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Company Formation

hetal shah (cs) (57 Points)

10 February 2011

Dear All,

Person want to incorporate a COmpany where he will contribute 51 % of the capital and other party will contribute 49%.

Person contributing 51% does not want to be held accountable for any non-compliances or violation under any acts applicable in our country. What is an appropriate way to float such COmpany?

Can we have any agreement or any such Clauses in AOA?

Thanks

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11 Replies

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 10 February 2011

Originally posted by : hetal shah
	Dear All, Person want to incorporate a COmpany where he will contribute 51 % of the capital and other party will contribute 49%. Person contributing 51% does not want to be held accountable for any non-compliances or violation under any acts applicable in our country. What is an appropriate way to float such COmpany? Can we have any agreement or any such Clauses in AOA? Thanks

Hi Hetal

In my opinion, the person is only a shareholder want to hold majority of stake in the company. He is not a Director ( I assume).

Directors are accountable for any non-compliances or violations as they run the company (management). The person is only a

shareholder and in my opinion is not subject to any compliances unless he is acting as Director or as such.

Having largest share can entitle him to have name of the company with his name or with any initials as per the request as such

of the person. & I assume this is a pvt ltd company

regards

Santosh Shah.

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 10 February 2011

Agree with santosh. Appoint another person as Director.

nidhigoel89 (Company Secretary ) (594 Points)
Replied 10 February 2011

Hello!

As these two person are holding shares in the company so a shs is nvr held liable for non compliance in Co. If these 2 person are also director in the co then u can pass a general POA in favor of one director and u can specifically mention the responsblity for compliances of differnent laws in favor of other person.

Directors have the general reaponsiblity for non compliance in Co. Bt if he doesnt found to be as officer in default then he can escape his responsiblity for non compliance

Further/Others view are solicited......

Regards

Nidhi

Tanay (CA Final Student) (274 Points)
Replied 10 February 2011

Pehle toh ye decide karlo, Company Private Limited ya Public...

Priya Sharma (Company Secretary & Student.MBA) (998 Points)
Replied 10 February 2011

Dear Tanay

Its a Private co. as it is proposed to be floated with only two subscribers, which is very clear from hetal's question.

Regards

Priya

hetal shah (cs) (57 Points)
Replied 10 February 2011

Thankyou all for your time and replies.

Company is a private limited Company. Even i am exploring law relating to Officer in default but need concrete suggestion as I have to make the same to promoter.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 10 February 2011

Under Companies Act, the shareholders are not held liable for non compliance, they are not Officer in Default.

Just appoint any other person as Director. Your problem would be solved.

Mohammed (CS, Mcom, LLB) (852 Points)
Replied 11 February 2011

Agree with the answer of Santosh!!!!!

CS Taher (CS, LLB) (1237 Points)
Replied 12 February 2011

Agree With Santosh

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 12 February 2011

As per Section 5(e) "Officer who is in default" includes "any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed at act". So if the Board of Directors is a shun and all instructions are given by the majority shareholder, then such a shareholder may come within the definition of "Officer who is in default".