What is a account company?
What is a account company?Types of company,Different Between Private company vs Public company
Company informationWhat is a account company?Types of company,Different Between Private company vs Public company
Introduction
The size and volume of business are increase rapidly due to globalization and information technology. The scope of modern business is not limited to the boundary of a country. Is such a situation, it has become more difficult for a sole trading or partnership to run the business effectively due to lack
Concept and meaning of company
A company or joint stock company is the most widely popular form of business organization it is a volume association of persons who contribute capital to carry on a particular type of business. It is established by law and can be dissolved only by law. The persons who contribute capital become members of the company and known as shareholders. This form of business has a legal and perpetual existence. The existence of the shareholders and the company is not related to each other. It means even if its members die. The company remins in existence. This form of business organization generally requires lrge capital investment; which is contributed by its members. The total capital is called share capital and its is divided into q number of units called shares. Thus, every member has some shares in the business depending upon the amount of capital contributed by him/her.
Some of the definitions of joint stock companies are given below:
"a company refers to any company formed and resisted under this act." –nepal company act. 2063
"A company is an artificial person created by law, having a separate legal entity, with perpetual sucussion and a common seal." – Indian company act. 1956
"A corporation is an artificial being invisible, intangible and existing only in the contemplation of law. " Chief justice Marshall of USA.
Characteristics of company
The company from of organization possesses the features that have made it an unparallel and unrivalled one among the different forms of business. They are presented below.
1. Legal entity: a company is an artificial person created by law. So it has a separate legal entity from its members. It can hold and deal with any type of property that it owes. It can enter into contracts, open bank account in its own name, sue and be sued in its name and capacity.
2. Perpetual succession. A company is a corporate body. It acquires a separate legal existence different from its members. With a common seal. Its existence is not dependent to the existence of its members. It member or shareholders. The shareholders. The shareholders may come and go but the company runs only law can terminate its existence.
3. Limited liability: the liability of shareholders of a company is limited up to their capital investment. In other words, the liability of the shareholders in q public limited company is limited to the extent of the amount of share that they have subscribed. The shareholders are not liable for the payment of excess claim of the creditors even if the capital of the company is insufficient.
4. Common seal: a company is an artificial person created by law and possesses the right like a natural person. However, a company being an artificial person cannot sign on documents like natures person. Therefore, a common seal is used as a substitute of signature. The common seal is affixed on all documents of the company.
5. Transfer ability of share: the shares of a company are freely transferable from one person/firm to another person/form to another person/firm except in case of a private compny. A shareholder can transfer his/her shares to any person at his/her will without the consent of other shareholders. The transfer of the share changes the ownership of the member but does not affect the regular activities and existence of the company.
6. Separation of ownership and management: even thought the shareholders are owners of the company, all of them cannot participate in the management. Normally, the shareholders elect representatives known to manage the affairs of the company. So the ownership of the company is in the hand of shareholder whereas management is in the hand of director.
7. Maintenance of books of accounts: a company has to keep and maintain a prescribed set of accounting books and any failure in this regard attracts penalties.
8. Audit of accounts and publication of financial statements: it is compulsory for each and every company to get its account to be audited. A joint stock company has to publish its account to be audited. Joint Stock Company has to publish its financial statement at end of every fiscal year.
Types of company
Company can be classified into various types depending upon of members, liability formation and ownership, domicile and control. They have been mentioned below in detail:
On the basis of number of member
On the basis of number of member, company may be divided into two categories.
Private company
A company is said to be a private company if it restricts the right of its members to transfer shares, limited the number of its member to fifty and does not invite the public to subscribe its shares or debentures by issuing prospectus. A private used the words "private limited" after its name.
Characteristics and privilege of private company
A private limited company company enjoys a number of privileges over a public limited company. Some of them are mentioned below:
1. Formation by a single person. A private limited company may be formed even by a single person.
2. Commencement of business: a private company is not bounded to publish prospect incorporation.
3. No bound to issue prospection: a private company is not bounded to publish prospectus while issuing is not subscription.
4. Allotment before minimum subscription: it can allot shares even it the minimum subscription is not for subscription.
5. Statutory meeting and report: it is not necessary to hold statutory meeting or file the stqturory report with the company register.
On the basis of number of member
On the basis of number of member, company may be divided into two categories.
Private company
A company is said to be a private company if it restricts the right of its members to transfer shares, limited the number of its member to fifty and does not invite the public to subscribe its shares or debentures by issuing prospectus. A private used the words "private limited" after its name.
