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Small Company Definition Thresholds

Topic: Companies Act, 2013Chapter: Chapter 1

\begin{cases} \text{Paid-up Share Capital} \le \text{INR 4 Crores} \ \text{Turnover} \le \text{INR 40 Crores} \end{cases}

A company is classified as a 'Small Company' if it meets both of these conditions. These thresholds are subject to change by government notification. This classification offers certain exemptions and reduced compliance burdens under the Companies Act, 2013. It is crucial for determining applicability of various provisions.

One Person Company (OPC) Thresholds for Conversion

Topic: Companies Act, 2013Chapter: Chapter 1

\begin{cases} \text{Paid-up Share Capital} > \text{INR 50 Lakhs} \ \text{Average Annual Turnover of 3 preceding years} > \text{INR 2 Crores} \end{cases}

An OPC must mandatorily convert into a public or private company if its paid-up share capital exceeds INR 50 Lakhs OR its average annual turnover during the immediately preceding three consecutive financial years exceeds INR 2 Crores. Meeting either of these conditions triggers the conversion requirement, indicating that the company has outgrown the OPC structure.

Ordinary Resolution (OR) Voting Threshold

Topic: Companies Act, 2013Chapter: Chapter 1
Votes in favour>Votes against\text{Votes in favour} > \text{Votes against}
An Ordinary Resolution is passed when the number of votes cast in favour of the resolution exceeds the number of votes cast against the resolution, whether on a show of hands or on a poll. This is typically used for routine business matters that do not require a higher degree of shareholder consensus.

Special Resolution (SR) Voting Threshold

Topic: Companies Act, 2013Chapter: Chapter 1
Votes in favour≥3×Votes against\text{Votes in favour} \ge 3 \times \text{Votes against}
A Special Resolution is passed when the votes cast in favour of the resolution are not less than three times the number of votes, if any, cast against the resolution. This higher threshold is required for significant decisions, such as altering the Memorandum or Articles of Association, changing the company's name, or reducing share capital, indicating a need for substantial shareholder approval.

Quorum for Public Company General Meeting

Topic: Companies Act, 2013Chapter: Chapter 1

\begin{cases} 5 \text{ members personally present} & \text{if members } \le 1000 \ 15 \text{ members personally present} & \text{if } 1001 \le \text{members } \le 5000 \ 30 \text{ members personally present} & \text{if members } > 5000 \end{cases}

The quorum is the minimum number of members required to be personally present at a general meeting for it to be validly held. If the required quorum is not present within half an hour from the time appointed for holding a meeting, the meeting stands adjourned or cancelled as per the Articles of Association or Act's provisions. This ensures that decisions are made by a sufficiently representative group of shareholders.

Damages for Non-Delivery (Seller's Breach)

Topic: Sale of Goods ActChapter: Chapter 1
Damages=Market Price at date of breach−Contract Price\text{Damages} = \text{Market Price at date of breach} - \text{Contract Price}
This formula is applied when the seller wrongfully neglects or refuses to deliver the goods to the buyer. As per Section 57 of the Sale of Goods Act, if there is an available market for the goods, the measure of damages is the difference between the market price at the time when they ought to have been delivered (or at the time of refusal if no time was fixed) and the contract price. This aims to put the buyer in the position they would have been in had the contract been performed.

Damages for Non-Acceptance (Buyer's Breach)

Topic: Sale of Goods ActChapter: Chapter 1
Damages=Contract Price−Market Price at date of breach\text{Damages} = \text{Contract Price} - \text{Market Price at date of breach}
This formula is used when the buyer wrongfully neglects or refuses to accept and pay for the goods. According to Section 56 of the Sale of Goods Act, if there is an available market for the goods, the measure of damages is the difference between the contract price and the market price at the time when the goods ought to have been accepted (or at the time of refusal if no time was fixed). This compensates the seller for the loss incurred due to the buyer's breach.

Damages for Breach of Warranty of Quality

Topic: Sale of Goods ActChapter: Chapter 1
Damages=Value of goods as warranted−Value of goods delivered\text{Damages} = \text{Value of goods as warranted} - \text{Value of goods delivered}
This formula is applied to calculate damages when there is a breach of warranty, particularly a warranty of quality. As per Section 59 of the Sale of Goods Act, the measure of damages is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty. This aims to compensate the buyer for receiving goods of inferior quality than promised.

Formation of a Valid Contract

Topic: Overview of Business Laws in IndiaChapter: Chapter 1
Offer+Acceptance+Intention to Create Legal Relationship+Lawful Consideration+Lawful Object+Free Consent+Capacity of Parties+Not Expressly Declared Void=Valid Contract\text{Offer} + \text{Acceptance} + \text{Intention to Create Legal Relationship} + \text{Lawful Consideration} + \text{Lawful Object} + \text{Free Consent} + \text{Capacity of Parties} + \text{Not Expressly Declared Void} = \text{Valid Contract}
This 'formula' outlines the essential elements that must be present for an agreement to be legally enforceable as a valid contract under the Indian Contract Act, 1872. Each component is a prerequisite for enforceability.

