CORPORATE LAW

Presented by

Ujwal vijapure

14 Shilpa kini 21 Amruta sawant 22 Mohit joshi 46

Topics covered
Types of companies

Corporate veil

A company formed and registered i.e. incorporated under the Companies Act, 1956 or an existing co. [Sec.3] Company is a voluntary association of persons formed for the purpose of doing business having a distinct name and limited liability.

Basis of incorporation (i) Statutory (ii) Registered Public Participation (i) Public (ii) Private Limitation of Liability (i) Limited Co. (ii) Unlimited Co. Country of formation (i) Domestic Co. (ii) Foreign Company

Participation Of Govt. (i) Govt. Co. (ii) Non Govt. Co. Control over Management (i) Holding co. (ii) Subsidiary Co. Listing in Stock Exchange (i) Listed (ii) Unlisted

Companies are classified according to liability, size and where they are listed. We will discuss the first two and the resulting 6 common types of companies

Companies limited by shares

Companies limited by guarantee

Unlimited liability companies No liability companies

Proprietary Companies Public Companies

Proprietary companies

Public companies (all non-proprietary

(no more than 50 nonemployee shareholders)

companies: s9 definition of public company)

1 Limited by shares 98.2%

3 Unlimited with share capital

1 Limited by shares 0.7% 2 Limited by guarantee 3 Unlimited with share capital

4 No liability company (mining only) 0.09%

MoA - Charter of the company and contains the powers of the company. Contents

Name Clause Domicile Clause Objects Clause Liability Clause Capital Clause

AoA (i) Rules & Regulation of internal Management.

(ii) Contract between the company and its members. Contents Business of the company Amt. of capital issued & the classes of shares Rights of each class of share holder & procedure for variation Allotment ,Calls, Forfeiture of shares Transfer of shares Companies lien on shares

Exercise of borrowing powers including issue of debentures. General Meeting, Notices, Quorum, Proxy, Voting, resolution, Minutes etc. Appointment, No., & Powers of Directors. Dividends- Interim & Final- General Reserve. Accounts & Audits. Keeping of books.

MEANING Ordinarily, the Courts recognize the separate legal entity of the company and consider themselves bound by the principle laid down in the case of Salomon Vs. Salomon & Co. Ltd. They do not lift or pierce the veil of corporatess entity to look at the economic realities behind the legal veil. But in exceptional cases, the courts may disregard the concept of corporate entity to look at the persons (members or shareholders) behind the

company. They may, so to say lift the corporate veil to probe

into the economic realities behind the scene. This is known as the lifting or piercing the corporate veil.

For determining the character of the company Company cannot act as agent of shareholders

For checking fraud or improper conduct

Against public policy Avoidance of legal obligation In the interest of revenue

Reduction in membership below the statutory minimum (Sec 45) Civil Liability in case of any mis-statement in Prospectus (Sec 62) Failure to refund application money (Sec 69) Fraudulent conduct of business (Sec 542) Contracts made in personal names of directors etc (Sec 147) Subsidiary Company (Sec 212) Ultra vires acts

In this case, the court refused to compel the board of film censors to register a film as an English film, which was in fact produced by a powerful American film company in the name of a company, registered in England in order to avoid certain technical difficulties. The English company was created with a nominal capital of $100 only, consisting of 100 shares of which 90 were held by the American president of the company. Two out of three directors were British and all the funds were to be provided by the American Company. The court held that the real producer was the American Company and that it would be a travesty of facts to hold that the American Company and American president were merely agents of the English company for producing the film.

Re: Gilford Motor Co. In this case, a former employee of the company contracted not to solicit its customers. He formed a separate company, which resorted to solicitation in violation of the contract. The court restrained the company. Re : Jones Vs. Lipman In the particular case, a person agreed to sell certain land to another person. But pending completion of the formalities of the sale he transferred the land to a company of which he and his clerk were the only shareholders and directors. This was done to avoid a decree for specific performance. The court lifted the corporate veil and held that the company was a creature of the first person and a mere mask to conceal his identity in the eyes of equity. It was held that he must complete the contract with the second person.