Incorporation of Company and Incidental Matters Flashcards

A set of vocabulary-style flashcards covering the key concepts, legal doctrines, section references, and judicial cases related to the incorporation of companies under the Companies Act, 2013.

Promoter

As per Section $2(69)$ of the Companies Act, $2013$, a person named in a prospectus, identified in an annual return, having control over company affairs, or whose advice the Board is accustomed to act upon, excluding professional advisors.

Fiduciary Position

The relationship of trust and confidence occupied by a promoter toward the company and its future shareholders, requiring the disclosure of all material facts and the accounting of any secret profits.

Twycross v. Grant

The judicial case defining a promoter as one who undertakes to form a company with reference to a given project, sets it going, and takes necessary steps to accomplish that purpose.

Chartered Company

A company incorporated by a Royal Charter granted by the Crown or Sovereign, such as the historical East India Company.

Statutory Company

A company incorporated by a special Act of Parliament or State Legislature, such as the $RBI$, $LIC$, or $SBI$.

Company Limited by Shares

A registered company where the liability of its members is limited to the unpaid amount, if any, on the shares held by them.

Company Limited by Guarantee

A company where members' liability is limited to the amount they undertake to contribute to the assets of the company in the event of winding up.

One Person Company (OPC)

A private company formed with only $1$ member who must be a natural person and an Indian citizen, also requiring the nomination of a natural person as a nominee.

Resident in India

For the purpose of incorporating an $OPC$, a person who has stayed in India for not less than $120 \text{ days}$ during the immediately preceding financial year.

SPICe+ (Part A)

The simplified electronic proforma ($Simplified Proforma for Incorporating Company Electronically Plus$) used for the reservation of a name for a new company.

Corporate Identity Number (CIN)

A unique $21 \text{-character}$ alpha-numeric identifier allotted to a company by the Registrar at the time of incorporation.

Section 447

The specific section of the Companies Act, $2013$ that defines the liability for fraud, applicable to promoters or directors who furnish false information during incorporation.

Section 8 Company

A limited company formed for charitable or not-for-profit objects, prohibited from paying dividends to members, and not required to use 'Limited' in its name.

Memorandum of Association (MOA)

The fundamental charter or constitution of a company that defines its objects and relationship with the outside world.

Doctrine of Ultra Vires

The legal principle that any act performed beyond the objects stated in the $MOA$ is void and cannot be ratified, even by unanimous shareholder consent.

Ashbury Railway Carriage & Iron Co. Ltd. v. Riche

A landmark case confirming that a contract beyond the objects clause of the $MOA$ is zero and void, and cannot be ratified.

Articles of Association (AOA)

The document containing the internal rules and regulations for the management of the company, subordinate to the $MOA$.

Entrenchment

A provision in the $AOA$ that makes the alteration of specific rules more difficult than passing a standard special resolution.

Doctrine of Constructive Notice

The presumption that any person dealing with a company has read and understood its public documents, specifically the $MOA$ and $AOA$.

Doctrine of Indoor Management

Also known as Turquand's Rule, it protects outsiders by allowing them to assume that a company's internal proceedings have been duly followed.

Royal British Bank v. Turquand

The case that established the principle that outsiders need not inquire into a company's internal regularity if the act appears to be in order.

Section 10A

The legal provision requiring companies with share capital to file a declaration of commencement of business within $180 \text{ days}$ of incorporation.

Winding Up by Tribunal

The process of closing a company under Section $271$ for reasons such as acting against national interest, fraud, or default in filing financial statements for $5 \text{ consecutive financial years}$.