Characteristics and privilege of private company
A private limited company company enjoys a number of privileges over a public limited company. Some of them are mentioned below:
1. Formation by a single person. A private limited company may be formed even by a single person.
2. Commencement of business: a private company is not bounded to publish prospect incorporation.
3. No bound to issue prospection: a private company is not bounded to publish prospectus while issuing is not subscription.
4. Allotment before minimum subscription: it can allot shares even it the minimum subscription is not for subscription.
5. Statutory meeting and report: it is not necessary to hold statutory meeting or file the stqturory report with the company register.
Public company
According to Nepal company act 2063, a company which is not a private is a public company, it needs minimum seven person. There is no demarcation for the maximum number of persons. There is no restriction on issue or transfer of its shares and it can invite the
public to purchase its shares and debentures.
• A public limited company collects enough capital since the investment is made by a large number of people.
• The shares of public limited company are easily transferable from one person/party to other.
• The liability of the shareholders of a public limited company is limited o the extent of the capital investment by them.
• A public limited company can achieve the advance of large scale business.
Differences between public and private company
Public Company differs from private company in the following respects:
Bases of differences Public company Private company
Number of member Minimum seven members are required of form it and the maximum is unlimited. It needs at least one member for its formation but cannot exceed fifty.
Issue of prospectus It issues a prospectus for inviting public to subscribe its shares or debentures. It cannot issue prospectus to invite public for subscription of its shares or debentures.
Restriction on share transfer There is no restriction on the transfer of shares of public company. The shares cannot be transferred without the consent of the directors of the company.
Commencement of business It can commence business only after receiving the certificate for the commencement of business. It can commence business after getting certificate of incorporation.
Allotment of share It can allot its shares only after receiving the amount of minimum subscription. It can allot its shares after the incorporation.
Statutory meeting Statutory meeting must be held and statutory reports must be sent to the registrar office as well as shareholder of the company. It is neither required to hold statutory meeting nor file and issue statutory report.
Last word of name It has only the word 'limited' at the end of its name. It has the words 'private limited' in its name at the end.
On the basis of liability
On the basis of liability, the company can be divided into two types, namely company having limited liability and company having unlimited liability.
Company having limited liability
The shareholders under this type of company bear limited liabilities. This liability can be limited in two ways:
1. Liability limited be shares. The company in which the liability of shareholder is limited to the extent of the value of shares held by them is called the company having limited liability by shares. Most of the companies resisted under the company act are this type.
2. Liability limited by guarantee. The company, where the shareholders promise to pay a fixed amount to meet the liabilities of the company in the case of liquidation, is the company limited liability by guarantee. This assurance is called guarantee and such amount of guarantee is mentioned in the memorandum of association or articles of association.
Company having unlimited liability
A company where the liability of the shareholders goes beyond the value of shares invested by them is called a company having unlimited liability. It such company goes into liquidation, the member can be called upon to meet the liability even using their private properties.
On the basis of formation or incorporation
On the basis of formation, companies are divided into three types as mentioned below.
Chartered company
A company, which is incorporated or established under special charter or proclamation issued by the head of the state, is known as charted company. The charter issued for the establishment of a particular company does not govern other companies. In the world there is not existence of such company.
Statuary company
A company, which is formed or incorporated by a special act of parliament, is known as statutory companies. Such company is governed by their respective acts and do not have any memorandum or articles of association. The ownership of such company is held by the government fully or partially. For example Nepal electricity authority, Nepal rastra bank, employee provident fund etc are the statutory companies in Nepal/ word referent contrary are based in this country government company.
Registered company
A company, which is formed according to company act, is called registered company. The provisions of company act memorandum of association and articles of association govern such company.
On the basic of ownership
On the basis of ownership, the companies are divided into two types as mentioned below.
Government Company
A government company is a company in which at least 51% of the paid up capital has been subscribed by the government.
Non-government Company
If the government does not subscribe a minimum 51% of the paid capital, the company is called a non-government company.
Advantages of company form of management
The company form of organization provides the following advantages:
1. Huge amount of capital: a public company can collect huge amount enjoy of capital from its large number of shareholders for lage-scale enterprises.
2. Limited liability: the member or shareholders of a company enjoy the advantage of limted liability. They cannot be called upon to pay anything more than the value of the shares held by them.
3. Permanent existence: a company has permanent existence. Its life does not depend on the life of its members. Therefore, it is more stable form of business organization.
4. Transferability of shares: in a public company the shares of a member can easily be transfer without the consent of other member. As shares are freely transferable, a shareholder can convert his/her holding into cash or others. This facility encourages the general public for investments in a company.
5. Democratic management: a company management is a democratic in nature. It is managed by elected representatives of its members, who are called directors and their group is called board of directors.
