Practical Questions inCorporate & Other Laws
Both the shareholders of the Private Company died in a car accident. Decide whetherCompany’s existence also comes to an end.
The Company’s existence is not affected by the death of its shareholders, since theCompany has separate legal entity. This is clearly established in Salomon Vs. Salomon & Co. Ltd,Lee Vs. Lee Air farming Ltd & Kandoli tea Co. Ltd. cases. Further the Company has havingperpetual succession.
In a private Company, after the death of Mr.X entire capital of the company is held by hisson Y. Decide, whether Y can continue business of the co. with single shareholder.
In such a situation, Y can continue to carry on the business of the Company but, inaccordance with the provisions of Sec.45 of the Act, if the same position continues for more thansix months, then y will become personally liable for all the liabilities of the Company contractedafter six months from the date he becomes only shareholder.
The number of members in a public Company became reduced to six on the 10
September, 1988, the Company incurs trade debts on 11
September, 1988, 2
February, 1989and 17
March, 1989. How far are the remaining six members liable for the debts?
The remaining six members are liable for the debts incurred after 6 months of thereduction in the number of members below the statutory minimum specified in Sec. 45 of theCompanies Act, 1956 i.e., for debt contracted on 17
A public limited Company has only seven shareholders, all the shares being paid in full.All the shares of one such shareholder are sold by the court in an auction and purchased byanother shareholder. The Company continues to carry on its business thereafter. Discuss theliabilities of the shareholders of the Company.
The problem in question relates to reduction of membership below the statutory minimum.Section 12 of the Companies Act requires a public Company to have a minimum of sevenmembers. If at any time the membership of a public Company falls below seven and it continues’for more than six months, then according to Section 45 of the Companies Act, 1956, every suchmember who was aware of this fact, would be individually (personally) liable for the debtscontracted after six months. Thus, in the above problem the remaining members shall incur personal liability for the debtscontracted by the Company:
If they continued to carry on the business of the Company with that reduced membership(i.e., 6) beyond six months period.
Only those members who knew this fact of reduced membership shall be liable, forinstance, one of the members who was abroad and thus not aware of these developments,shall not be liable.
The liability shall extend only to the debts contracted after six months from the date of auction of that member’s shares.
In a private limited Company it is discovered that there are, in fact, 54members. On anenquiry, it is ascertained that 6 of such members have been employees of the Company in the
Corporate & Other Laws Practical Questions________________________________
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