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Khadija Khan Section - A Ba - Ll. B 3 (5 Semester) Internal Assessment 1
Khadija Khan Section - A Ba - Ll. B 3 (5 Semester) Internal Assessment 1
Section - A
Internal Assessment 1 st
Company law
Introduction:
The word ‘company’ comes from the Latin word (Com=with or together; panis =bread), and it
originally noted an association of persons who took their meals together. within the leisurely past,
merchants took advantage of festive gatherings, to debate business matters.
Nowadays, business matters became more complicated and can't be discussed at festive gatherings.
Therefore, the corporate sort of organization has assumed greater importance. It denotes a joint-
stock enterprise during which the capital is contributed by several people. Thus, in popular
parlance, a corporation denotes an association of similar temperament persons formed for the aim
of carrying on some business or undertaking.
Definition of company
An association or an organization which is registered or incorporated under the companies act of
2013 is called a company. It is an artificial person created by law.
A company is a "corporation" - an artificial person created by law. A human being is a "natural"
person. A company is a "legal" person. A company thus has legal rights and obligations in the
same way that a natural person does.
In the legal sense, a company is an association of both natural and artificial persons (and is
incorporated under the prevailing law of a country). In terms of the businesses Act, 2013 (Act No.
18 of 2013) a “company” means a corporation incorporated under this Act or under any previous
company law [Section 2(20)].
A company isn't merely a legal institution. it's rather a legal device for the attainment of the social
and economic end. It is, therefore, a combined political, social, economic and legal institution.
Thus, the term company has been described in many ways. “It may be a means of cooperation and
organization within the conduct of an enterprise”.
Need for a Company:
The need for a company is divided into four stages:
• Promotion
• Registration
• Certificate of incorporation
• Certificate of commencement of business
➢ Promotion – the steps which are taken to motivate a number of individuals to come
together for the achievement of a common objective through the company form is called
promotion. The person who undertake the responsibility to bring the company into
existence are called promoters.
1. Discovery of an idea
2. Detailed investigation
3. Assembling
4. Financing the proposition
1. Discovery of an idea - the promoters start with a plan to start out some business either in
new field which has not been commercially exploited or in some existing lines of
manufactured or business. he makes preliminary investigation to seek out out whether the
actual business is helpful and he roughly estimates income and expenditure of the proposed
business.
2. Detailed investigation - the promoters has to make detailed investigation of his idea with
the assistants of the many experts like engineers, chemists, market analysis's , finance
experts, management consultants etc. on the idea of reports of those experts the promoters
would be in a very position to grasp the capital requirements , place of location, size of the
unit, demand condition within the market , price of the merchandise, cost of production,
written on capital etc. an in-depth investigation will help him to check the estimated income
is enough to satisfy the value of production and other expenses.
3. Assembling – after detailed investigation, if he satisfied with practicability and
profitability of the proposal concern, he starts assembling preposition, assembling means
getting the support and consent of other persons to act as a director or founders arranging
for patents, an acceptable site for the corporate, machinery and equipment etc.
4. Financing the proposition – after assembling the proposition, the promoter prepares a
prospectus to present to the general public and to underwriters to steer them to finance the
proposition the promoter also takes steps to include the corporate and to secure the
certificate to commence the business.
➢ Registration- The Registration of the Company is legal recognition given to the body corporate
under the Company Law. The procedure of registration has been clearly stated in Section – 7 of
The Companies Act, 2013Steps and formalities for the or registration of the company. The
following documents to be filed with the registrar:
• Memorandum of Association (MOA) with at least 7 persons subscribed, each one share if
it is a public company. If it is a private company at least 2 persons with the shares
subscribed.
• Articles of Association (AOA) except where table ‘A’ considered a companies articles.
• Address of the registered office.
• A list of directions with their names, address and occupation.
• Consent of directions in writing to act as directions.
• An undertaking by directions to take and to pay for any qualification shares. This is not
required for private company.
(i) A public company issues a prospectus of inviting the general public to buy its share
capital,
(iii) the corporate is required to sell a minimum number of shares mentioned within the
prospectus.
After making the sale of the specified number of shares a certificate is shipped to the
Registrar stating this fact, along-with a letter from the banks, that it's received application
money for such shares.
The Registrar scrutinizes the documents. If he's satisfied, then issues a certificate called
Certificate of Commencement of Business. this is often the conclusive evidence of the
commencement of the business.
For all purposes of law, a company is thought to be a separate entity from its shareholders. But
sometimes it's sometimes necessary to appear at the persons behind the company veil. The separate
entity of the corporate is disregarded and also the schemes and intentions of the persons behind
are exposed to full view which is understood as lifting or piercing the company veil. this is often
usually drained the subsequent cases:
3. Fraud or improper conduct – in Gilford Motor Co. V. Horne,, H was appointed at the
decision maker of the plaintiff company on the condition that he shall not solicit the
shoppers of the corporate. He formed a brand-new company which undertook
solicitation of plaintiff’s customers. the corporate was restrained by the Court.
4. Agency or Trust or Government company - The separate existence of a corporation could
also be ignored when it's being employed as an agent or trustee. In State of UP v.
Renusagar Power Co. it had been held that an influence generating unit created by an
organization for its exclusive supply wasn't thought to be a separate entity for the aim of
excise.
In Re R.G. Films Ltd. an American company produced film in India technically within the
name of a British company, 90% of whose share was held by the President of the American
company. Board of Trade refused to register the film because the English company
acted merely because the agent of the American company.
5. To avoid welfare legislation – where it absolutely was found that the only purpose
of formation of recent company was to use it as a tool to cut back the quantity to be paid
by way of bonus to workmen, the SC pierced its corporate veil. The Workmen
Employed in Associated Rubber Industries Ltd. V. The Associated Rubber
Industries Ltd, Bhavnagar.
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