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Company Law

Company Law

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Published by Abbas Ansari

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Published by: Abbas Ansari on Dec 25, 2009
Copyright:Attribution Non-commercial


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• A company is a voluntary association of individuals formed for some common purpose. • It has capital divisible into parts, known as shares.

Characteristics of a company
• Separate Legal entity – It has an entity separate from its members. Any of its members can enter into contracts with it in the same manner as any other individual can. The company’s money & property belong to the company & not to the shareholders. Similarly the company’s debt are the debt’s of the company.

Case : Salomon v. Salomon & Co. Ltd
• S sold his boot business to a newly formed company for pound 30,000. His wife, one daughter & four sons took up 1 share of 1 pound. S took 23,000 shares of 1 pound each and 10,000 pound debentures ( secured) in the company. Subsequently when the company wound up, its assets were found to be worth 6000 pound & its liabilities amounted to 17,000 pound of which 10,000 pound were due to S & 7000 pound due to unsecured creditors. The unsecured creditors claimed that S & the company were one & the same person & hence they should be paid in priority to S. Held the company is a separate legal entity.

Limited Liability – A company may be a company 1. Limited by shares - the liability of the members is limited to the unpaid value of the share. Face value = Rs. 10, Paid = Rs. 7, Rs. 3 can be called upon. 2. Limited by guarantee – The liability of members is limited to such amount as the members may undertake to contribute to the assets of the company, in the event of its being wound up.

• Perpetual Succession – a company’s existence persists irrespective of the change in the composition of its membership. A company never dies, nor does its life depend on the life of its members. It is created by the process of law & can be put to an end only by the process of law. Members may come & go, but company can go on for ever.

• Common Seal – Company has no physical existence, it must act through its agents & all the contracts entered into by its agents must be under the seal of the company. • Transferability of shares – The capital of a company is divided into parts known as shares. These shares are freely transferable.

• Separate Property – Co. is a separate legal entity so it is capable of owning, enjoying & disposing of property in its own name. Although its capital & assets are contributed by its shareholders. • Capacity to sue – A company can sue & be sued in its corporate name.

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