Ø INTER CORPORATE LAWS AND OTHER LAWS LECTURE 2
COMPANY-MEANING AND ITS FEATURES
COMPANY-MEANING AND ITS FEATURES
Ø
MEANING OF COMPANY
•
NO STRICT OR TECHNICAL OR LEGAL MEANING. A COMPANY IN THE NORMAL SENSE MEANS
AN ASSOCIATION OF PERSONS UNITED FOR A COMMON OBJECT.
•
AN INCORPORATED COMPANY OR A CORPORATION IS A SINGLE PERSON DIFFERENT FROM
THE INDIVIDUALS CONSTITUTING IT. CO IS A CORPORATE BODY AND LEGAL PERSON HAVING
STATUS AND PERSONALITY DIFFERENT FROM ITS MEMBERS.
•
DEFINITION OF COMPANY
•
SECTION 2(10) OF THE COMPANIES ACT 1956 STATES
THAT COMPANY MEANS A COMPANY AS DEFINED SECTION 3. SECTION 3(1)(I) STATES THAT
COMPANY MEANS A COMPANY FORMED AND REGISTERED UNDER THIS ACT OR AN EXISTING
COMPANY. AN EXISTING COMPANY MEANS A COMPANY FORMED AND REGISTERED UNDER ANY OF
THE FORMER COMPANIES ACT.
•
SEC 2(20 ) OF THE COMPANIES ACT PROVIDES THAT”
COMPANY MEANS A COMPANY INCORPORATED UNDER THIS ACT OR UNDER ANY PREVIOUS
COMPANY LAW
• LORD JUSTICE LINDLEY HAS GIVEN COMPREHENSIVE
DEFINITION:-A COMPANY IS AN ASSOCIATION OF MANY PERSONS
A.
WHO CONTRIBUTED MONEY OR MONEY’S WORTH
B.
TO A COMMON STOCK AND EMPLOYED FOR A COMMON
PURPOSE
C.
THE COMMON STOCK SO CONTRIBUTED IS DENOTED IN
MONEY AND IS CAPITAL OF THE COMPANY
D.
THE PERSONS WHO CONTRIBUTE IT OR TO WHOM IT
BELONGS ARE MEMBERS
E.
THE PROPORTION OF CAPITAL TO WHICH EACH MEMBER IS ENTITLED TO HIS SHARE
F.
SHARES ARE ALWAYS TRANSFERABLE ALTHOUGH THE
RIGHT TO TRANSFER IS MORE OR LESS RESTRICTED
Ø
NATURE OF THE COMPANY
1.
COMPANY IS NOT A CITIZEN
2.
NATIONALITY. DOMICILE AND RESIDENCE OF A COMPANY
3.
COMPANY IS A CORPORATION OR BODY CORPORATE
- CORPORATE SOLE
- CORPORATION
- CORPORATE AGGREGATE
•
COMPANY IS NOT A CITIZEN:- CONSTITUTION OF INDIA AND CITIZENSHIP ACT
1955 DO NOT CONSIDER A COMPANY AS A CITIZEN THOUGH IT IS LEGAL PERSON.
•
STATE TRADE CORPORATION OF INDIA LTD VS CTO,THE
STATE TRADING CORPORATION OF INDIA IS INCORPORATED AS A PVT COMPANY. ALL THE
SHARES ARE HELD BY THE PRESIDENT OF INDIA AND TWO SECRETARIES IN THEIR OFFICIAL
CAPACITIES. BUT SUPREME COURT HELD THAT NEITHER THE PROVISIONS OF CONSTITUTION
,PART 2 OF THE CITIZENSHIP DOES NOT REGARD ANY PERSON EXCEPT NATURAL PERSON RECOGNIZED AS CITIZEN
OF COUNTRY. AND IN STATE OF GUJARAT V SHRI AMBICA MILLS LTD,HELD THAT A
CORPORATION HAS NO FUNDAMENTAL RIGHTS.
A.
COMPANY IS NOT CITIZEN
B.
BUT IT PERSON IN THE EYES OF LAW
C.
CAN CLAIM THE PROTECTION OF FUNDAMENTAL RIGHTS AS GUARANTEED TO ALL PERSONS
BUT CAN NOT CLAIM THE PROTECTION OF
FUNDAMENTAL RIGHTS WHICH ARE AVAILABLE ONLY TO CITIZENS.
