Companis Act Chapter 1 (Introduction of Company)

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? p Define company What are its characteristics?
Ans:
ñp word company is drivd from a Latin word Ǯcomǯ w ic mans wit or

togt r and t word Ǯpanisǯ w ic mans taking brad. So t is mans
company is a group of mrc ants or prsons taking food togt r or
discussing som mattrs.
ñp According to sction 3 of companis act, a company is a company w ic is
formd and rgistrd undr companisǯ act of 1956 and it includs an
isting company.
ñp According to lord justic Lindly, a company is an association of prsons w o
contribut mony or monyǯs wort to a common stock to carry on som
businss and s ar t profit and loss t r from. mony contributd by
t prsons is calld s ar capital and t part of s ar capital to w ic ac
prson is ntitld is a s ar and t prsons w o contribut ar t mmbrs
of t company.
ñp According to lord justic Mars all, company is an artificial intangibl lgal
prson isting only in t ys of law and bcaus it is a mr cration of
law it posssss only t os c aractristics w ic t c artr of its cration
confrs upon it it r prssly or as incidntal to its vry istnc.
ñp According to Hany,ǳ a company is an incorporatd association, an artificial
lgal prson cratd by law aving a sparat lgal ntity, prptual
succssion, limitd liability, common sal and transfrability of s arsǳ.
c cc c

1. p èncorporatd Association
a.p Evry company, w t r public or privat is to b compulsorily
rgistrd undr companis act, 1956.
b. p Aftr incorporation vry company gts COè and t dat on t is COè is
conclusiv (vn if it is wrong). is mans company acquirs a sparat
lgal istnc from t is dat.
c.p Evry association of prsons consisting of mor t an 10 prsons in a
banking businss and mor t an 20 in ordinary businss as to b
compulsorily rgistrd undr som law; ot rwis it will b calld as an
illgal association.
2. p Artificial lgal prson
a.p Company is an artificial lgal ntity bcaus t company dos not tak a
natural birt lik uman bing. èt as no body, no soul, lik uman bings,
it is invisibl, intangibl, it cannot sign lik uman bings using its ands,
it cannot b snt to jail, it cannot tak oat tc.
b. p Company is a lgal prson as it is cratd and ndd by law.
c.p Company is calld a prson bcaus it can ntr into contracts, can
purc as proprty lik uman bings.
3. p Sparat lgal ntity:
a.p Sparat lgal ntity is most important c aractristics of t company.
ntir company law is basd on t is fact only. Onc t company gts
t COè, it acquirs sparat lgal istnc in t ys of law.
b. p Company is now an indpndnt prson, t businss blongs to t
company, company itslf is t ownr of t businss. Nobody can say
t at is t ownr of t businss or proprty of t company.
c.p Company can su or b sud in its own nam.
d.p crditors of t company ar t crditors of t company alon.
y cannot procd against t mmbrs and dirctors of t company
for t ir dus.
.p No prson as any insurabl intrst in t company.
c OF Ǯ OMON V OMON ND cOMP NY D

Mr. S was a s o manufacturr w o incorporatd a company calld
Salomon and Co. Ltd consisting of imslf, is wif, is daug tr and is
four sons. H sold is businss to t is company for t purc as
considration of 30000 pounds. purc as considration was paid by
t company by allotting im 20000 s ars fully paid up of 1 pound ac .
rmaining mmbrs took 1 s ar ac of 1 pound (just to fulfill lgal
rquirmnt). Mr. S was also allottd 10000 dbnturs aving a floating
c arg ovr t assts of t company. Mr. S was t MD of t company
olding majority s ars. Aftr 1 yar, company bcam insolvnt and
winding up startd. At t tim of winding up, statmnt of affair s ows:
Assts 6000 pounds
Liabilitis:
Mr. S as dbntur oldr 10000 pounds
Unscurd crditors 7000 pounds
assts wr running s ort of liabilitis by 11000 pounds.
unscurd crditors fild a cas t at t y s ould b paid first out of assts
as t r is no diffrnc btwn Mr. S and t businss of t company.
y furt r said,ǳ How can on ow to onslf?ǳ

court said t at Mr. S is totally diffrnt from Salomon and Co. Ltd. and
is claim of 10000 pounds will b satisfid first bcaus is t scurd
dbntur oldr of t company.
Conclusion:
us from t abov cas, it is clar t at company is a sparat lgal
corporat prsonality, it is unaffctd by t dat or insolvncy of its
mmbrs and dirctors. No s ar oldr as any insurabl intrst in t
co.
èn mat matical trms:

Company= n+1
W r n dnots no. of mmbrs and 1 for t co. itslf.
4. p Prptual succssion
a.p Co. is a stabl form of organization w ic is unaffctd by t dat or
insolvncy of its mmbrs, tc.
b. p Co. can b compard wit t rivr ams w os watr kps on
c anging (watr mans mmbrs) but t idntity of t rivr rmains
t sam.
c.p èn t cas of ǮMat Supplirs Pvt. Ltd.ǯ, all t mmbrs wr killd by
ydrogn bomb in t mting but t co . continud to ist. Mmbrs
may com, mmbrs may go, co. gos on forvr.
5. p Limitd liability
a.p Gnrally t liability of mmbrs in t co. is limitd dpnding upon t
natur of t co. t at w t r it is limitd by s ars or by guarant.
b. p èn cas of liability limitd by s ars, t liability is limitd to t amount
not paid on t s ars.
For g. A prson as 10 s ars of Rs. 10 and as paid rs. 6 pr s ar. His
rmaining liability will b Rs. 4 pr s ar. H cannot b askd to pay mor
t an t at.
c.p èn cas of t liability limitd by guarant, t liability is limitd to t
amount guarantd by t mmbr to b paid in t vnt of winding up.
( is liability ariss only during winding up.)
d.p liability of t mmbrs may b unlimitd in crtain cass. For g.
i.p U/S 45, w n t no. of mmbrs is rducd blow 7 in public co.
and blow 2 in Pvt. Co. and companis carry on businss for mor
t an 6 mont s, t n vry mmbr is liabl to an unlimitd tnt
for all dbts contractd aftr 6 mont s priod.
ii.p U/S 542, if during winding up it is found t at t businss of t
co. was bing carrid on to dfraud its crditors, t n all t
mmbrs will b liabl to an unlimitd tnt.
6. p Common Sal
a.p Co. is an artificial lgal prson; it canǯt sign lik uman bings.
b. p Common sal is t signatur of t co. wit t nam of t co. ngravd
on it.
c.p Any documnt w ic bars t common sal of t co. and is signd by 2
dirctors of t co. is a lgally binding documnt of a co.
7. p ransfrability of s ars
According to sc. 82 of t companis act, t s ars of a co. ar frly
transfrabl dpnding upon t provisions of t articls.
For g. s ars of t public co. ar frly transfrabl wit out any
rstriction. But s ars in Pvt. Co. ar transfrabl but not as frly as in
public co. bcaus t r may b som rstrictions.
· p plain the concept of Ǯlifting of corporate veilǯ Under wha t circumstances

can this veil be lifted?
Ans:
1. p famous cas of Salomon and Co. ltd. as stablis d t corporat vil of
sparat lgal ntity of t company.
2. p W n t law disrgards t concpt of sparat lgal ntity and pays
rgards to t individual mmbrs b ind t lgal façad, it is calld as
lifting of corporat vil.
3. p corporat vil is liftd to prvnt frauds, misconduct, vasion of ta
liability, prvntion of conomic offncs, prvntion of trading wit alin
nmy and prvntion of violations of statutory ruls.
4. p corporat vil is liftd undr two circumstancs:
Ú p Ú

p

Ú
Ú

5. p Statutory provisions
Following ar som of t ampls undr w ic corporat vil can b liftd
to old t guilty mmbrs and dirctors liabl.
a.p Sction 45 w n no. of mmbrs is rducd blow 7 in public co. and

blow 2 in pvt co. and t co. carris on businss for mor t an 6 mont s;
t corporat vil is liftd in t is cas to find out mmbrs w o ar
partis to t is businss of a company.
b. p W n t r is misrprsntation in t prospctus undr sction 62, t n
t promotrs and dirctors of t company w o ar liabl for t issu of
prospctus can b ld liabl by lifting up of corporat vil.
c.p W n t co. fails to issu s ar crtificat wit in 3 mont s of allotmnt
or 2 mont s of rgistration of transfr undr sction 113, corporat vil is
liftd to find out w y t r is a dlay and by w om.
d.p W n t r is misdscription of nam of t co. on any documnt U/S
147, t n corporat vil is liftd to find out t guilty dirctors.
.p W n U/S 235 and 237, inspctor is appointd to invstigat t affairs of
t co. to prvnt opprssion and mismanagmnt of t co., corporat
vil is liftd to lp t inspctor to find out guilt y dirctors.
f.p U/S 247, w n cntral govt. appoints inspctor to invstigat t
ownrs ip of t co., t corporat vil is liftd to find out w o ar t
ownrs of t co. i.. financially intrstd in t co.
g.p o find out t rlations ip of olding and s ubsidiary co. U/S 202,212-
214, corporat vil is liftd to find out t cos., undr som managmnt
i.. w t r t r ists a rlation of olding and subsidiary co. or not
(bcaus olding co. is a co. controls t managmnt of subsidiary co.
and U/S 212-214 t combind financial position of olding and
subsidiary co. must b dpictd vry yar by olding co.
. p promotrs ar ld prsonally liabl for pr-incorporation contracts
w n t co. dos not ratify aftr incorporation.
i.p dirctors ar ld prsonally liabl for ultra virs torts committd by
t m and corporat vil is liftd in t is to find out guilty dirctors.
j. p W n t co. dos not rturn t s ar application mony U/S 69 or as
pr t SEBè guidlins w n it dos not rciv minimum subscription
amount as pr ruls of 90%wit in 120 days from t dat of issu of
prospctus or wit in 60 days of closur of issu as pr SEBè guidlins.
k.p U/S 542, w n t businss of t co. is carrid on to commit fraud wit
t crditors and it is dtctd during winding up, t corporat vil is
liftd to find out t guilty dirctors and mmbrs.
6. p Judicial intrprtations
lgal cass w ic av actually com bfor t court w r corporat
vil as alrady bn liftd:
a.p Protction of incom ta rvnu:
èf t sparat lgal ntity is usd to vad t ta liability, it can b
disrgardd by t law and t prson can b ld liabl to pay incom
ta liability as ld in t cas of
Dinshaw Manickjee Petit case