6. Advantages of large scale business: since a joint stock company is a large scale organization, it enjoys the advantages of large scale in every Ares of its business.
Company promoters
The person or a group of persons who take necessary steps to incorporate a company are knows as company promoters. They conceive the idea of starting the company and work-up on it to develop the idea and finally form it. In other words, company promoters are those who discover opportunities to make money, investigate such position, assemble and finance them and thereby a shape to a joint stock company. So, they generally perform the following functions.
• Conceive the idea of forming a company.
• Analyze profitability and feasibility of the idea.
• Investigate the workability of the idea by consulting experts.
• Decide the name and location of the company and also the amount and form of its share capital.
• Prepare the memorandum of association, articles of association, prospectus and other necessary documents and file them to the concerned offices for the process of incorporation.
Main documents of company
For the incorporation of a joint stock company, it is essential to complete some documentation and submit to the concern department of Nepal government along with the application. The application must be accompanied by the following documents.
Public limited company Private limited company
Memorandum of associate Memorandum of association
Articles of association Articles of association
prospectus
Memorandum of association
The first foremost document of a joint stock company is memorandum of association. It is the basis of incorporation; hence a company cannot be registered without it. It nests out constitution of a company and the foundation on which the structure of the company is based. In other words, memorandum of association is consolation is considered as the charter or constitution of the company because it lays down the objectives of the company precisely and clearly, defines scope of its operations and its relation with the investors and outside word.
According to Nepal company act 2063, a memorandum of association must include the following convents;-
• The name of company,
• The address of the registered office of the company,
• The objectives of the company,
• The acts to be carried out to accomplish the objectives of the company,
• The figure of the authorized capital of the company and the figure of the share capital to be issued by the company for time being and the figure of undertaken to be paid by the promoter of the company,
• Types of shares of the company, the right and powers inherent is such shares, value of each share and number of shares of different types,
• Restrictions, if any, in the purchase or transfer of shares,
• Number of shares which the promotes have undertaken to subscribe for the time being,
• Terms of payments of share amounts,
• Statements that the liability of shareholders shall be limited,
• The maximum number of shareholders is case of a private company,
• Other necessary matters.
The memorandum must be printed, divided into paragraphs, number consecutively, and be signed by at least seven person who agree to take at least one share.
Articles of association
Articles of association is another important document of a company. It contains in detail the rules and regulations that govern the operation of a company. It defines the mode and manner in which the company's business is to be carried on along with the right, powers and duties of the management. In other words, it provides the by-laws governing the conduct of shareholders, directors and other officers of the company and directing the way in which the objectives of the company are achieved.
According to company act, 2063, the following are the main contens of articles of association of a company.
• Procedures for convening the general meeting of the company and notice to be given such meeting.
• Proceeding of general meeting.
• Number of directors, provision of alternate director, if any, and tenure of directors,
• Provisions relating to the minutes of decision of the general meeting and the board of directors, and duplicate copies and inspection thereof,
• If a person has to subscribe shares to become director of a company, minimum number of shares.
• In the case of a public company, qualification and number of independent director,
• Where any professional persons, other than shareholders, are to be appointed as directors, provisions relation to number, tenure, qualification and procedures of appointment of such persons.
• Powers and duties of the board of director and the managing director,
• Authority of directors and delegation of authority.
• Quorum for a meeting of the board of directors, notice of meeting and proceedings of meeting,
• Lien on shares,
• Different classes of shares and the rights, powers and restrictions attached to such shares,
• Provisions relating to the transfer of shares,
• Provisions relating to calls on shares and forfeiture of shares,
• Matters on alteration is share capital.
• Matters on buying back of shares by the company, if the company is to buy back its shares,
• Appointment of a company secretary,
• Provision relating to remuneration, allowances and facilities of directors,
• Use of the company's seal in its transaction, if it is to be so used,
• Accounts, book of accounts and audit of the company,
• Provision on power to raise loans or debentures,
• Amalgamation of the company,
• Such matters, if any, as required law to be mentioned in the articles of association of a company carrying on any specific business.
• Such other necessary matters as required to be mentioned in the articles of association.
Prospectus
A prospectus is written invitation made to the public to subscribe the shares and any other securities of a company. The prospectus may be defined as any document is including and notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any sh
ares in or debentures of a body/corporate. Its main purpose is to encourage the public to publishing and has to be submitted to the securities board for approval, under the prevailing laws on securities.
The important contents to be included in the prospectus are as follows.
• The name, address, nature and objectives of the company.
