit‑sharing. |
| Section 11 | Incorporation – filing MOA & AOA. | Filing deadline: 30 days from incorporation. |
| Section 12 | Name reservation & certificate of incorporation. | Name must be unique & not misleading. |
| Section 135 | Annual Return & Annual Report. | Compliance with audit & financial statements. |
| Section 169 | Directors – appointment, duties, conflicts. | Directors must act in best interest & avoid self‑dealing. |
| Section 174 | Directors’ liability – civil, criminal, fiduciary. | Personal liability for wrongful acts. |
| Section 180 | Disqualification of directors. | Prevents unfit directors from holding office. |
| Section 240 | Shareholder rights – voting, dividends, etc. | Voting power = number of shares. |
| Section 248 | Dissolution – voluntary, court‑ordered, liquidation. | Company can be wound up. |
Tip: Memorise Section 169 (directors) and Section 240 (shareholder rights) – exam questions often hinge on these.
3. Incorporation – Step‑by‑Step Derivation
| Step | Document | Key Details | Deadline |
|---|---|---|---|
| 1 | MOA | Objective, name, registered office, share capital, liability of members | 30 days |
| 2 | AOA | Internal rules – directors, meetings, voting | 30 days |
| 3 | Form INC‑32 | Details of first directors & shareholders | 30 days |
| 4 | Digital Signature | For directors & incorporating entity | 30 days |
| 5 | RoC Filing | Submit MOA, AOA, INC‑32, fees | 30 days |
| 6 | Certificate of Incorporation | Issued by RoC; company now legally exists | 30 days |
Tricky Point – Incorporation vs registration: Incorporation is the act of forming a company; registration is the process of filing with RoC.
4. Types of Companies
| Type | Minimum Capital | Liability | Typical Use |
|---|---|---|---|
| Private Limited | ₹1,00,000 (if unlimited share capital) | Limited to share value | Start‑ups, SMEs |
| Public Limited | ₹5,00,000 (if unlimited share capital) | Limited | Large enterprises, listed on stock exchange |
| One‑Person Company (OPC) | ₹1,00,000 | Limited | Sole proprietorships wanting corporate benefits |
| Non‑Profit (Section 8) | No minimum | Limited | Charities, NGOs |
Complication – Unrestricted share capital (no limit) vs restricted (₹5 crore max).
Exam Trick – Many questions ask: “Which company type can issue securities to the public?” – answer: Public Limited.
5. Share Capital – Calculations & Formulae
5.1 Dividend Per Share (DPS)
[ \text{DPS} = \frac{\text{Dividends Paid}}{\text{Average Outstanding Shares}} ]
| Example | Dividends Paid | Outstanding Shares | DPS