CHAPTER 1:
THEORY OF JOINT STOCK COMPANY
INTRODUCTION:
The increased needs of modern industry and commerce could not met by Sole proprietorship or Partnership firms. They T hey were favourable till the trading and industry could be run small scale and high capital was not needed. Some other form of organization was, therefore needed to deliver the goods. After industrial revolution, use of machines increased, production was undertaken on a large scale, and production was undertaken with the t he expectation of high demand. Capital investment was needed much as unit became bigger, resultantly, risk element increased; in these circumstances forms having unlimited liability did not remain favorable. Need for establishing a type of business organization arose which could sustain high risk. JOINT STOCK COMPANY emerged from this. It was the joint stock type of organization or ganization which which facilitated the full utilization of technical and other innovations innovations brought in by the industrial revolution. The joint stock organization was already known when the industrial revolution took place, but it was considered less efficient then the partnership form of organization. Economist like Adam Smith thought that a joint stock company was suitable only for such occupations as could be reduced to a routine or for those t hose fields where monopoly existed. For ordinary business requiring initiative and prompt decisions the joint stock company was not considered suitable. The misgiving has, however, been belied by recent developments. In fact, it ca n be said that the industrial revolution could not have been succeeded so well, had it not been for the company type of organization. The joint stock company was the chariot on which the forces of Industrial Revolution came riding and conquering.
Thus, the company organization grew out of the failings and limitations of the earlier forms of organizations like the proprietorship or the partnership on the one hand, and the highly increased needs of large scale industry in the era following the Industrial Revolution on the other.
MEANING:
According to Indian Company Act 1956, Joint Stock Company is such a form of business organization which is established on the principle of having permanent paid or authorized capital divided into shares of specific amount and only its shareholders can be its members.
CH ARECTERISTICS:
egistration of a company co mpany is compulsory under a) Compulsory registration: R egistration Company Act. Company does not get separate identity without registration. Legal provisions of Company Act have been imposed upon it, which are to be implemented. To secure incorporation, the promoter prepares and file with the
R egistrar egistrar
of Joint Stock Company as the necessary documents have
been compiled with. b) Separate and perpetual existence: Company separate existence from its
members, which leads it to undertake undertake all types of business activities like a person. The company has a continuous existence which is not interrupted by death, insolvency or retirement of any shareholder or director.this is a
characteristic which lends stability and long life to a company as compared to other forms of organization. or ganization. c) Voluntary membership: Company is a voluntary association of persons
who gather with a purpose to earn profit. Members may resign voluntarily. d) Limited liability: since the company has a separate legal existence and is
recognized a s an artificial person existing in the eye of law, its debts are its own and the shareholders cannot be held liable for them t hem under ordinary circumstances. A shareholder is liable to pay only his s hare in the company. If he has paid
R s. s.
50 towards share of R s. s. 100 his liability extends only up to
further R s. s. 50 e) Transfer of shares: As the capital of the company is divided into small
divisions i.e. shares, any member i.e. shareholder can transfer the ownership of his shares easily. Share S hare holder can sell his shares in a stock exchange and any person can purchase p urchase them. f) Common seal: As a company is an artificial person its existence is
expressed through its common seal. This seal exhibits the identity of a company. By stamping the seal on important contracts, documents, and certificates and in day-to-day transactions of company documents and transactions become official. g) Management by representatives: As a company has no physical existence
it is managed by the representatives elected by the share holders. This board of directors handles the management of company on behalf of o f shareholder. It means that ownership and management are separate. co mpany are holding right to vote on the h) Voting per share: Members of company basis of the number of shares that they own.
TYPES OF COMP ANY:
CHARTERED COMPANY
REGISTERED COMPANY
COMPANY CREATED UNDER SPECIAL LAW
CL ASSIFIC TION FROM FROM INCORPOR ATION VIEWPOINT: POINT: ASSIFIC A ATION ATION VIEW
1)
Chartered company: Company incorporated under the special order of
ruler or by charter is known as chartered company. E.g. East India I ndia Company. This type of company cannot be incorporated in India. re gistering under 2) Registered company: Companies incorporated by registering company law are known as registered companies. 3) Company created under special law: Companies incorporated through
special law of Parliament or legislative assembly, e.g. State Trading Corporation.
