FEATURES OF A COMPANY: THE BASIC ATTRIBUTES

The Company Act,2013 replaced the old Company Act,1956 and brought about a number of changes.The new Act comprises of 29 chapters, 470 sections and 7 schedules while the previous Act had 26 chapters and 658 sections and 15 schedules. However, the basic features of the Company shall always remain the same. The below mentioned are few of them:

Legal Personality:All the companies incorporated shall have distinct legal personalities. This includes the capacity to enter into contracts, sue and be sued, own a property and incur debts.

Artificial Person: A company is an artificial person and not a natural person in terms of its existence. It shall be owned by atleast one Director and one Shareholder. It has its own legal existence and is unaffected by the death, insolvency, bankruptcy and other situations of either of its members and shareholders. A company can only be ended as per the winding up provisions of the Company Act and not otherwise.

Common Seal:A Company after its incorporation shall have common seal .The common seal shall be the official signature of the Company and shall be distinct for each company.

Central Administration: The administration of all companies is the responsibility of the Central Government.

Perpetual Succession: A Company and an organisation shall continue being in existence not being affected by the death, bankruptcy, insanity, change in stocks or shares, changes in membership, entry and exit of its members, etc. and continues to exist.

Board of Directors and other Management: The Company is managed by its Board of Directors, Managers and Managing Directors. Their appointment and responsibilities are subject to the provisions of the Company Act.

Statutory Obligations:A Company has to abide by various statutory obligations for a valid and secure existence. Maintainingregisters, filing balance sheets, declaring dividends, holding meetings and other.

Limited Liability: In a limited liability corporation, the member’s liability is limited to the share value worth of their company and they are not personally liable for the debts and liability of a limited liability corporation.

Doctrine of Indoor Management: Also known as the Doctrine of Constructive Notice. As per this, what happens internally in a company is not a matter of public knowledge and the external people doing business with the company should be safeguarded in case of fraud or misconduct of the Company.

Doctrine of Oppression and Mismanagement: Any affair of a company which is unfair, prejudiced and oppressive towards a member or public interest can be complained before the Tribunal for a suitable action.

The COMPANY ACT, 2013 has further introduced reforms with the introduction of certain new features. Some of those are following:

Number of members: The number of members of a Private Limited Company has been increased to 200 from the existing number 50.The total number of partners have been increased to 100 from the previous limit of 20.However, this limit shall not apply to professional associations of  lawyers, company secretaries and chartered accountants etc.

Corporate Social Responsibility: Section 135 of the new Act, 2013has incorporated Corporate Social Responsibility in the VII Schedule of the Act. The Companies shall have to divert atleast 2 percent of their net profit towards CSR or Corporate Conscious. This shall apply to Companies having either 5 crore net profit, 1000 crore turn over or 500 crore net value.

More Power to Shareholders: Any member or depositor on behalf of other members and depositors can now file a class action suit before the National Company Law Tribunal and prevent the Company for doing any act which is beyond its powers mentioned in the Articles of Association. The Shareholders have more approving rights for various transactions now.

Woman Director: The new Act has incorporated to have atleast one woman Director in a Company. As per the section 149(1) and Companies (Appointment and Qualification of Directors) Rules, 2014, a woman Director shall be one of the Directors in the following situations:

1. For Public Companies, under the following circumstances:

Companies with a paid- up share capital of 100 crore rupees or more

Companies with a turnover of 300 crore rupees or more.

2. All the other listed Companies.

National Company Law Tribunal: The National Company Law Board and the Board for Industrial and Financial Reconstruction has been replaced now with the National Company Law Appellate Tribunal for relieving the Courts of its burden and provide specialised services.

Mergers: The mergers and their procedures have been reformed under the new Act of 2013.The concept of cross-border mergers has been introduced where a foreign Company can merge with an Indian Company as per the guidelines of RBI.

One Person Company:The new one person Company concept of the Act allows having a private company with only one Director and one Shareholder while earlier there had to be two Directors and Shareholders.

Directors: As per the new Act, the Companies shall have atleast one Indian resident Director who has for minimum stayed for 182 days in the previous calendar year. All the listed Companies shall have atleast one-third of the Board as Independent Directors who shall not hold office for more than 2 consecutive years in 5 years. The Directors and members can now be indemnified by the company in case of losses unlike before.

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Author: This blog is written by Ms. Priya Dwivedi, a passionate blogger & intern at  Aapka Consultant.

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PRE & POST FUNDING COMPLIANCE FOR STARTUP

The concept of PRE & POST FUNDING COMPLIANCE FOR STARTUP is considered as the most important factor for initiating any business in India. The things which we should know about pre and post funding compliance for start-up are with registrations, meetings, allotment of shares and issue various certificate etc.

