The existence of a legal framework is perhaps the most significant aspect of the corporate environment. Not being an exception, the Indian company law, largely based on its English counterpart, streamlines the procedure for regulation of Indian companies & branches of foreign companies operating in India.

The promoters, deciding the nature of company to be floated, can initiate incorporation of a company, by making application for availability of the name, prepare memorandum & article of association and file it with Registrar of Company (R.O.C.), who after scrutinizing the documents issues the certificate of incorporation.

Memorandum of association (MoA) comprises of the fundamental parameters upon which company is enacted which includes clauses of name, registered office, objects, liability & subscription. Similarly, articles of association (AoA) constitute the rules & regulations that govern the management of its internal affairs & conduct of business including provisions relating to share capital of the company, rights of various shareholders, transmission of shares etc. The act also contains provisions & regulates the acceptance of public deposits, which gets initiated through advertisement.

Shares may be defined as indivisible units of fixed amounts into which the capital of the company is divided. Generally, a public company is entitled to issue two kinds of shares-equity & preference. Shares can be issued either by private placement of shares or by inviting the public to subscribe for the shares through a prospectus or by allotting the same to an issue house which offers it for further sale to the public. SEBI has come out with guidelines in relation to issue of shares to the public. In case a company desires to increase its subscribed capital, it has to first offer the share to the existing shareholders .The company can augment its accumulated profits available for paying dividends, by issue of bonus shares. Shares can be freely transferred subject to certain restrictions contained in the act like restrictions on a private company to transfer its shares.

Debentures, which are also a source of long term-capital for a company, is a document which acknowledges the debt of the company. They may be non-convertible, partly or fully convertible. The issue of such PCDs & FCDs requires the prior approval of shareholders. SEBI, which regulates the issue of capital by the company, has specified that debentures to be offered to the public have to be secured by mortgage of assets of the issuer company if the redemption takes place on the expiry of 18 months after allotment or afterwards. More importantly a company desirous of raising capital through public issue of securities (debentures, bonds) has to issue a prospectus, which has to be approved by the stock exchange before it is filed with the R.O.C. . SEBI, which regulates the securities market & ensures investor protection, also scrutinizes such documents.

The act also lays down the provisions relating to composition of the board of directors, who are entrusted with the management & direction of the company to carry out the objectives in MoA. (A prescribed minimum of 2 & 3 in private & public limited company respectively). The AoA of a company describe the powers & duties of the board of directors. Unless specifically required by the AoA the directors need not own any shares. Even a foreign national can be appointed as the director of a company, without seeking any prior approval. The directors, who act in the nature of trustees of the company’s assets, are required by the Act to hold a board meeting at least in every quarter of the year.

Used interchangeably, these terms involve the taking over or absorption of the assets, liabilities & business of the transferor company by the transferee company. The formalities are initiated by the formal expression of desire of the transferor company, subject to the sanction by the tribunal, to amalgamate itself with the transferee company, valuation of shares of both the companies & consideration of its exchange followed up by approval of the same by the boards. According to a recent amendment, powers of the high courts have been transferred to nationalcompany law tribunal, to which the petition for amalgamation has to be moved, initially by the transferor company. SEBI has come out with recommendations regarding mandatory disclosures, which have to be made to the shareholders by the listed companies.

The statute makes it a mandatory requirement for the any company to maintain its book of account, which provides a genuine view of the financial maneuvers of the company. It further obligates the company to present its shareholders the company’s financial account statements (along with the auditor’s & director’s report), at every annual general meeting. A member of I.C.A.I. has to be appointed by the company in the nature of an auditor, to audit the company’s account.

It may be defined as the termination of the life of the company, & involves the appointment of a liquidator who supervises property administration through collection of assets, payment of debts & distribution of assets. Winding –up can be compulsory (by the court, on presence of some conditions which make it essential) or voluntary (members & creditors). Petition for compulsory winding up can be made by the company, its creditors, registrar etc.the petition is to presented to the district/high court which is followed by appointment of a liquidator (provisionally) & passing of the order on satisfaction of the court on all counts. From the commencement of the winding up the company shall cease to carry on its business except so far as may be required to secure a beneficial winding up of the company. In the event of winding up, certain payments rank in priority to others, called the preferential payments; and have to accordingly taken up.