Types of registered company:
Registered Company Number of memeber viewpoint
Liability viewpoint
Registration viewpoint
Control viewpoint
1) Classification according to number of members viewpoint: a) Private Company: The Company is known as private company which has minimum two and maximum fifty members, the transfer of shares of which is restricted and which has been prohibited to invite public to subscribe for its shares. µPrivate Limited¶ words are inserted at the end of the name of such company. b) Public Company: The Company which is not a private is a public company. There are seven and limitless-unlimited-members in this company. The company is known as public company of which shares can be transferred freely and which can invite public to subscribe for s hares. The (Limited) word has to be inserted at the end of its name.
2) Classification according to liability viewpoint:
a) Company limited by shares: The company is known as company limited by share capital of which members¶ liability is limited by the amount of shares subscribed by shareholders. s hareholders. b) Company limited by guarantee: The company is known as company co mpany limited by guarantee of whose members¶ liability remains limited by the amount of guarantee given by them at the time t ime of its incorporation. The liability to pay the guarantee amount arises at the time of its liquidation. c)
Unlimited
liability: The company is known as unlimited liability company
of whose members¶ liability is unlimited like those of sole proprietorship and partnership firm. If the debt of o f this company becomes more than its assets the personal property of members is affected at the time of its liquidation.
3) Classification according to control viewpoint:
a)
Holding
Company: Holding company means a company which holds 50%
or more shares of o f other company and has the right to nominate majority or all directors. b) Subsidiary Company: The company is a subsidiary s ubsidiary company of which 50% or more shares are held by other company and whose majority or all directors¶ nomination right is vested into the other company. c)
Government
Company: The company is known as the government
company of which at least 51% of share s hare are held by the state government and/or central government or are held by more than one state government. 4) Registration place viewpoint:
a) Indian Company: Indian company is company which is registered re gistered under the Indian Company Actor under any special Act of Indian I ndian Parliament. b)
Foreign
co mpany which is registered Company: Foreign company means a company
in countries other than India. 5)
Deemed
public company:
This company is registered as private. pr ivate. It was considered automatically as public if it fulfills conditions. The provisions for this type of co mpany cease to exist since 2000 A.D.
B ASIC COMP ANY DOCUMENTS:
The memorandum of association:
Memorandum of Association is the constitution of a company. co mpany. Memorandum of Association is a fundamental fundamental document of a company. Basic conditions conditions of establishment es tablishment of a company are included into memorandum of association. Memorandum of Association states the authority of the company and it determines the boundary of authority of the company. co mpany. So, third party relies on the provisions of memorandum of association while entering in to the re lation with the company. Any work done above the preview of memorandum of association is Ultra Vires. Thus, thirs party gets idea of company and its limitations through memorandum of association. It is compulsory to make following provisions in the memorandum of association according to Act:
1) Name
2) R egistered egistered office clause
5) Capital clause
3) Object clause
4) Liability clause
6) Association Association clause
a) Name Clause: the name of the company is mentioned in this clause. The
company is known by the name inserted in this clause and its administration is also run in this name b) Registered Office Clause: The company has to register the address of its
registered office with the Act. So, the
R egistrar egistrar
R egistrar egistrar
within the time-period stipulated by the
and public will get information of the company address.
The address indicated in this should be written in all the documents and correspondence. c) Objects Clause: Information of the objects for which the company has come
into existence and for which the business will be done b the company available through this clause. The objects of company are to be stated very clearly in this clause and clarification has to be made about about the main and a nd the subsidiary objects. d) Liability Clause: What will be the liability of the members of the company is
indicated in this clause. A company with limited liability of shares has to clarify through this clause that he liability of the members is limited up to the shares held by them. co mpany and e) Capital Clause: the information of the authorized capital of the company its division into equity and preference shares is given in this clause. f) Association Clause: Company promoters declare through this clause that they
have established the company on the basis of o f the memorandum of association. This clause states that the minimum seven se ven persons, if the company is public and two if it is private have established the company. These persons make this statement under their signatures.
