Only if they refuse to buy within the stipulated period that they can be sold to the outsiders. Ltd. [ ] All ER 33 , Salomon was a prosperous leather merchant. He converted his business into a Limited Company— Salomon & Co. The company so formed consisted of Salomon, his wife and five of his children as members.
- The liability of a member as a shareholder extends to the contribution of the capital of the company up to the nominal value of shares held and not paid by him.
- Used in the aforesaid sense, the word ‘company’, in simple terms, may be described to mean a voluntary association of persons who have come together for carrying on some business and sharing the profits therefrom.
- In his capacity as the controlling shareholder, ‘L’ exercised full and unrestricted control over the affairs of the company.
- The assessee, in this case was a millionaire earning huge income by way of dividend and interest.
‘Horne’ had been employed by the company under an agreement that he shall not solicit the customers of the company or compete with it for a certain period of time after leaving its employment. After ceasing to be employed by the plaintiff, Horne formed a Company which carried on a competing business and caused the whole of its shares to be allotted to his wife and an employee of the company, who were appointed to be its directors. The Companies Act, 2013 even upholds shareholders’ agreements providing for ‘Right of first offer’ and ‘Right of first refusal’ as valid even in case of a public company. What it means is that Articles of a company, whether public or private, may contain a clause that in case a member wishes to sell his shares, he will have to first offer the same to existing members.
A company is created with the sanction of law and is not itself a human being, it is therefore, called artificial; and since it is clothed with certain rights and obligations, it is called a person. A company is accordingly, an artificial person thereupon the nature of company is artificial too. An incorporated company owes its existence either to a special Act of Parliament or to company law. Public corporations like Life Insurance Corporation of India, SBI etc., have been brought into existence by special Acts of Parliament, whereas companies like Tata Steel Ltd., Reliance Industries Limited have been formed under the Company law i.e. Companies Act, 1956 which is being replaced by the Companies Act, 2013. A member of company can contract with a company of which he is a shareholder.
In case of companies limited by guarantee, the liability of each member shall be determined by the guarantee amount, i.e., he shall be liable to contribute up to the amount guaranteed by him. A) Lord Justice Lindley – A Company is an association https://1investing.in/ of many person who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising the form. The common stock so contributed is denoted in money and is capital of the Company.
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The word Company , in simple term , may be described to mean a voluntary association of person who have come together for carrying on some business and sharing the profits there from. The capital of a company is divided into parts, called shares. The shares are said to be movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. Section 44 of the Companies Act, 2013 enunciates the principle by providing that the shares held by the members are movable property and can be transferred from one person to another in the manner provided by the articles. 4.2 Determination of the enemy character of a company – Company being an artificial person cannot be an enemy or friend.
It is called a body corporate because the persons composing it are made into one body by incorporating it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by a process other than natural birth. It is, for this reason, sometimes called an artificial legal person. As a legal person, a corporation can enjoy many of the rights and incurring many of the liabilities of a natural person. A company is a fictitious individual with a separate legal identity from its owners.
However, section -3 of the companies Act, 2013 allows formation of one person Company also. A shareholder can transfer his shares to any person without the consent of other members. Articles of association, even of a public company can put certain restrictions on the transfer of shares but it cannot altogether stop it. A company must be incorporated or registered under the Companies Act. Minimum number of members required for this purpose is seven in the case of a ‘public company’ and two in the case of a ‘private company’. The number of members that a corporation can have is governed by several regulations.
Characteristics Features of Company:
A member of such a corporation is liable for the company’s debts in relation to his stake in it. After passing a special resolution for conversion and applying to the Registrar of Companies for enrollment as a limited partnership, such a company may be turned into a limited liability company. A shareholder has the right to transfer his shares to others without the permission of the other shareholders.
Company is known as such type of or Artificial person because Company is create by law and destroyed by law. A company cannot go beyond the power stated in its Memorandum of Association. The Memorandum of Association of the company regulates the powers and fixes the objects of the company and provides the edifice upon which the entire structure of the company rests. The content/information published on the website is only for general information of the user and shall not be construed as legal advice.
Examples of statutory companies in India include the Reserve Bank of India, the Industrial Finance Corporation of India, the Life Insurance Corporation of India, etc. Efiling Income Tax Returns is made easy with ClearTax platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources.
Similarly, the company may bring an action against anyone in its own name. However, a person duly authorized to execute documents pursuant to a power of attorney granted in his favour under the common seal of the company may execute such documents and it is not necessary for the company meaning definition common seal to be affixed to such documents. The concept of ‘Company’ or ‘Corporation’ in business is not new but was dealt with, in 4th century BC itself during ‘Arthashastra’ days. The nature of company got revamped over a period according to the needs of business dynamics.
Only a Section 8 company can be formed with no profit motive. Likewise, a shareholder cannot be sued on contracts made by his company. The distinction between a company and its members is not confined to the rules of privity but permeates the whole law of contract. Seal of company when to be used – The articles of association of the company provide for putting the seal of the company on documents. The shares are said to be a movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. When the joint-stock companies were established, the object was that their shares should be capable of being easily transferred, [In Re.
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The advantages of starting a business include diversification of profits, a positive connection between effort and reward, independence of production, and versatility. The drawbacks of starting a company include increased financial burden, increased legal liability, long working hours, employee and administrative personnel responsibilities, and legislation and tax issues. The advantages of incorporation are allowed to be enjoyed only by those who want to make an honest use of the ‘company’. In case of a dishonest and fraudulent use of the facility of incorporation, the law lifts the corporate veil and identifies the persons who are behind the scene and are responsible for the perpetration of fraud. To investigate the affairs where it is formed for fraudulent purposes, to defeat the true work and nature of company and circumvent the law or to defraud its creditors or to avoid valid obligations.
Different businesses in the world offer a variety of services and products. Various businesses are organized per some type of hierarchy or bureaucracy. In these businesses, the positions have a customary role and responsibility. Documents are required to be kept at the Registrar’s office, its office becomes a public office, and documents so kept are public documents. Its members, but the members have limited access to the management’s day-to-day work.
Accordingly, the word ‘company’ is employed to represent associations formed to carry on some business for profit or to promote art, science, education or to fulfill some charitable purpose. This body of individuals may be incorporated or unincorporated. The word Company has no strictly technical or legal meaning . It may be described to imply an association of persons for some common object or objects .