COMPANY LAW - NATURE OF COMPANY

Definition of Company: Voluntary association of

persons, formed for some common purpose.
Company has no physical existence, has no body or soul.
CHARACTERISTIC FEATURES / ADVANTAGES
OF
INCORPORATION:
Separate legal entity -- Case law: SALOMON Vs.
SALOMON & Co Ltd.,
Limited liability for its
members, Perpetual succession, Common seal,
Shares are transferable,
Separate property,
Capacity to sue.
Company has a nationality and
residence but it is NOT a citizen.

LIFITING THE CORPORATE VEIL

Company has a separate legal entity distinct from
its members - known as Doctrine of Corporate veil.
EXCEPTIONS: LIFITING THE CORPORATE VEIL:
Protection of revenue (Case Law : Sir Dinshaw Maneckjee
Petit.),
Prevention of fraud (fraud on creditors),
Determination of character of a company (case law:
Daimler Co Ltd Vs. Continental Tyres & Rubber Co Ltd.),
Co. avoiding legal obligations, avoidance of welfare
legislations, Protecting public policy.
STATUTORY EXCEPTIONS: No. of members below mini.
2 or 7., Failure to refund application money,
Misdescription of Co.s name, Fraudulent trading etc..

KINDS OF COMPANIES

UNINCORPORATED CO.: Large Partnerships which are not

allowed now not regarded as distinct entities, partners will have
unlimited liability. Having more than 10 members for banking or
more than 20 members for other business illegal association.

A.) ON THE BASIS OF INCORPORATION 1) Statutory

Companies: RBI, LIC, UTI, Railways etc.. 2) Registered
Companies : which are Registered under the Companies Act.
B.) ON BASIS OF LIABILITY: 1) COMPANIES LIMITED BY
SHARES: Liability of members limited to amount of shares
subscribed, Pvt. Ltd or Public Limited.
2) COMPANIES LIMITED BY GUARANTEE: No profit motive, to
promote art, science, culture sports etc., liability of members fixed to
the amt. guaranteed, generally amount called up only at the time
of liquidation nature of reserve capital. P Ltd or Public Ltd.

KINDS OF COMPANIES Cont..

3) UNLIMITED COMPANIES: Company without limited liability. By a

special resolution can re register as limited liability Company.

C.) ON THE BASIS OF NUMBER OF MEMBERS:

1) PRIVATE LTD.CO: Mini. Paid-up capital Rs.1 Lakh, Restricts
the right to transfer shares, limits the no. of members to 50 not
including present or past employees, Prohibits invitation to public to
subscribe for its shares or fixed deposits.
Must
have its own AOA. Formation: Minimum: 2 members,
2
Directors Quorum 2. Given certain special privileges under the
Act.
2) PUBLIC LTD CO : Mini. Paid-up capital Rs.5 Lakhs, Not a
subsidiary of a Pvt Ltd Co., it can be listed or unlisted. Minimum 7
members & 3 Directors. Quorum : 5 Members personally present.
Can invite public to subscribe for its shares or FDs.

KINDS OF COs Cont..

D.)ON THE BASIS OF CONTROL : 1) HOLDING COMPANY : When
it can control another Co. by
1) Controlling the composition
of Board of Directors,
2) Holding of majority shares and
3) when it is a subsidiary of another subsidiary.
2) SUBSIDIARY COMPANY:
E.)ON THE BASIS OF OWNERSHIP: 1) GOVERNMENT COMPANY:
When a Govt. holds not less than 51% of the paid up capital.
It is NOT a dept. of Govt.
2) FOREIGN CO.: A Co. incorporated outside India and which has a
place of business in India.
3) ASSOCIATIONS NOT FOR PROFIT (Sec.25) Central Govt. can
grant licence to associations formed NOT for profit, with limited
liability without using the words Limited or Pvt Limited. For
promoting commerce, science, charity etc.. To prohibit payment
of dividend. Example: Chamber of commerce, associations etc..
4) ONE MAN CO. : When one person holds all most all shares.
(Salomon V Salomon Co Ltd.) It is a separate legal entity distinct
from its members.