Articles of Association:
Articles of Association is prepared within the boundaries framed by the Memorandum of Association. The Articles of Association is a secondary s econdary document of Memorandum of Association is made tangible by describing how to implement it in the Articles of Association. Thus, Articles of Association is an internal administrative document. Public company can utilize Articles of Association given as model in the Act (which is given as table A in the Act) The provisions given in Table ± A can be accepted in total or in part. The company has to state that it has accepted provisions of Table ± A in total or in part. Information must be given with regard to the t he value of shares, distribution of shares, qualification shares, installment of shares, share forfeiture, meetings, etc. Due to Articles of Association mutual relations between shareholders and company are established. R esponsibility esponsibility of members towards the company and of the company towards the members is determined through t hrough Articles of Association.
Prospectus:
As we have seen previously, a public company has to publish prospectus or has to register a statement state ment in lieu of prospectus compulsorily while receiving Certificate of Commencement of business. A private company does not collect capital from public so private company does not need to issue prospectus. The public p ublic company which collects the capital will issue prospectus for the company. If I f the public company does not collect from the public, it has to register statement in lieu of prospectus with the company registrar.
The prospectus is to be registered re gistered with the registrar after receiving the certificate of incorporation and before submitting it to the public.
Whoever
is a
director or would become will have to sign the prospectus. The date on which the prospectus is registered should be stated in it. Following information is to be contained in the prospectus according to the Act:
Main objects of company
Number of qualification shares for directors
Names, addresses, qualification of the directors, amount a mount and number of shares held by them.
Name, address of the auditor of the t he company Amount to be paid by the applicant while applying for shares and when allocation of shares takes place
Details of the underwriting agreement
Information pertaining to primary expenses
Information pertaining to minimum subscription
Statement that applying for getting shares under fictitious namd is an offence. Public invests in share capital of the company on the basis of the prospectus. So, if any information is concealed or falsely given intentionally, intentionally, the signatories s ignatories of the prospectus are liable for punishment.
ADV ANT AGES OF A COMP ANY:
Limited Liability: The liability of the shareholders is limited to the amount
of shares held by them even e ven though they are its owners. The personal property of shareholders is not at risk for paying the debts of the t he company at the time of liquidation. So, more and more investors are attracted to shareholders. High
capital: Company is capable of collecting more capital than sole
proprietorship, partnership or co-operative society. Innumerable persons can invest who are small savers and reside in a village of a corner of a country through small denominated shares, so business risk is distributed amongst many persons. Easy
share transfer: Company gets separate personality from its members
through act. The existence of unit is not affected due to the death, insolvency or lunacy of owner as well as by the entry-exit of the members. So long term planning can be framed. Efficient
s hareholders management: The ownership of the company is of shareholders
where as it is managed by elected-nominated elected-nominated representatives. Besides, experts having knowledge-experience can be appointed according to the requirements. So, its management remains efficient in comparision with other private units. Democratic
management: Company is managed by elected directors but
important decisions are taken in Shareholders¶ meeting by majority. Annual General Meeting has the authority to remove the directors. Of, course voting right is according to shares.
Large-scale production: Due to high capital and efficient management the
gains of large-scale production can be obtained in company form. By purchasing and selling on large scale, using modern machines, procuring expert services, having advantages of research company can produce more with less expenses therefore, economic developments of the country gets impetus.
opportunities for people. Social benefits: company creates employment opportunities Some companies render economic econo mic help in developing schools, colleges, dispensaries, playgrounds in local areas. It attracts small s mall savings of society. It helps in improving the standard of living of people. It contributes in enhancing national income and in the economic development of the country.
Tax relief: Companies are liable to pay income-tax as separate legal entities,
at a flat rate fixed by the Finance Act from year to year. For higher incomes, this rate is lower than that chargeable c hargeable in the case of sole traders or partners in partnership firm.
LIMIT ATIONS OF A COMP ANY:
Long and expensive incorporation procedure: Company registration
procedure consumes more time. Some documents are to be prepared with the help of experts. For that high fee is to be paid even to the registrar of companies. Thus, from time and money angles, the incorporation procedure of company is more expensive than sole proprietorship and partnership.