• The names, addresses and occupations of the directors, managing directors or managers etc.
• Dates of opening and closing of subscription list.
• Capital structure of the company as authorized, issued, subscribed and paid up share.
• Terms of payment, modes of payment, size of the present issue, shares issue at discount or premium etc.
• Details about underwriting, brokerage and other commissions
• Projected financial statements for at least for three years.
public to purchase its shares and debentures.
• A public limited company collects enough capital since the investment is made by a large number of people.
• The shares of public limited company are easily transferable from one person/party to other.
• The liability of the shareholders of a public limited company is limited o the extent of the capital investment by them.
• A public limited company can achieve the advance of large scale business.
Differences between public and private company
Public Company differs from private company in the following respects:
Bases of differences Public company Private company
Number of member Minimum seven members are required of form it and the maximum is unlimited. It needs at least one member for its formation but cannot exceed fifty.
Issue of prospectus It issues a prospectus for inviting public to subscribe its shares or debentures. It cannot issue prospectus to invite public for subscription of its shares or debentures.
Restriction on share transfer There is no restriction on the transfer of shares of public company. The shares cannot be transferred without the consent of the directors of the company.
Commencement of business It can commence business only after receiving the certificate for the commencement of business. It can commence business after getting certificate of incorporation.
Allotment of share It can allot its shares only after receiving the amount of minimum subscription. It can allot its shares after the incorporation.
Statutory meeting Statutory meeting must be held and statutory reports must be sent to the registrar office as well as shareholder of the company. It is neither required to hold statutory meeting nor file and issue statutory report.
Last word of name It has only the word 'limited' at the end of its name. It has the words 'private limited' in its name at the end.
On the basis of liability
On the basis of liability, the company can be divided into two types, namely company having limited liability and company having unlimited liability.
Company having limited liability
The shareholders under this type of company bear limited liabilities. This liability can be limited in two ways:
1. Liability limited be shares. The company in which the liability of shareholder is limited to the extent of the value of shares held by them is called the company having limited liability by shares. Most of the companies resisted under the company act are this type.
2. Liability limited by guarantee. The company, where the shareholders promise to pay a fixed amount to meet the liabilities of the company in the case of liquidation, is the company limited liability by guarantee. This assurance is called guarantee and such amount of guarantee is mentioned in the memorandum of association or articles of association.
Company having unlimited liability
A company where the liability of the shareholders goes beyond the value of shares invested by them is called a company having unlimited liability. It such company goes into liquidation, the member can be called upon to meet the liability even using their private properties.
On the basis of formation or incorporation
On the basis of formation, companies are divided into three types as mentioned below.
Chartered company
A company, which is incorporated or established under special charter or proclamation issued by the head of the state, is known as charted company. The charter issued for the establishment of a particular company does not govern other companies. In the world there is not existence of such company.
Statuary company
A company, which is formed or incorporated by a special act of parliament, is known as statutory companies. Such company is governed by their respective acts and do not have any memorandum or articles of association. The ownership of such company is held by the government fully or partially. For example Nepal electricity authority, Nepal rastra bank, employee provident fund etc are the statutory companies in Nepal/ word referent contrary are based in this country government company.
Registered company
A company, which is formed according to company act, is called registered company. The provisions of company act memorandum of association and articles of association govern such company.
On the basic of ownership
On the basis of ownership, the companies are divided into two types as mentioned below.
Government Company
A government company is a company in which at least 51% of the paid up capital has been subscribed by the government.
Non-government Company
If the government does not subscribe a minimum 51% of the paid capital, the company is called a non-government company.
Advantages of company form of management
The company form of organization provides the following advantages:
1. Huge amount of capital: a public company can collect huge amount enjoy of capital from its large number of shareholders for lage-scale enterprises.
2. Limited liability: the member or shareholders of a company enjoy the advantage of limted liability. They cannot be called upon to pay anything more than the value of the shares held by them.
3. Permanent existence: a company has permanent existence. Its life does not depend on the life of its members. Therefore, it is more stable form of business organization.
4. Transferability of shares: in a public company the shares of a member can easily be transfer without the consent of other member. As shares are freely transferable, a shareholder can convert his/her holding into cash or others. This facility encourages the general public for investments in a company.
5. Democratic management: a company management is a democratic in nature. It is managed by elected representatives of its members, who are called directors and their group is called board of directors.
6. Advantages of large scale business: since a joint stock company is a large scale organization, it enjoys the advantages of large scale in every Ares of its business.