èn t is cas Mr. D was a millionair arning ug amount of intrst and
dividnd incom. o vad is ta liability, formd four Pvt. Cos. &
transfrrd is incom to t s cos. & t s cos. rturn t amount to Mr.
D as prtndd loan. èn t is cas, t court liftd t corporat vil of
t s 4 pvt cos. & ld Mr. D liabl for paymnt of incom ta liability
bcaus t only purpos to form t s cos. was to vad t ta liability.
b. p Prvntion of fraud or misconduct:

corporat vil can b liftd w n a company is formd just to commit
fraud or not to prform t lgal obligation i.. misconduct as appnd in
following cass.
ones V ipman
èn t is cas, Lipman ntrd into contract wit Jons for slling a
pic of land to im. Aftr somtim, Lipman c angd is mind and
formd a fak co. consisting of imslf and is club and transfrrd
t pic of land in t nam of t is fak co. W n Jons askd for
land, Lipman rfusd saying t at dos not av pic of land
now, it blongs to t co. Jons fild a cas in court of law against
Lipman. court liftd t vil of fak co. formd, canclld t
transfr dal in favour of t is fak co. & ordrd Lipman for
spcific prformanc of contract wit Jons.
c.p W n fak companis ar formd for committing fraud and som
illgalitis:
DD V PP cONUcON cO D
èn t is cas, on of t dirctors of t co. cratd many fak cos.
consisting of imslf & is family mmbrs just to commit fraud & illgal
t ings. court liftd t vil of t s fak cos. & ld t dirctor liabl.
d.p For dtrmining t tc nical comptnc of t co., t corporat vil is
liftd as appnd in t cas of:
NW HO ON D V UNON OF ND
èn t is cas, t tlcom dpt of Hydrabad invitd tndrs for printing &
binding of tlp on dirctoris covring 50000 tlp on lins. NH Ltd.
along wit rspondnt no.4 applid. tndr was grantd to
rspondnt no. 4. NH Ltd. fild a cas in ig court against union of èndia
saying t at it as tc nical comptnc to do t is job, so t tndr s ould
b grantd to im. ig court rjctd t pla. NH Ltd. furt r fild
t cas in Suprm Court. Suprm Court liftd t corporat vil of
NH Ltd. & found it ad bot èndian & forign collaboration & is tc nically
comptnt to andl t businss. So t tndr s ould b grantd to NH
Ltd. by t tlp on dpt.
.p W n subsidiary co. is usd by t olding co to commit fraud t
corporat vil is liftd by t court as appnd in:
McH ND NPO D V BH N PO
cOPO ON
èn t is cas, t oldr co. or parnt co. mad an application to transport
corporation for granting licns for its v icls but it could not obtain t
licns for its v icls. So it formd a fak subsidiary company & mad an
application for licns in t nam of subsidiary co. transport dpt
fild a cas in t court against t olding co. court liftd t vil of
subsidiary co. & ordrd t transport dpt to cancl t application for
licns bcaus r subsidiary is formd by t parnt co. just to commit
fraud.
f.p Dtrmination of nmy c aractr of t co.:
Co. is an artificial lgal prson. èt can nvr b a frind or nmy but if its
dirctors & s ar oldrs acquir nmy c aractr, t co. acquirs t
nmy c aractr as appnd in t cas of:
D M & cO D V cONNN Y & UBB cO D
èn t is cas t co. was rgistrd in London to sll t ir tyrs and tubs
manufacturd by t Grman. majority s ar oldrs and dirctors
wr Grman. èn 1914, t war brok out btwn Grmany and England.
So t co. acquird nmy c aractr against t ot r co. On co fild a
cas against t ot r co for t rcovry of r trading dbt. court
ld in t is cas t at by lifting t corporat vi l of t cos. it was found
t at bot cos. av bcom alin nmis. So no paymnt of dbt will b,
mad bcaus trading wit an nmy is against public policy.
3 p Write a note on illegal associations

