Unit 1 b.com - company law pdf

COMPANY LAW

UNIVERSITY OF MYSORE

SYLLABUS – B.Com – 6th Semester

Unit 1: Meaning and Definition ofCompany – Corporate Personality – Liftingthe Corporate Veil – Types of Companies

COMPANY LAWB.Com - 6th Semester – UNIT 1

Meaning & Definition of Company:

A company is a very common word, some tell it’s agroup of people, some others opinions that it’s a firm,and others feel a company means a commercial dealing.We can conclude that Company has multiple meaning,which deems fit for the given situation.

A company can be said as ‘Association of individuals,with a common idea, thought, or an objective, whichcan be commercial or non-commercial purposes,registered or not registered with a appropriateauthority’ This association may be with little or moremembers.



Every economy has their own definition of companyhence it doesn’t carries any technical or legal meaning,as ‘in certain countries a association of people withcommon objective, with profit motive or not, and isn’tregistered is also called as a Company’.

Hence the word, ‘Company’ has numerous meaning. Itsvisible by its name, available and known to the people,which is been promoted by some people, whose ideas,thoughts, which, when accepted, grows huge reaching avast population’. Hence promoters play a vital role inthe growth of a company.



According to Chief Justice of US, Marshall,

Company is ‘a corporation is an artificial being,

invisible, intangible and existing only in the

contemplation of the law, Being a mere creation

of law, it possesses only those properties which

the charter of its creation confers upon it either

expressly or as incidental to its very existence”.

[Source: Dortmouth College v. Woodword, 4 Wheat (US) 518]



According to Section 3 (1) (i) of the Company

Act 1956, ‘A Company means, a company

formed and registered under this Act or an

Existing Company’. Here an existing company

refers to the company formed prior to 1956,

with the prior Company Act (British Law)’.



According to the company law, a firm can be

registered as a ‘Public Company’ and as a

‘Private Company’

A Public Company shall have a minimum of 7

members as its promoters, while in

A Private Company shall have a minimum of 2

members as its promoters.


Characteristics of Company: A Company has thefollowing characteristics:

(a) A Company is a legal entity.,

(b) A Company is visible only on documents.,

(c) A Company must be registered with ‘Registrar ofCompanies’.,

(d) A Company can sue and can be sued.,

(e) A Company protects it promoters on liabilities as it’s alegal entity.,

(f) A Company has a legal entity, but not a citizen.,

(g) A company exists, even if its promoters do not exists.,


Characteristics of Company: A Company has thefollowing characteristics:

(h) A Company is represented by its ‘CommonSeal’.,

(i) A Company registered as ‘Public Company’permits shareholders to transfer their shares(Shareholders may stay or quit the company asper their individual desire)

(j) A Company is a legal representation of itspromoters, and a separate property.,


Corporate Personality:

A Company is a legal representation of itself and isseparate from its promoters of the firm, who may be thepartners, shareholders or managers of the company.Hence it is called a Corporate Personality.

A Company is born by its registration at the registrar ofcompanies and is a legal and independent property ofitself.

A Company’s personality is a corporate personality, asits represents transactions of commercial or non-commercial but it is not entitled to fundamental rights.


Corporate Personality: A company is said to be acorporate personality because:

(a) A Company has a legal entity.,

(b) A Company can hold property.,

(c) A Company can sue.,

(d) A Company has a nationality.,

(e) A Company is registered and has a place ofexistence.,

(f) A Company is been taxed for its operations andso on..


Lifting a Corporate Veil:

Meaning of Corporate Veil:

(a) ‘Every incorporated company limits the liabilities of itspromoters as a company is a legal entity of its own andenjoys its own powers as discussed earlier.

(b) The Company promoters are safeguarded as per thecompany law. The promoters enjoy the commercialbenefits earned by the artificial person, that is a‘Company’.