Autocratic management: The authority of shareholders is on paper o nly.
Certain persons are taking control over management management and sustain it by
groupism and then manage the company high-handedly. Small investors are careless in attending general meeting. Sometimes, managers managers use assets as sets finance of the company for personal perso nal benefits.
Observance of law: Company is a creation of law. During and after
incorporation many documents are to be submitted to the registrar. Accounts are to be published. If any a ny mistake occurs in them, penalty is to be imposed, due to this management loses dynamism. Delay
in decision making: Company cannot take prompt decisions as in
case of sole proprietorship or partnership. Policy P olicy decisions in general meeting and important decisions in board of directors meeting are to be taken by majority. Time is wasted in calling the meetings and in discussions, so decisions are taken belatedly. Difficulty
in keeping secrets in tact: The accounts of the company, the
proceedings of the meeting and auxiliary information are to be published according to the law. So, it becomes difficult to maintain business secrets, possibility of misusing this information by the competitors is always there.
Absence of personal interest: Even though the shareholders of the
company are owners they do not manage it. Directors and other experts, administrative officers are managing the company, so it is natural that that do not have as much personal interest as the owners.
Conclusion: From the above discussion of the merits and drawbacks of the
corporate form of organization, it may be concluded that the advantages of this form of organization outnumber its weaknesses. Most of the evils enumerated above arise either from management or from the misuse of this t his otherwise desirable form of organization. organization. It is also clear that despite despite its weaknesses the company company form of organization is best suited to those lines of business entity which require huge
capital outlay and maximum stability. For those lines of business that call for prompt decisions, personal interest and initiative on the part of the proprietor or proprietors and do not require very large investment for long periods, individual proprietorship and partnership will generally be more suitable. In fact it is this which accounts for the fact that these forms of organizations co ± exist with the company organization even though the latter is undoubtedly superior to them.
CHAPTER 2: ABOUT THE COMPANY
NAME OF THE COMPANY: ADANI ENTERPRISES LTD
.
COMP ANY HISTORY: 1993:
The Company was incorporated on 2nd March; by conversion of Partnership firm namely M/s. Adani
Exports
into a limited limited company. company. The
Company was promoted by Shri Gautam S. Adani and Rajesh S. Adani. It was engaged in the business of exporting frozen foods, dyes and intermediates, plastic products, agricultural products etc. to about 28 countries all over the world.
1994:
Adani Management Consultancy Services Pvt. Ltd. was amalgam a malgamated ated with the company.
1995:
AMCPL entered into Amalgamation with AEL, a group company of Adani Group in order to achieve higher economies of scale. s cale.
1997:
Eastern Generation, has signed a memorandum of understanding (MoU) with Adani Exports Limited to jointly develop, own and operate coal-fired power projects in the country. The R s 1,600 crore Adani Exports Limited has decided to enter into a joint venture with the Gujarat government to build a mega port at Mundra in Kutch district. In mid-October, Adani signed a letter of intent with the Gujarat government to develop a port and set up a 3,000 hectare industrial park.
Adani Global Limited was incorporated as a Company's wholly owned subsidiary in Mauritius upon receipt of necessary approvals from t he
eserve R eserve
Bank
of India and Government of India for the purpose of Direct IInvestment. nvestment.
1998:
Adani Exports Ltd, the
s. R s.
1,700-crore trading house, has incorporated
Adani Eastern Generation Company Ltd (AEGCL), a 50 :50 joint venture company with the UK power maintenance giant - Eastern Generation. The R s.340 s.340 crore project is promoted by Adani Exports E xports Ltd on the basis of the build-own-operate-transfer (BOOT) format. The concession pact has been signed for 30 years from the t he date of commissioning commiss ioning.. The Adani port will be the second private sector port in the country after
Gujarat
Pipapav Port Ltd.
