COMPANY LAW IN INDIA by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india [email_address] mobile : 91+9414430763
WHAT IS A COMPANY The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it originally referred to an association of persons who took their meals together
CASE : SOLOMAN V/S SOLOMAN Soloman framed a company and became secured creditor. He sold his own business to company and made his family shareholders. Company became bankrupt and payment was made to only soloman as a creditor. Thus Other unsecurited creditors didnt get payment. The case of Salomon v. Salomon and Co. Ltd., (1897) A.C. 22, has clearly established the principle that once a company has been validly constituted under the Companies Act, 1956 it becomes a legal person distinct from its members and for this purpose it is immaterial whether any member has a large or small proportion of the shares, and whether he holds those shares beneficially or as a mere trustee.
Case : Lee v/s Lee's air farming Lee was a pilot and managing direcor of the company, he died in place crash. The court ordered the company to pay compensation in the case of Lee v. Lee’s Air Farming Ltd. (1961) A.C. 12 (P.C.) In this case, a company was formed for the purpose of aerial top-dressing. Lee, a qualified pilot, held all but one of the shares in the company. He voted himself the managing director and got himself appointed by the articles as chief pilot at a salary. His widow claimed compensation for the death of her husband, which the compnay refused to pay as Lee was shareholder.
DIN Director Identification Number (DIN) to be obtained by all existing directors and every other person, intending to become a director. DIN to be allotted by the Central Government within one month from the receipt of application for allotment of DIN. Individuals prohibited to apply, obtain or possess more than one DIN. Every existing Director to intimate his DIN to the company or all companies wherein he is a director, within one month of receipt of DIN. Intimation of DIN, to the Registrar or any other officer or other specified authority by every company, within one week of the receipt of intimation by the Director. Intimation to be given in prescribed form and manner. DIN to be quoted by every person or company while furnishing any return, information or particulars required to be furnished under the Act, if such return etc. relate to the director or contain any reference of the director
CHARACTERISTICS OF COMPANY PERPETUAL SUCCESSION ARTIFICAL PERSON SEPARATE ENTITY LEGAL ENTITY COMMON SEAL NOT A CITIZEN
TYPES OF COMAPNY PUBLIC OR PRIVATE LIMITED OR UNLIMITED SHARES OR GUARANTEE
Difference Between company & partnership Partnership require 2 to 20 partners, company can have 2to 50 (private company) or 7 to unlimited (public company). Separate entity principle perpetual succession principle
Difference between company and corporate sole Corporate includes company, corporate sole, corporations framed by goverunment as per separate act / parliament law corporation generally means government organisation Corporate word is wider than company corporate sole is a single person keeping some official position, but company is a group of persons.
LIFTING CORPORATE VEIL No body is permitted to lift corporate veil (who is the real owner of the company). Company remains different from shareholders. But it is lifted when in defence proceedings, such as for the evasion of tax, an entity relies on its corporate personality as a shield to cover its wrong doings. [BSN (UK) Ltd. v. Janardan Mohandas Rajan Pillai  86 Comp. Cas. 371 (Bom).] Shareholders cannot ask for lifting veil for their purpose - held in Premlata Bhatia v. Union of India (2004)
Illegal association Section 11 of the Companies Act, no company, association or partnership consisting of more than 20 persons (10 in the case of banking business) can be formed for the purpose of carrying on any business for gain, unless it is registered as a company under the Companies Act, or is formed in pursuance of some other Indian Law, or is a Joint Hindu Family carrying on business for gain.
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