D.
AMPLE PROTECTION UNDER CONSTITUTION OF INDIA
E.
NO DISCRIMINATION, NO TAXATION WITHOUT AUTHORITY OF LAW, NO CURBS INVOLVING
FREEDOM OF TRADE, COMMERCE AND NO COMPULSORY ACQUISITION OF PROPERTY.
•
A COMPANY DOES HAVE A NATIONALITY, DOMICILE AND
RESIDENCE
1.
A COMPANY INCORPORATED AN PARTICULAR COUNTRY HAS
THE NATIONALITY OF THAT COUNTRY.
2.
THE RESIDENCE OF A COMPANY IS AT PLACE WHERE
THE REGISTERED OFFICE IS SITUATED
•
IN COMPANIES ACT,1956,
THE TERM CORPORATE AND BODY CORPORATE ARE USED FOR THE COMPANY.
·
SECTION 2(7) EXPLAINED BODY CORPORATE OR CORPORATION INCLUDE A COMPANY
INCORPORATED OUTSIDE INDIA BUT DOES NOT INCLUDE:_
a)
A CO-OPERATIVE SOCIETY REGISTERED
UNDER ANY LAW RELATING TO COOPERATIVE SOCIETIES AND
b)
ANY OTHER BODY CORPORATE ( NOT BEING A COMPANY AS DEFINED IN THIS ACT) WHICH
THE CENTRAL GOVERNMENT MAY BY NOTIFICATION SPECIFY IN THIS BEHALF.
•
A COMPANY IS A CORPORATE OR BODY CORPORATE
•
SECTION 2(11)
OF THE COMPANIES ACT 2013,EXPLAINED BODY CORPORATE OR CORPORATION
INCLUDE A COMPANY INCORPORATED OUTSIDE INDIA BUT DOES NOT INCLUDE:_
- A CO-OPERATIVE SOCIETY
REGISTERED UNDER ANY LAW RELATING TO COOPERATIVE SOCIETIES AND
- ANY OTHER BODY CORPORATE ( NOT BEING A COMPANY AS DEFINED IN THIS ACT)
WHICH THE CENTRAL GOVERNMENT MAY BY NOTIFICATION SPECIFY IN THIS BEHALF.
A CORPORATE
SOLE HAVE BEEN DELETED FROM THE DEFINITION OF COMPANIES ACT 1956 AS THE NEW ACT
CONSIDERED A ONE PERSON COMPANY
Ø
FEATURES OF A COMPANY
- INCORPORATED ASSOCIATION: THE COMPANY COMES INTO EXISTENCE
- SEPARATE LEGAL ENTITY:-INDEPENDENT CORPORATE EXISTENCE
- THE LEADING CASE:- SALOMAN V SALOMAN AND CO LTD(1897)
- SALOMAN HAD A BOOT BUSINESS. HE SOLD HIS BUSINESS TO A COMPANY NAMED
SALOMAN & COMPANY LTD WHICH HE FORMED
- WERE SEVEN MEMBERS-HIS WIFE,DAUGHTER AND FOUR PERSONS TOOK ONE SHARE
EACH AND SALOMON 20000 SHARES OF ONE UK POUND
- SALOMAN V SALOMAN AND CO LTD
- HE PURCHASED CONSIDERATION WAS UK 39,000 AND WAS DISCHARGED IN THE
FOLLOWING MANNER:-
- 9000 UK POUND IN CASH
- FULLY PAID 20,000 SHARES OF ONE UK POUND
- SECURED DEBENTURES ISSUED TO SALOMAON 10000 UK POUND
- COMPANY WOUND UP DUE TO STRIKE
- LEFT AMOUNT WAS 1055 UK POUND
- LIABILITIES WERE 17,773 UK POUND INCLUDING 10,000 SECURED DEB OF
SALOMAN AND UNSECURE LIABILITIES 7773 UK POUND
- IMPLICATION OF SEPARATE PERSONALITY
a) MEMBERS HAVE
NO INSURABLE INTEREST IN THE PROPERTY OF THE COMPANY
b) COMPANY
CONTINUE TO EXIST EVEN WHEN THE MEMBERS DIE
c)
NATIONALITY OF THE COMPANY DOES NOT DEPEND UPON
THE NATIONALITY OF THE MEMBER
d) THE COMPANY CAN
SUE AND BE SUED IN ITS OWN NAME
- SEPARATE PROPERTY: MACAURA V NORTHERN ASSURANCE CO LTD
- M WAS HOLDER OF NEARLY ALL THE SHARES EXCEPT ONE OF TIMBER COMPANY. HE
WAS ALSO A SUBSTANTIAL CREDITOR OF THE COMPANY. HE INSURED THE CO’S TIMBER
IN HIS OWN NAME. TIMBER WAS DESTROYED AND M CLAIMED THE LOSS
- PERPETUAL SUCCESSION: A COMPANY IS JURISTIC PERSON WITH A PERPETUAL
SUCCESSION. ITS LIFE DOES NOT DEPEND UPON THE LIFE OF THE MEMBERS. MEMBER
MAY COME MEMBERS MAY GO BUT IT WILL FLOW LIKE RIVER
- TRANSFER ABILITY OF SHARES:WHEN THE JOINT STOCK COMPANIES WERE
ESTABLISHED THE OBJECT WAS SHARES SHOULD BE CAPABLE OF BEING EASILY TRANSFERRED.