1999:
Adani Exports and
Wilmar
Trading Pte signed a memorandum to form a
50:50 joint venture company. company. The equity base of the the company named Adani Wilmar
is million. A joint venture between Gujarat Port Infrastructure Development
Corporation and Adani Port is operational at Mundra in Gujarat since October
Company received
GCC (Gujarat
Chamber of Commerce and
Industry) Export Appreciation Award for the year
1997 -98
commendable performance in merchandise exports from Commerce Minister Shri Ramakrishna
Hegde
in June.
in recognition of
Honorable Union
2000:
Adani Exports, one of India's largest trading houses, has entered t he packaged edible oil market with the launch of its new brand `Fortune' in Jaipur. The Company received Texprocil Silver Trophy for outstanding export performance in Fabrics amongst top exporters (Merchant) for the year 1998-99.
The Company has entered into an agreement with both National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) to facilitate the shareholders of the t he Company to avail demat facility.
2003:
Shanxi Corporation ties up with Adani Exports Ltd for providing 1-1.5m tonnes of coal in India.
THE AD ANI GROUP:
Founded in 1988 the Adani Group has grown from being a trading house to a diversified and dynamic business group with interests from infrastructural development to FMCGs. A leader in international trading and infrastructure development, the Adani Group is engaged in a continuous Endeavour to maximize potentialities by
synergizing the multiple businesses of the Group creating optimum business model. The Group has made foray into high growth sector like Power, Infrastructure, Global Trading, Logistics, and Energy and is recognized for creating benchmarks for others to follow«
We
are the operator of largest private port in India,
the developer of largest multiproduct SEZ in India,
We
We
are
have the largest edible oil
refining capacity in India, and we are one o ne of the largest trading houses in India. The Adani Group, despite a humble beginning in 1988, is one of the fastest growing professionally owned enterprises in India and in the global arena. The flagship company, Adani Enterprises Ltd. (formerly known as Adani Exports Ltd.), was established by Mr. Gautam S Adani in 1988 as a partnership firm with a seed capital of R s. s. 5 lacs. An entrepreneurial vision coupled with lofty ambitions and hard work set the pace for the growth of the company co mpany.. Adherence to world-class quality standards and a customer centric approach has helped the Adani Group touch revenues of IN R 180 billion (as on March 31, 2007.) The journey from a being a India¶s most trusted trading house to a diversified conglomerate is fast, yet memorable. Today, the Adani business portfolio is a diverse, yet profitable assortment of Edible Oil, Logistics, Power Generation, Coal, Oil and Gas Exploration E xploration,, Gas distribution,
eal R eal
Estate, Ports, Special Economic
Zones and IT enabled services. Its growth has been organic leading to a synergy among its business units, making them more productive and competitive together. together. The group is committed to constantly deliver good returns to its stakeholders and convert partnerships into winning combination.
BUSINESS DESCRIPTION:
The Group's principal activity is to export agricultural commodities, textiles, gems and jewellery and fertilizer and raw materials. The Group operates in two segments namely Trading and Others. Agricultural commodities like wheat, rice, soya bean meal, castor oil, sugar s ugar and pulses are exported to Middle M iddle East and South East Asia. Textiles include products like cotton grey, knitted fabrics, bed sheets and raw silk. The markets for these products include China, Israel, Slovenia and Africa. The Group exports cut and polished diamonds to Dubai and European countries. Fertilizer and
R aw aw
Materials include export of Sulphur and Ammonium
Nitrate. The Group also trades in coal, power, petroleum products trading and city gas distribution d istribution..
MAN AGEMENT AD ANI ENTERPRISE:
KEY EXECUTIVES ± ADANI ENTE R PR IS IS LTD.:
R ajesh ajesh
S. Adani
Name
Managing Director Directo r
Gautam S.Adani
Chairman/Chair Chairman/Chair Person
Devang Desai Desa i
Chief Financial Financia l Officer Office r
Parthiv Parikh
Assistant Company Secretary
BOAR D OF DIR ECTO ECTOR S:
R ajesh ajesh
Gautam S. Adani
Vasant Adani
Jay shah
Pravin shah
Shah
Yoshihiro Miwa
Anil Ahuja
Tatsuo Fuke
S. Adani
EXECUTIVE COMMITTEE:
COMMITTEE NAME
CHAIR PERSON
Audit committee
Jay H. Shah
Compensation committee
Pravin P. Shah
Corporate governance committee
Jay H. Shah
COMP ANIES OF AD ANI ENTERPRIS:
AD ANI ENTERPRIS: COMP ANRISION WITH
COMPETITORS
Last price Market
PTC Adani enterprise India (R s. s. (Rs. Cr.) Cr.) 101.85 710.00 17560.73
STC India (R s. s. Cr.)
