CORPORATE TRANSACTIONS AND CONVERSIONS

CORPORATE TRANSACTIONS AND CONVERSIONS

Preliminary Contracts

1. Contracts made on behalf of the Company before its Incorporation – If the company takes some benefit from a contract made before its formation, the contract is not binding on the Company. The promoters only remain personally liable for it.
2. Contacts made after incorporation but before obtaining the certificate to commence business – provisional contracts are not binding on Company until the company is entitled to commence business on the grant of the Certificate.
3. Contracts made after obtaining the Certificate of Commencement – contracts which are intra vires or within the powers of the Company will be valid and binding

Conversion of Private Company into A Public Company:-

1. Conversion by Choice - Section 44
2. Conversion by default – Section 43
3. Conversion by Operation of law – Section 43A

Conversion of Public Company into A Private  Company

1. Central Government approval required – Section 31(1)
2. Passing of Special resolution
3. Changing of Name – Section 21
4. Filing of printed copy of articles as altered with ROC.

Conversion of an Existing Business into a Company

     1. By Outright Sale

     2. By making partners, only shareholders in the newly incorporated company

     3. Company becoming partner in the firm, which dissolve later.

     4. By registration of existing joint stock company or existing joint family business under Sections 567 and 568 of Companies Act, 1956.

     5. By amalgamation under Sections 391, 392, 393, and 394 of Companies Act, 1956.

Conversion of inter-State co-operative societies to become Producer Companies - Section 581J

Section 149(1) - A company having a Share Capital has issued a Prospectus inviting public to subscribe to shares it cannot commence any business or exercise any borrowing powers unless

• Fully paid shares have been allotted
• Every Director has paid on each share contracted to be taken by him
• No money liable to be repaid
• Filed with ROC the verified declaration in Form 19

Every Company must mention in its prospectus the Main Object to be pursued by the Company on its Incorporation and objects ancillary to attainment of Main object – Section 13

Section 149 prohibits a Company from commencing any business stated under other objects without obtaining the prior approval of the shareholders in general meeting by a special resolution.