Professional Documents
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Introduction To Company
Introduction To Company
Company
Introduction
• Business may be understood as the organized efforts of an
enterprise to supply consumers with goods and services for a
profit.
• Businesses vary in size, as measured by the number of employees
or by sales volume etc.
• But, all businesses share one common purpose that is to earn
profits.
• The purposes of business that goes beyond earning profits are:–
• an important institution in society
• for the supply of goods and services
• creating job opportunities
• offering better quality of life
• contributing to the economic growth of the country
• The success of every business depends on adapting itself to
the environment within which it functions.
• change in the government polices, change in the technology,
fashion or customers’ taste.
• Types of business environment:
Internal
External
FEATURES OF BUSINESS
ENVIRONMENT
Totality of
External
Forces
Dynamic
Relativity
Nature
Specific and
Multi-
General
faceted
Forces
Uncertainty
Introduction to Company
• A Company form of business organisation is a voluntary association of
persons to carry on business.
• It is an association of persons who generally contribute money for some
common purpose.
• The money so contributed is the capital of the company.
• The persons who contribute capital are its members.
• The proportion of capital to which each member is entitled is called his
share, therefore members of a company are known as shareholders and
the capital of the company is known as share capital.
• As per Sec. 2(20) of the Companies Act, 2013, ‘company’ means a company
incorporated “under this Act”; or “under any previous company law”
• derived from the Latin word (Com=with or together; panis =bread).
• It originally referred to an association of persons who took their
meals together.
• In the leisurely past, merchants took advantage of festive
gatherings, to discuss business matters.
• Nowadays, the business matters have become more complicated
and cannot be discussed at festive gatherings.
• a company denotes an association of likeminded persons formed
for the purpose of carrying on some business or undertaking.
• A company is not merely a legal institution. It is rather a legal
device for the attainment of social and economic end.
• It is, therefore, a combined political, social, economic and
legal institution.
• “It is a means of cooperation and organisation in the conduct
of an enterprise”.
• It is “an intricate, centralised, economic and administrative
structure run by professional managers who hire capital from
the investor(s)”.
Features of a Company
• CORPORATE PERSONALITY: bears its own name, acts under name,
has a seal of its own and its assets are separate and distinct from
those of its members.
• a company is recognized as a legal entity distinct from its
members. A company with such personality is an independent
legal existence separate from its shareholders, directors, officers
and creators.
• As a result of corporate personality, a company has perpetual
succession. It simply means the company is everlasting and will
continue to do business until it is properly wound up.
• the entity acts like a natural person but only through a
designated person, whose acts are processed within the ambit of
law [Shiromani Gurdwara Prabandhak Committee v. Shri Sam
Nath Dass AIR 2000 SCW 139]
• INDEPENDENT LEGAL EXISTENCE: A company has a legal entity distinct and
separate from its constituent members (shareholders).
• It is an autonomous body, self-controlling and self-governing. It can hold and
deal with any type of property of which it is the owner, in any way it likes.
• It can enter into contracts, open a bank account in its own name, sue and be
sued (floating Services Ltd v. M. V. San Fransceco Dipalola 2004) by its
members as well as outsiders.
• Saloman v. Saloman & Co 1895 – 99 All ER Rep 33.
• Where the conduct conflicts with public policy, courts lifted the
corporate veil for protecting the public policy.
• Connors Bros. v. Connors (1940) 4 All E.R. 179
• Daimler Co. Ltd. v. Continental Tyre & Rubber Co., (1916) 2 A.C. 307
• Where it was found that the sole purpose for which the company
was formed was to evade taxes the Court will ignore the concept
of separate entity and make the individuals concerned liable to
pay the taxes which they would have paid but for the formation
of the company.
• Re. Sir Dinshaw Manakjee Petit, A.I.R. 1927 Bombay 371
• Sole purpose for the formation of the new company was to use it
as a device to reduce the amount to be paid by way of bonus to
workmen.
• The Workmen Employed in Associated Rubber Industries Limited,
Bhavnagar v. The Associated Rubber Industries Ltd., Bhavnagar and
another, A.I.R. 1986 SC 1. The Supreme Court of India held that the
new company was formed as a device to reduce the gross profits of
the principal company and thereby reduce the amount to be paid
by way of bonus to workmen.
• Liability would arise on its failure to perform the
constitutional duties and the functions of these undertakings.
• Kapila Hingorani v. State of Bihar, 2003(4) Scale 712