Company promoters
The person or a group of persons who take necessary steps to incorporate a company are knows as company promoters. They conceive the idea of starting the company and work-up on it to develop the idea and finally form it. In other words, company promoters are those who discover opportunities to make money, investigate such position, assemble and finance them and thereby a shape to a joint stock company. So, they generally perform the following functions.
• Conceive the idea of forming a company.
• Analyze profitability and feasibility of the idea.
• Investigate the workability of the idea by consulting experts.
• Decide the name and location of the company and also the amount and form of its share capital.
• Prepare the memorandum of association, articles of association, prospectus and other necessary documents and file them to the concerned offices for the process of incorporation.
Main documents of company
For the incorporation of a joint stock company, it is essential to complete some documentation and submit to the concern department of Nepal government along with the application. The application must be accompanied by the following documents.
Public limited company Private limited company
Memorandum of associate Memorandum of association
Articles of association Articles of association
prospectus
Memorandum of association
The first foremost document of a joint stock company is memorandum of association. It is the basis of incorporation; hence a company cannot be registered without it. It nests out constitution of a company and the foundation on which the structure of the company is based. In other words, memorandum of association is consolation is considered as the charter or constitution of the company because it lays down the objectives of the company precisely and clearly, defines scope of its operations and its relation with the investors and outside word.
According to Nepal company act 2063, a memorandum of association must include the following convents;-
• The name of company,
• The address of the registered office of the company,
• The objectives of the company,
• The acts to be carried out to accomplish the objectives of the company,
• The figure of the authorized capital of the company and the figure of the share capital to be issued by the company for time being and the figure of undertaken to be paid by the promoter of the company,
• Types of shares of the company, the right and powers inherent is such shares, value of each share and number of shares of different types,
• Restrictions, if any, in the purchase or transfer of shares,
• Number of shares which the promotes have undertaken to subscribe for the time being,
• Terms of payments of share amounts,
• Statements that the liability of shareholders shall be limited,
• The maximum number of shareholders is case of a private company,
• Other necessary matters.
The memorandum must be printed, divided into paragraphs, number consecutively, and be signed by at least seven person who agree to take at least one share.
Articles of association
Articles of association is another important document of a company. It contains in detail the rules and regulations that govern the operation of a company. It defines the mode and manner in which the company's business is to be carried on along with the right, powers and duties of the management. In other words, it provides the by-laws governing the conduct of shareholders, directors and other officers of the company and directing the way in which the objectives of the company are achieved.
According to company act, 2063, the following are the main contens of articles of association of a company.
• Procedures for convening the general meeting of the company and notice to be given such meeting.
• Proceeding of general meeting.
• Number of directors, provision of alternate director, if any, and tenure of directors,
• Provisions relating to the minutes of decision of the general meeting and the board of directors, and duplicate copies and inspection thereof,
• If a person has to subscribe shares to become director of a company, minimum number of shares.
• In the case of a public company, qualification and number of independent director,
• Where any professional persons, other than shareholders, are to be appointed as directors, provisions relation to number, tenure, qualification and procedures of appointment of such persons.
• Powers and duties of the board of director and the managing director,
• Authority of directors and delegation of authority.
• Quorum for a meeting of the board of directors, notice of meeting and proceedings of meeting,
• Lien on shares,
• Different classes of shares and the rights, powers and restrictions attached to such shares,
• Provisions relating to the transfer of shares,
• Provisions relating to calls on shares and forfeiture of shares,
• Matters on alteration is share capital.
• Matters on buying back of shares by the company, if the company is to buy back its shares,
• Appointment of a company secretary,
• Provision relating to remuneration, allowances and facilities of directors,
• Use of the company's seal in its transaction, if it is to be so used,
• Accounts, book of accounts and audit of the company,
• Provision on power to raise loans or debentures,
• Amalgamation of the company,
• Such matters, if any, as required law to be mentioned in the articles of association of a company carrying on any specific business.
• Such other necessary matters as required to be mentioned in the articles of association.
Prospectus
A prospectus is written invitation made to the public to subscribe the shares and any other securities of a company. The prospectus may be defined as any document is including and notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any sh
The important contents to be included in the prospectus are as follows.
• The name, address, nature and objectives of the company.
• The names, addresses and occupations of the directors, managing directors or managers etc.
• Dates of opening and closing of subscription list.
• Capital structure of the company as authorized, issued, subscribed and paid up share.
• Terms of payment, modes of payment, size of the present issue, shares issue at discount or premium etc.
• Details about underwriting, brokerage and other commissions
• Projected financial statements for at least for three years.
Good explain of the post .The general public may purchase registered shares from a public firm. A private business might offer a select group of eager investors its own, privately held shares with
ReplyDeletedirectors of company