Index of Companies Law Posts

Index updates as on 28th October 2016. Click “continue reading” below for Index of Companies Law Posts on this blog.

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Limited in Limited Company??

I receive a question on Quora which may interest readers of this Blog. The question is –

What is limited in private limited company? I understand limited means limited liability but can someone explain with a detailed example about how this liability turns out to be limited. Please use numerical in the example. Lets consider 4 owners, each one has 25% stake in the company & the total investment is say 1 lac INR.”

My reply is as under –

Sometimes, laymen assume in a limited or private limited company, liability of a company is limited. Limit of liability of a company is unlimited always or can say, limited to total liability a company have incurred. It is liability of members or shareholders of the company, which is limited.

In legal terms, limited company (whether private or public) has liability of its members (shareholders) limited to the extent of unpaid amount on shares held by them or guarantee provided by them.

In simple words, liability of members or shareholders limited to pay debt of the company.  Such liability of members or shareholders arises in event of winding up/insolvency/bankruptcy only not otherwise. In these cases, a member or shareholder shall pay to the limited extend to unpaid amount on shares held by him or guarantee provided by him.

Usually, general public see two types of limited companies – first, called private limited company and second usually called company or limited company. However, with regard to limited liability, there are two type of limited companies – first, limited by shares and second, limited by guarantee.

Most companies are limited by shares as also the company given as example in query. I explain above example with additional assumed fact –

Total Authorised Capital – Rs. Five lakh  – This is just a government limit to which company may raise money as capital from public. It has no direct relation with liability of company.

Total issued Share Capital – Rs. Two Lakh – This is sum of total liability of the all members combined. In day to day business, shareholders/members as investors see it total limit of investment promised by them.

Total paid – up share capital – Rs. One Lakh – This is sum total amount paid by all members/shareholders till date. This is amount of promise already paid by them. They will not get this amount back from a company as going concern. They may sale this investment in market or wait for winding up when excess of assets over liability may be distributed among them.

In above example given, 4 owners, each one has 25% stake in the company and present total investment Rs. 1 Lakh. As I assumed issued capital two lakh, They will have liability to unpaid capital amount.

Total unpaid share capital – Rs. One Lakh – This is difference of total issued share capital and total paid –up share capital. In event of winding –up/ Insolvency/ Bankcruptcy, shareholders/members shall be liable for this part of amount as their pending promise.

In case of all shares are fully paid, there will be no liability of shareholders/members. In case of listed companies, all listed shares are usually fully paid up, hence, there will be no liability for members in event of winding –up/ Insolvency/ Bankcruptcy.

In case of company limited by guarantee – liability will be unpaid amount of guarantee held by them. In case guarantee amount is fully paid (which is usually not a case), there will be no liability for member.

Exceptions –

However, there are some circumstances where this liability made unlimited by governing law, like reduction of number of members below prescribed minimum.

Practice making limited liability unlimited –

More interestingly, practically most small private limited companies, few or more shareholders have their liability unlimited. This is due to borrowing or loan agreements signed by companies where these shareholders stand as guarantor towards that borrowing/loan. This is quite interesting to incorporate a company with limited liability and loose it very next day to a lender.

Readers may reach original reply written here.


Company Incorporation version 2017.1 Form – INC – 32

Procedural aspect of company incorporation is constantly changing since implementation of the Companies Act, 2013. This registration service is most used and critical service provided by Ministry of Corporate Affairs. Government of India aims to get good rank in World Bank’s ease of doing business ranking. Now, a company may be incorporated with single simple form.

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Company Name with India

I receive a question on Quora which may interest readers of this Blog. The question is –

What is the procedure for inclusion of word ‘INDIA’ in the name of company?

My reply is as under –

Law related name of a company is governed with Section 4 of the Companies Act 2013 read with Rule 8. Under present law, there restriction related to inclusion of word “India” has been removed with effect from 1st April 2014.

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5th Amendment of 2016 in Incorporation Rules

Ministry of Corporate Affairs recently on 29th December 2016 came out with and notified the Companies (Incorporation) 5th Amendment Rules, 2016. These amendments came into force on 1st January 2017.

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DBA Names in India

I receive a question on Quora which may interest readers of this Blog. The question is –

Doing Business As (DBA) name for a Private Limited company in India?

Typically in US, we can have a company registered name as JP Morgan Chase Limited and they have a DBA as Chase which is very business friendly name. Can I have similar DBA name for a Private Limited Company in India?

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AishMGhrana: 2016 in review

This blog always believe in ethical compliance of law, governance and responsibility. The blog has responsibility to its readers and writers. The blog regularly put here its annual reports for public information.

This blog now has secured https protocol to make reading experience more secured.

The blog was adjudged as one of the best blogs in India by in category “law” in 2013 and continue hold this position. Indian Blog critics listed this blog among best blogs on Corporate Affairs for year 2013 – 14, 2014 – 15, and 2016.

Most readers are resident of India and others are from 168 (against 148 last year) territories worldwide. Other than India; United States, United Kingdom, Malaysia, Pakistan and Singapore are important territories with more than 1,000 yearly views.

Most of our readers landed here on the blog from Search engines. Few others were referred by Social Media and friends. This year readers using mobile phone increased sharply to about 1700 in numbers.

Blog is participant of Accelerated mobile Pages (AMP) program of Google to ensure less mobile data consumption while loading.

The blog got about 3.6 lakh page views by 2.4 lakhs unique visitors this year against 4.1 lakh views by 2.7 lakh unique visitors last year. During the year, the blog posted 92 blog posts against 150 and 228 posts in 2015 and 2014 respectively. Blog now host total 571 blog posts and completed 12 lakh pageviews. The blog is thankful for testimonials sent by readers.

On readers demand – Index of Companies Law Posts is placed on home page.

Now 692 committed readers (against 545 last year) subscribed the blog over their email to get instant updates. You may also join mail subscription. 109 fellow blogger – readers read the blog on wordpress reader. About 600 person got blog updates through whatsapp. Blog has 5,274 amazing fans and committed readers.

This blog request all its users to share posts among their friends through social media buttons given after each post. Mobile phone users may share blog to whatsapp also.

I am thankful to WordPress which provided me all kind of support of excellent software which are easy to learn and use.

Powers Delegated to Regional Director

Government of India delegates its powers time to time to subordinate offices for better implementation of law. Section 458 of the Companies Act, 2016 confers power of such power of delegation in relation to the provision under the Act to the Government of India. Government of India issued notification S.O. 4090(E) dated 19th December 2016 regarding delegation of powers to Regional Directors, which came into effect from that date.

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