The Basics of Company Law (book) By : FS Mahdi

Book Reference : 

The Basics of Company Law

 FS Mahdi

University of Dhaka.

Part 2

Key Distictions 

DISTINCTION BETWEEN ‘COMPANY’ AND ‘PARTNERSHIP’

S.N.	Company	Partnership
1	It is created by registration under the Companies Act i.e., it comes into existence by operation of law.	It is created by mutual agreement of the partners i.e., it comes into existence by acts of partners (mutual agreement) not by operation of law.
2	It is regulated by the provisions of the Companies Act, 1994.	It is regulated or governed by the Partnership Act, 1932.
3	It is a separate legal entity distinct from its members.	It has no separate legal entity distinct from its members (partners). The firm and the partners are treated the same entity in the eyes of law.
4	The minimum number of members is 2 (in case of a private company) or 7 (in case of a public company).	The minimum number of partners is 2.
5	The maximum number of members must not exceed 50 in case of a private company but no such maximum limit is fixed in the case of a public company.	The maximum number of members in the case of a firm is fixed at 10 for banking business and at 20 for any other business.
6 7	It must be registered with the Registrar of Joint Stock Company (RJSC). The members’ liability is limited i.e., their liability is limited to the unpaid nominal value of shares held by them and they are not personally liable for the debts of the company.	Registration is not compulsory but optional. The partners’ liability is unlimited i.e., they are personally liable for the debts of the firm.
8	The general powers of the company are governed by its memorandum, and articles of association.	The general powers of the firm are governed by the mutual agreement of the partners.
9	There is no agency relationship between the company and its members and also between the members themselves. Thus, a member is not an agent of the company or of other members.	There is an agency relationship between the firm and its members (partners) and also between the partners themselves.
10	It exists irrespective of the death, retirement or insolvency of a member.	It is dissolved by the death, retirement or insolvency of a partner, unless there is a contract to the contrary.

DISTINCTION BETWEEN ‘PRIVATE COMPANY’ AND ‘PUBLIC COMPANY’

S.N.	Private Company	Public Company
1	The minimum number of members is 2.	The minimum number of members is 7.
2	The maximum number of members must not exceed 50. [ Sec. 2 (q)(iii)]	No such maximum limit is fixed.
3	The right to transfer its shares is restricted.  [ Sec. 2 (q)(i)]	The right to transfer its shares is not restricted i.e., the shares are freely transferable.
4	Any invitation to the general public to subscribe for its shares or debentures is prohibited. [ Sec. 2 (q)(ii)]	Any invitation to the general public to subscribe for its shares or debentures is allowed.
5	It is not required to keep an index of its member. [Sec. 35]	It is required to keep an index of its members if the number of members exceeds 50. [Sec. 35]
6	It is not required to hold a statutory meeting. [Sec. 83]	It is required to hold a statutory meeting. [Sec. 83]
7	The quorum required for holding a meeting is of two members i.e., there must be at least two members personally present for holding the company meeting. [Sec. 85]	The quorum required for holding a meeting is of five members i.e., there must be at least five members personally present for holding the company meeting. [Sec. 85]
8	The minimum number of directors is 2. [Sec. 90]	The minimum number of directors is 3. [Sec. 90]
9	A director may cast his vote even if he is interested in the subject-matter. [Sec. 131 (3)]	A director cannot cast his vote even if he is interested in the subject-matter. [Sec. 131]
10	It can commence business immediately after its registration. [Sec. 150]	It cannot do so. It is required to obtain a certificate to commence business from the Registrar of Companies. [Sec. 150]

 (IV) DISTINCTION BETWEEN ‘MEMORANDUM’ AND ‘ARTICLES OF ASSOCIATION’

S.N.	Memorandum of Association	Articles of Association
1	It contains the objects and powers of the company.	it contains rules and regulations for internal management or affairs of the company
2	It is the supreme document of the company.	It is subordinate to the memorandum of association.
3	In the case of inconsistency on any point, the memorandum of association gets priority over the articles of association.	It never gets priority over the memorandum of association.
4	It regulates the relationship of the company with the outsiders or third parties.	It regulates the relationship of the company with the members or shareholders.
5	It cannot be easily altered	It can be easily altered.
6	It is a mandatory document for every company.	It is not necessary for every company. Because, a public company limited by share may adopt the regulations of Schedule I of the Companies Act as the substitute to the articles of association.
7	Any act which is ultra vires (beyond powers) the memorandum, is wholly void and cannot be ratified by the shareholders.	Any act which is ultra vires the articles, is merely irregular not void and can be ratified by the shareholders only if it is within the scope of memorandum of association.

DISTINCTION BETWEEN ‘SHARE’AND ‘STOCK’

S.N.	Share	Stock
1	It is the distinct smaller part of the total share capital of the company.	It is the aggregate of fully paid up shares legally consolidated. In other words, it is a set of shares put together in a bundle.
2	It has a nominal value.	It has no nominal value.
3	It may be fully or partly paid up.	It is always fully paid up.
4	It cannot be transferred in small fraction rather it is always transferred as a whole.	It can be transferred in any fraction.
5	It can be issued directly to the public.	It cannot be issued directly to the public.
6	All the shares are of equal amounts.	It may be of unequal amount.
7	All the shares are numbered distinctly.	It is not numbered.
8	It is always registered.	It may be registered or unregistered.

DISTINCTION BETWEEN ‘SHARE’ AND ‘DIBENTURE’

S.N.	Share	Debenture
1	The holders of shares are the owners of the company.	The holders of debentures are the creditors of the company.
2	Share represents ownership of the shareholders in the company.	It represents the acknowledgement of debts of the company.
3	Income earned on shares is termed as dividend.	Income earned on debenture is termed as interest.
4	Rate of dividend on shares is not fixed.	Rate of interest on debentures is fixed.
5	Shares can never be converted into debentures.	Debentures can be converted into shares.
6	The holders of shares have right to participate in affairs of company.	The holders of debenture cannot conduct the affairs of the company neither directly not indirectly.
7	The holders of shares have voting rights.	The holders of debenture have no voting rights.
8	Shares are not secured as they bear maximum risk.	Debentures are normally secured by fixed or floating charge.
9	No trust deed is executed in case of share.	When the debentures are issued to the public, trust deed must be executed.
10	In the case of winding up, shares are repaid after the payment of all the liabilities.	Debentures get priority over shares, and so they are repaid before shares.