Company law

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Company law

  1. 1. Company Law
  2. 2. Company…Definition • A company is a voluntary association of individuals formed for some common purpose. • It has capital divisible into parts, known as shares. • Artificial person created by process of law
  3. 3. Characteristics of a company • Separate Legal entity – It has an entity separate from its members. Any of its members can enter into contracts with it in the same manner as any other individual can. The company’s money & property belong to the company & not to the shareholders. Similarly the company’s debt are the debt’s of the company.
  4. 4. Case : Salomon v. Salomon & Co. Ltd • S sold his boot business to a newly formed company for pound 30,000. His wife, one daughter & four sons took up 1 share of 1 pound. S took 23,000 shares of 1 pound each and 10,000 pound debentures ( secured) in the company. Subsequently when the company wound up, its assets were found to be worth 6000 pound & its liabilities amounted to 17,000 pound of which 10,000 pound were due to S & 7000 pound due to unsecured creditors. The unsecured creditors claimed that S & the company were one & the same person & hence they should be paid in priority to S. Held the company is a separate legal entity.
  5. 5. • Limited Liability – A company may be a company 1. Limited by shares - the liability of the members is limited to the unpaid value of the share. 2. Limited by guarantee – The liability of members is limited to such amount as the members may undertake to contribute to the assets of the company, in the event of its being wound up.
  6. 6. • Perpetual Succession – a company’s existence persists irrespective of the change in the composition of its membership. A company never dies, nor does its life depend on the life of its members. It is created by the process of law & can be put to an end only by the process of law. Members may come & go, but company can go on for ever.
  7. 7. • Common Seal – Company has no physical existence, it must act through its agents & all the contracts entered into by its agents must be under the seal of the company. • Transferability of shares – The capital of a company is divided into parts known as shares. These shares are freely transferable.
  8. 8. • Separate Property – Co. is a separate legal entity so it is capable of owning, enjoying & disposing of property in its own name. Although its capital & assets are contributed by its shareholders. • Capacity to sue – A company can sue & be sued in its corporate name.
  9. 9. Lifting or piercing the corporate veil Protection of revenue- tax Prevention of fraud- land transfer Determination of character of company whether it is enemy- in diff country Whether the company is a mere cloak or sham Company avoiding legal obligations Company acting as agent of the shareholders Avoidance of welfare legislation Protecting public policy
  10. 10. STATUTORY EXCEPTIONS Number of members below statutory minimum- below 7 in public and 2 in pvt more than 6 months Failure to refund application money- within 130 days, liable with interest Misdescription of company’s name Fraudulent trading with creditors at winding up Holding and subsidiary company
  11. 11. Diff between company and partnership

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