As per the guidelines of the Companies Act, 2013, a private limited company can issue shares to raise money by making a preferential allotment of shares. The issuing of shares on a preferential basis should be authorized by article of association of the company. Allotment of shares should be authorized by a special resolution, and the price of such shares should be determined by the company valuation report.

The factor of investment and getting deals are the most important aspects, but sometimes it goes complicated too. Private limited company has too adhered to while receiving the funds from the investors. The allotment of shares should also be authorized by the special resolution, there are included the various steps with regard to the allotment of shares which are as following:-

1. Meeting(conducting a board meeting): meeting are considered as the important compliance under the company because, with the timely meetings only , the raising factors and the start-up base will increase. For making a proposal for a preferential allotment, a meeting of the board of directors of the company should be conducted.

2. Secondly, conducting an extra ordinary meeting. For the approving of the preferential allotment by passing a special resolution, an extra ordinary general meeting of the shareholders should be held. The validity period for this resolution is only for 12 months.

3. Thirdly, issue of the offer letter. The majority of the votes in the company is required for the approval of the various proposal. Once the proposal has been approved by the majority, the company go ahead and issue offer letter to the investors in the specific format.

Within the 30 days of issuing letters, a complete record of preferential allotment is to be filled with the registered company.

4. Fourthly and the important one is the allotment of the shares, because the company has to allot securities to the investors within the 60 days of receiving the funds, and for that too they have to pass a resolution in board meeting and filing a return of allotment with the registrar within 30 days of such allotments.

There should be the complete details which contain the list of all shareholders, their complete names, address, percentage of shareholders allotted and other relevant information.

5. And the final step is about the issuing of the certificate. On completion of the allotment, company can finally issue shares, certificate to the investors; later they will be the shareholders of the company.

These all are the above steps mentioned for the domestic and foreign investors both. It is very important for the companies raising capital t be aware and ensure compliance for a better and smooth business and to understand their business in a better way.

Author: This blog is written by Ms. Deepshikha Dabi, student of Vivekananda Institute of Professional Studies, a passionate blogger & intern at  Aapka Consultant.

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Review of New Company Name Approval Process

Becoming an entrepreneur has many processes to follow. Mere knowledge on the subject matter and expertise in the same does not suffice the statutory and legal requirements to start a new company. Different aspects are reviewed when one wants to open a new Company. Let us have a look at the review of new Company approval process which has some changes as compared to old approval process.

In February, 2016 the name approval process was transferred from the State ROC offices to a centralized name approval processing cell.

Company name approval process till February 2016

• The form to be filled for Company name approval process was Form INC-1
• Anyone who wants a company name to be approved fill the above stated form and submitit to the ROC offices of the concerned states
• Such approvals did not happen in a computerized manner but were manually processed
• The processing time of these requests and issue of final approval differed from state to state

To put a full stop to such unruly way of Company Name Approval Processes and delays in the same, the concerned Ministry announced that CRC – Central Registration Centre would be responsible for all Company Name Approvals vide a circular dated 22nd January 2016

All about CRC – Central Registration Centre

• The territorial jurisdiction of Central Registration Centre is the complete Indian terrain
• Central Registration Centre will process Company Name Approval Requisition adhering to the Companies Act of India
• Central Registration Centre comes under the Administrative Control of Registrar of Companies located in New Delhi
• The effectiveness of the new system and efficiency of Central Registration Centre is witnessed openly in the speed with which company names have been processes within this short period of time. Approvals are being released within 2 to 3 days from the date of submission of the request form
• The system has been computerized and no manual work is involved in the new method of getting approvals for Company names
• Approximately 70% of 14000 plus applications received for Company name approval process have been approved in the past one month. The balance 30% have been intimated for resubmission with changes
• The zero-balance program announced by the Ministry of Commerce has insisted that Central Registration Centre clears off all applications in a quick manner particularly between Tuesday and Fridays every week.
• The Ministry has plans to centralize this process making it more easy for people to start more and more profitable commercial ventures across the country.

Review of New Process

The new process has drastically changed the incorporation process and made it simpler.

Now, companies can be registered in 10-15 days in India, instead of about 25-30 days, it used to take prior to the introduction of the new central registration Centre for name approval. The introduction of a central registration Centre for incorporation is expected to even shorten the time for company registration, making true the dream of incorporating a company in one day in India.

The plans of Ministry of Commerce for the future is sure to make Company Name Approval process a one day affair soon.

Author: This blog is written by Ms. Arushi Sethi, a passionate blogger & intern at  Aapka Consultant.