Ans:
Sction 11:
ñp Evry association of prsons consisting of mor t an 10 mmbrs in banking
businss and mor t an 20 mmbrs in ordinary businss carrying som
businss for gain, if not rgistrd will b calld as an illgal association.
ñp Faturs of illgal association
a.p numbr of mmbrs must b mor t an 10 in banking & mor t an
20 in ordinary businss.
b. p businss must b carrid on for som gain bcaus t os associations
w ic do not av t businss for som gain ar not rquird to b
rgistrd vn if t numbr of mmbrs cds 10 or 20. Eg. Rligious
Association, C aritabl Association, tc.
c.p èllgal associations donǯt av any lgal istnc.
i.p y cannot su or can b sud in t court of law.
ii.p y cannot b wound up bcaus t r is not ing to wind up.
iii.p y cannot dissolv bcaus t r is not ing to dissolv.
d.p liability of t mmbrs of illgal association is unlimitd. èf any
dfault is committd by any mmbr, t r is pnalty or fin of Rs 10000.
.p profits of illgal associations ar subjct to incom ta liability.
f.p subsqunt rgistration will not c ang t position of illgal
association wit rgard to its past activitis.
Note: vn if t numbr of mmbrs is rducd subsquntly t illgal

association dos not bcom lgal unlss it is rgistrd undr som law.
X p comment on the statement,ǳ the term body corporate is wider term than
company ǳ Do you agree?
Ans:
abov givn statmnt is absolutly corrct on t basis of t following
discussion:
1. p Acc to sc 34(2), t trm Body Corporat is widr t an t company
bcaus it includs all èndian cos., forign cos., public financial institutions
lik èFCè, èDBè, LèC, Uè, RBè (Companis formd undr spcial act of
parliamnt), Nationalisd banks, tc.
2. p trm body corporat and company ar usd intrc angably bcaus
aftr incorporation or rgistration t co. bcoms a body corporat or
corporation aving prptual succssion, common sal and sparat lgal
ntity.
3. p Acc to sc 2(7), t trm body corporat dos not includ t following,
t oug t y ar includd in t trm company in t sns t at t y can
bcom t mmbr of t company.
a.p Corporation Sol: corporation sol mans govrnor of stat or
Prsidnt of èndia w o njoy corporat status vn if t y ar singl
prsons bcaus of t natur of function t y prform.
b. p Cooprativ socitis
c. p Socitis rgistrd undr Socitis Rgistration Act, 1860.
d.p Any ot r association w ic t CG may notify from tim to tim, not
to b includd in t trm body corporat.

Companis Act Chapter 1 (Introduction of Company)

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Companis Act Chapter 1 (Introduction of Company)

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c

? p Define company What are its characteristics?

ñp word company is drivd from a Latin word Ǯcomǯ w ic mans wit or

c OF Ǯ OMON V OMON ND cOMP NY D

èn mat matical trms:

· p plain the concept of Ǯlifting of corporate veilǯ Under wha t circumstances

a.p Sction 45 w n no. of mmbrs is rducd blow 7 in public co. and

Dinshaw Manickjee Petit case

b. p Prvntion of fraud or misconduct:

3 p Write a note on illegal associations

Note: vn if t numbr of mmbrs is rducd subsquntly t illgal

Vous aimerez peut-être aussi

Companis Act Chapter 1 (Introduction of Company)

Transféré par

Informations du document

Description originale:

Titre original

Copyright

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Partager ce document

Partager ou intégrer le document

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Companis Act Chapter 1 (Introduction of Company)

Transféré par

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Formats disponibles

c 

? p Define company What are its characteristics?

ñp word company is drivd from a Latin word Ǯcomǯ w ic mans wit or

c OF Ǯ OMON V OMON ND cOMP NY D

èn mat matical trms:

· p plain the concept of Ǯlifting of corporate veilǯ Under wha t circumstances

a.p Sction 45 w n no. of mmbrs is rducd blow 7 in public co. and

Dinshaw Manickjee Petit case

b. p Prvntion of fraud or misconduct:

3 p Write a note on illegal associations

Note: vn if t numbr of mmbrs is rducd subsquntly t illgal

Vous aimerez peut-être aussi

c

· p plain the concept of Ǯlifting of corporate veilǯ Under wha t circumstances