UB holdings (R s. s. Cr.) 219.95
Sical logistics (R s. s. Cr.) 61.45
Surana corp (R s. s. Cr.) 35.50
Vishal retail (R s. s. Cr.) 60.35
20.00
1469.67
242.86
77.60
135.18
57.47
6532.79 18786.65 325.63
474.52
2285.34 1323.23 0.55
90.80
43.84
5.46
25.44
-94.49
26.22
2350.57
949.82
348.38
927.49
36.76
312.50
2995.25 1875.00
JIK industries (R s. s. Cr.)
capital 11575.05 Sales turnover Net 326.42 profit 4849.82 Total assets
81.34
1536.53 2947.61
Source: www.adanigroup.in
SUBSIDI ARY COMP ANIES OF AD ANI:
To drive its business globally, your Company has 29 subsidiary s ubsidiary companies across the globe as per details given here in below :
- Real Estate: 1. Adani Infrastructure and Developers Pvt. Ltd. 2. Adani Estates Pvt. Ltd. 3. Swayam R ealtors ealtors and Traders Ltd. 4. Columbia Chrome (India) Pvt. Ltd. 5. Shantigram Estate Management Management Pvt. Ltd. 6. Adani Land Developers Develope rs Pvt. Ltd. 7. Adani Developers Pvt. Ltd. 8. Adani Landscapes Pvt. Ltd. (Became subsidiary w.e.f. 27th September, 2007) 9. Adani Mundra SEZ Infrastructure Infrastructure Pvt. Ltd. Ltd. (Became subsidiary w.e.f. 1st February, 2008) 10. Miraj Impex Pvt. Ltd. Ltd. (Became subsidiary w.e.f. 15th October, 2007)
- Agro: 11. Adani Agri Logistics Ltd. 12. Adani Agri Fresh Ltd.
- Energy: - Power: 13. Adani Power Ltd. Ltd. 14. Adani Power Maharashtra Ltd. (Became subsidiary w.e.f. 23d July, 2007) 15. Adani Power R ajasthan ajasthan Ltd. (Became subsidiary w.e.f. 10th March, 2008) 16. Adani Power Dahej Ltd. (Became subsidiary w.e.f. 15th December, 2007)
- Coal: 17. Adani Global Pte. Ltd., Singapore. (Subsidiary of Adani Global Ltd., Mauritius) 18. PT Adani Global, Indonesia (Subsidiary of Adani Global Pte. Ltd., Singapore) 19. Parsa Kente Kente Collieries Ltd. (Became subsidiary w.e.f. 16th October, 2007) 20. Adani Mining Pvt Ltd. (Became subsidiary w.e.f. 31st August, 2007)
- Oil and Gas: 21. Adani Energy Energ y Ltd. (Became subsidiary w.e.f. 21st June, J une, 2007) 22. Adani Welspun Exploration Ltd. (Became subsidiary w.e.f. 4th August, 2007)
- Metals, Minerals and Scrap: 23. Vyom Tradelinks Tradelin ks Pvt. Ltd. Ltd. 24. Adani Global FZE, Dubai (Subsidiary of Adani Global Ltd., Mauritius) 25. Adani Virginia Virgin ia Inc, USA (Subsidiary of Adani Global FZE, Dubai)
- Ship Owning and Chartering 26. Adani Shipping Shippi ng Pte. Ltd, Singapore. (Subsidiary of Adani Global Ltd., Mauritius) 27. Libra Shipping Pte Ltd, Singapore. (Subsidiary of Adani Global Ltd., Mauritius)
- Others - Holding Companies 28. Adani
Habitats
Pvt. Ltd.
29. Adani Global Ltd., Mauritius