Age of Majority (Capacity to Contract)

Topic: Overview of Business Laws in IndiaChapter: Chapter 1
Age≥18 years\text{Age} \geq 18 \text{ years}
This rule defines the minimum age at which an individual is considered competent to enter into a contract in India, as per the Indian Majority Act, 1875. A minor's agreement is generally void ab initio.

Maximum Number of Partners in a Partnership Firm

Topic: Overview of Business Laws in IndiaChapter: Chapter 1
Non-banking Business: Number of Partners ≤50Banking Business: Number of Partners ≤10\text{Non-banking Business: Number of Partners } \leq 50 \\ \text{Banking Business: Number of Partners } \leq 10
This 'formula' specifies the statutory limit on the number of partners in a partnership firm. These limits are prescribed under Section 464 of the Companies Act, 2013, read with Rule 10 of the Companies (Miscellaneous) Rules, 2014, impacting firms formed after 2014.

Minimum Members for Company Formation

Topic: Overview of Business Laws in IndiaChapter: Chapter 1
One Person Company (OPC): 1 MemberPrivate Company: 2 MembersPublic Company: 7 Members\text{One Person Company (OPC): 1 Member} \\ \text{Private Company: 2 Members} \\ \text{Public Company: 7 Members}
This rule specifies the minimum number of individuals required to incorporate different types of companies under the Companies Act, 2013. Adherence to these minimums is crucial for legal formation and continued existence.

General Penalty Structure (Illustrative)

Topic: Overview of Business Laws in IndiaChapter: Chapter 1
Penalty=Base Amount+(Daily Fine Rate×Number of Days of Default)\text{Penalty} = \text{Base Amount} + (\text{Daily Fine Rate} \times \text{Number of Days of Default})
This illustrative 'formula' represents a common structure for calculating penalties for non-compliance with statutory provisions across various business laws. Penalties often involve a fixed base amount and an additional daily fine for each day the default continues, up to a maximum limit.

Default Profit/Loss Sharing Ratio (in absence of agreement)

Topic: Indian Partnership ActChapter: Chapter 1
Partner’s Share=Total Profit/LossNumber of Partners\text{Partner's Share} = \frac{\text{Total Profit/Loss}}{\text{Number of Partners}}
As per Section 13(b) of the Indian Partnership Act, if the partnership deed does not specify the profit and loss sharing ratio, partners are entitled to share profits and losses equally. This formula applies when no specific ratio is agreed upon.

Default Rule for Interest on Capital (in absence of agreement)

Topic: Indian Partnership ActChapter: Chapter 1
Interest on Capital=0\text{Interest on Capital} = 0
As per Section 13(c) of the Indian Partnership Act, a partner is not entitled to interest on capital subscribed by him if there is no express agreement in the partnership deed. Interest on capital is only allowed if explicitly provided for in the partnership deed.

Default Rule for Interest on Drawings (in absence of agreement)

Topic: Indian Partnership ActChapter: Chapter 1
Interest on Drawings=0\text{Interest on Drawings} = 0
As per Section 13(d) of the Indian Partnership Act, the firm is not entitled to charge interest on the drawings made by any partner if there is no express agreement in the partnership deed. Interest on drawings can only be charged if explicitly agreed upon in the partnership deed.

Default Rule for Partner's Remuneration (in absence of agreement)

Topic: Indian Partnership ActChapter: Chapter 1
Partner’s Salary/Commission=0\text{Partner's Salary/Commission} = 0
As per Section 13(a) of the Indian Partnership Act, a partner is not entitled to receive any remuneration (salary or commission) for taking part in the conduct of the business if there is no express agreement in the partnership deed. Remuneration is only payable if specifically provided for in the partnership deed.

Order of Application of Assets on Dissolution (Section 48)

Topic: Indian Partnership ActChapter: Chapter 1

\text{Assets Applied (in order)} = \begin{cases} \text{1. Payment of firm's debts to third parties} \ \text{2. Payment to each partner rateably what is due to him on account of advances (loans)} \ \text{3. Payment to each partner rateably what is due to him on account of capital} \ \text{4. The residue, if any, divided among the partners in the proportion in which they were entitled to share profits} \end{cases}

Section 48 of the Indian Partnership Act, 1932, prescribes the specific statutory order in which the assets of the firm, including any contributions from partners to make up deficiencies of capital, are to be applied for payment of liabilities upon dissolution. This sequence is crucial for the financial settlement of the firm.
Chapter 1 Formulas — CA Foundation | Kartavvya