(c) There are more possibilities for a company promoters totake advantage of the legal entity of the company andengage in illegal or fraud activities, on the name ofArtifical Person, that is a company.


Lifting a Corporate Veil:

Meaning of Corporate Veil:

(d) To see a smooth operations of the firm,

without indulged in illegal activities the law of

land (Court) can lift the corporate veil or

interfere to know on the promoters of the firm.

Which is called as ‘Lifting A Corporate Veil’


When is the lifting of corporate veil exists:

(a) The Law of The Land (Court) receives apetition that a company is indulged in anyillegal activities.,

(b)The Law of The Land (Court) finds some ofthe promoters are victimized in any criminaloffence.

(c) When a Company is not following the rulesand regulations as per the law of the land.



The law of the land (Court) can lift the corporateveil during two instances, namely:

(a) Common Law Exceptions and

(b)Statutory Exceptions

The former Common Law Exceptions, includethe Judicial interpretations, while theStatutory Exceptions include the statutorynorms of the company law.


Lifting of corporate veil:

(a) Common Law Exceptions, includes

i. Determination of the character of the

company.,

ii. Where Company is a sham.,

iii) Prevention of fraud or improper conduct.,

iv) Where the company is acting as a agent of

the shareholders.,


Lifting of corporate veil:

(a) Common Law Exceptions, includes

v) Protection of revenue.,

vi) Avoidance of welfare legislations.,

vii) Punishment of contempt of court.,

viii) Ascertaining true nature of transaction if allegedas sham.,

ix) Determination of technical competence of thecompany.,

x) Formation of subsidiary company to act as anagent.



(b) Statutory Exceptions: These include,

(i) Numbers of members below the statutory

minimum.,

(ii) Company not mentioned on the bills of

exchange.,

(iii) Group Accounts.,

(iv) Investigations into related companies.,



(b) Statutory Exceptions: These include,

(v) Failure to refund the application money.,

(vi) Fraudulent Trading.,

(vii) Investigation on the ownership of

company.,

(viii) Liability for ultra vires acts.


Types of Company:

We have discussed earlier that a company can beregistered also it may not be registered. Hence thefirst broad type is:

(a) Incorporated Companies

(a) Un-incorporated Companies.


Types of Company:

UN-INCORPORATED COMPANIES:

Under the Unregistered Companies there are

no sub-heads as there means of operations are

unknown.


Types of Company:

INCORPORATED COMPANIES:

Under incorporated companies there are three

heads:

(a) Chartered Companies.,

(b)Statutory Companies.,

(c) Registered Companies.,


Types of Company:


Under incorporated companies there are three heads:

(a) Chartered Companies: Chartered Companies are the‘Crown’ in the exercise of the royal prerogative haspower to create a corporation by the grand of a charterto persons assenting to be incorporated.

Example: Bank of England (1694), East India Company(1600). Such companies does not exists in Indiamoreover the provisions of the Companies Act 1956does not apply.


Types of Company:


Under incorporated companies there are three heads:

(b) Statutory Companies: Statutory companies are beenincorporated by means of special act of the parliamentor any state legislation.

Example: Reserve Bank of India (RBI), Food Corporationof India (FCI), Life Insurance Corporation of India(LIC), State Trading Corporation STC), Unit Trust ofIndia (UTI) and so on.


Types of Company:


Under incorporated companies there are threeheads:

(c) Registered Companies: Registered companies asper Section 12(2), provides that a companyregistered under the Act can be:

i. Companies Limited by Shares.,

ii) Companies Limited by Guarantee.,

iii) Unlimited Companies.


Hello friends!!!, This is Sanjeev KumarSingh., from Mysuru, Karnataka State,India.We will appreciate, for your valuable suggestions,complaints, if any therefore the same can befurther shaped to reach the students:

You can reach me at

Mobile No: + 91 91640 76660

Email: [email protected]

Date post:	20-Jan-2017
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Unit 1 b.com - company law pdf

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