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Whether Keyword Advertising Is a Trademark Infringement or Not

The era of internet has lead to the coming up of keyword advertising. Generally defined as a form of advertising on the Internet in which a business pays to have an advertisement for a website appear on a consumer’s computer screen when the consumer uses a particular word or phrase to search for information on the internet they lay a very important role in advertising and marketing of various businesses.

But the problem arises when a person or a company purchases a keyword in order to advertise his product and such a word is a trademark of a third party. In such a case, a consumer is likely to get confused with such keyword, as in if a person is searching a word which is a trademark of a particular third party and is lead towards the advertisement of the keyword purchaser, is that considered to be a trademark infringement?

The problem that is posed by the trademark owner is that this practice of buying keywords results in confusion among the consumers. As a consequence, many of the trademark owners have filed hundreds of cases on their competitors buying such keywords. They claim that the Lanham Act of USA prohibits any use in commerce of a registered mark or imitation thereof that “is likely to cause confusion, or to cause mistake, or to deceive.” Therefore, such a practice is the practice of trademark infringement.

Initial interest confusion

The doctrine of initial interest confusion says that the confusion occurs prior to purchase. A consumer might be confused at the starting point of his search as a result of the misuse of the trademark by the keyword purchaser.

Thus, the factor that plays a most important role in determining that whether there is an infringement or not is the concept of ‘Initial Interest Confusion.’

In the case of Brookfield Communications v. West Coast Entertainment:

The court while giving importance to the protection of the trademark owner  noted that “the use of another’s trademark in a manner calculated ‘to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion, may be still an infringement.’’

Factors that courts typically consider in determining whether there is a likelihood of confusion include:

1. The amount of similarity between the goods and services and trademark;
2. The strength of the plaintiff’s mark;
3. Evidence of confusion caused to consumers;
4. The intention of the defendant in using its mark;
5. The amount of reasonable care that is exercised by the consumer.

The courts have been uncertain on this concept. In many cases, the court has held that such a practice of keyword advertising is normal competition if it does not result in customer confusion.

However, in many cases, the courts of USA, have ruled that if a person or a party uses a trademark of another in the form of a keyword, such act is not considered as a trademark infringement. In order to make a person liable under the Lanham Act for purchasing that keyword and infringing the trademark, the trademark owner has to establish that

1. Is the trademark being “used” in commerce? 

In order to make a person liable for the trademark infringement under the Lanham Act, it is necessary to prove that the person accused of the infringement must be using such mark or the keyword. However, it is well settled by a number of cases that the use of a ‘keyword’ as a trademark does qualify as a “use in commerce” under the Lanham Act.

2. What is the consumer searching for?

It has been decided by various courts that if a person types the name of a particular brand or product, then it is to be inferred that he is searching for that particular product or that particular brand. Therefore, in these cases, it has to be assumed that the customer was searching that particular product of particular brand only.

3. Is the trademark used in the text or body of the advertisement?

It has been decided in the case of Rosetta Stone Ltd. v. Google, Inc,

that the when the trademarks as ‘keywords’ were used in the title or body of an ad or “sponsored link” that appears on a Google search results page there is a likelihood that such would cause consumer confusion.

Keeping the above three factors in mind, it is important that such an attention should be paid to the visual advertisement of the keyword purchaser  on the search engine result’s page, because while browsing the product information the consumer might be confused by the advertisement on the same screen.

Therefore, if a person uses the trademark as a keyword in the body of the advertisement and tries to confuse the customers, it can result in trademark infringement.

The application of the law on keyword advertising

This doctrine of ‘Initial Interest Confusion’ has not been embraced by all the courts. In the cases of keyword advertising, there are less number of cases where the courts have dealt with the issue of confusion- let alone initial interest confusion.

Due to the lack of cases on this point of law, many of the courts have decided cases those should have involved initial interest confusion on any other issue that has resulted in some unsettled question regarding this doctrine. Some courts have adopted the aspect of Initial Interest confusion, but some have not considered the online aspect at all.

Conclusion

Keyword advertising has proved to be a potentially valuable method of online advertising as it has the ability to catch the interested and potential purchasers. However, the law that is applicable to this aspect is not settled and if someone purchases a keyword that is a trademark of a third party it has the risk of infringement.

But it is possible to use a trademark as a keyword without any liability of infringement if the keyword purchaser (a) has given truthful advertisements, (b) undertook preventive steps to avoid confusion between trademark and keyword (c) have avoided a false association between the goods or services advertised and the mark owner.

Author: This blog is written by Ms. Vernita Jain, a passionate blogger & intern at  Aapka Consultant.

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