- CAPACITY TO SUE AND BE SUED
- LIMITED LIABILITY:-A COMPANY MAY BE LIMITED BY SHARES OR A COMPANY
LIMITED BY GUARANTEE. IN CASE OF SHARES LIMITED BY SHARES.THE LIABILITY OF
MEMBERS IS LIMITED TO THE UNPAID VALUE OF THE SHARES.IN A COMPANY LIMITED
BY GUARANTEE,THE LIABILITY OF THE MEMBERS IS LIMITED TO SUCH AMOUNT AS THE
MEMBERS MAY UNDERTAKE TO CONTRIBUTE TO THE ASSETS OF COMPANY IN THE EVENT
OF BEING WOUND UP.
- A COMPANY IS AN ARTIFICIAL PERSON AND IT CAN NOT SIGN ITS NAME ON
CONTRACT. SO IT WORKS WITH THE HELP OF SEAL. COMMON SEALS MEANS THE
SIGNATURE OF THE COMPANY. EVERY COMPANY MUST HAVE A SEAL WITH ITS
NAME ENGRAVED ON IT. W.E,F 29 THE MAY 2015, THE USE OF COMMON SEAL IS NOW
OPTIONAL AND NOT MORE MANDATORY. IF THE COMPANY DOES NOT HAVE A COMMON
SEAL THEN AUTHORIZATION UNDER SECTION 22(2) SHOULD BE SIGNED BY 2
DIRECTORS OR ONE BY DIRECTOR AND CS WHERE COMPANY HAS APPOINTED COMPANY
SECRETARY. THE DOCUMENTS WHICH REQUIRE COMMON SEAL:-
1.
POWER OF ATTORNEY TO EXECUTE DEEDS IN OR OUT OF
INDIA
2.
SHARE CERTIFICATE
3.
SHARE WARRANT
4.
DOCUMENTS AUTHORIZING ANY PERSON IN A TERRITORY
OUTSIDE INDIA TO AFFIX COMMON SEAL TO DEED
5.
OTHER DOCUMENTS NEED NOT REQUIRE COMMON SEAL.
6.
A COMAPNY CAN EMPOWER ANY PERSON TO EXECUTE
DEEDS UNDER HIS SEAL. AUTHORITY TO PUT COMMON SEAL CAN BE GIVEN BY RESOLUTION
OR BY COMMITTEE OF BOARD
MERITS:-
a)
ARTIFICIAL LEGAL PERSON
b)
LIMITED LIABILITY
c)
PERPETUAL SUCCESSION
d) TRANSFER ABILITY OF SHARES
e)
INFINITE MEMBERS AND UNLIMITED RESOURCES
f)
EASE IN CONTROL AND MGMT
- SEPARTAE PROPERTY
Ø
DIASADVANTAGES
1.
TOO MUCH
2.
CORPORATE DISCLOSURE
3.
DIVORCE BETWEEN OWNERSHIP AND MGMT
4.
DETAILED WINDING UP
5.
MORE TAX
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