01.Companies Act Notes.docx

Making company companies which are registered under

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making Company Companies which are registered under Section 8 of Companies Act are called ‘Non-profit making Companies’. The shareholders of the Company do not get any periodical dividend. These
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Companies are formed to promote Art, Religion, Education, Culture, Literature etc. These Companies do not use the word ‘Ltd.’ at the end of their company name . BASIC DOCUMENTS OF A COMPANY: MEMORANDUM OF ASSOCIATION: It is called the charter of the Company What an outsider normally want to know about the Company is explained in the Memorandum of Association It contains 6 clauses i.e. Name, Place, Objects, Liability, Capital & Association clauses The borrowing powers of a Company is mentioned in the Memorandum of Association Any act beyond the scope of Memorandum is ‘ultra vires’ of the company. It means such transaction cannot be enforced against the company. For example, the borrowing powers as per Memorandum of Association are Rs.10 crore. A Bank sanctioned loan of Rs.12 crore.The Bank cannot recover the amount from the Company. A Public Ltd. Co. can borrow to a maximum extent of its paid up capital & reserves. However such Public Ltd. Co. can borrow to any extent subject to the approval of Resolution of the shareholders in the Annual General Body meeting.
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