CORPORATE LAW - I

COURSE OUTLINE

SEMESTER V
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INTRODUCTION
Corporate form of ownership is the most important form of ownership of business in
the contemporary times. Its significance is due to many distinct advantages it has over other
forms of ownership of business. In order to regulate various aspects of functioning of
companies, Company Act was enacted in the year 1956. Till date this has been the lengthiest
piece of legislation ever passed by the Indian Parliament. The emphasis in this course is on
the fundamental principles of law relating to basics of Corporate Law covering topics right
from the pre-incorporation to the establishment and management of a company.

DETAILS OF THE COURSE OUTLINE

MODULE I. COMPANY AS A MEDIUM OF BUSINESS
Company, as a form of ownership, developed in order to address the requirement of
business at that time. It is a statutory creation and it has different forms to suit different
requirements of business and trade. Law recognize veil by dissociating members from
company and also the grounds on which corporate veil may be lifted.

History of Company Legislation - UK

Corporate personality Concept
Nature and Features of a Corporate Body
Theories of corporate personality.
Lifting of corporate veil
Classification of company
Company as distinguished from other forms of business

MODULE II. PRE-INCORPORATION PHASE

Being statutory creations, companies are created by promoters. Promoters play a very
strategic role. It is through their expertise and efforts that a company is born. In

cotemporary times, task of promotion has professionalized. Law has the task of balancing
the protection of their interests on the one hand and on the other hand to protect the interest
of the company. Further it maintains sanctity of contracts entered into by promoters.

Promoters - Promotion of company

Promoters: Position, Duties and Liabilities
Pre-incorporation contracts

MODULE III. INCORPORATION OF A COMPANY

A company is incorporated upon its registration. Registration confers many
advantages on the company. Both MoA (constitution of the company) and AoA (rules for
internal functioning) are necessary for getting a company registered. Moa contains the
fundamental conditions upon which the company is allowed to be incorporated. The three
common law doctrine protects the interest of different stakeholders involved.

Memorandum of Association
Doctrine of Ultra Vires
Articles of Associations
Doctrine of Indoor Management
Doctrine of Constructive Notice
Incorporation and its consequences on Corporate Transactions
o Certificate of Incorporation
o Certificate of Commencement

MODULE IV. RAISING OF CAPITAL

In order to finance its activities the company needs capital. Capital of a company is
of different kinds. Capital can be raised at the time of formation of the company for starting
a business or later on, for expansion and diversification. But once raised it becomes the
permanent liability of the company. And such capital is raised by issuing prospectus in the
market which arouses interest of the investors in the company and it induces them to invest
in the company. It may be generated through different means from various sources (e.g.

public and private). Each mean is well regulated through a combination of Companies Act,
1956 and different regulations made by SEBI for this purpose.
Prospectus
o Meaning, Issue and Contents.
o Kinds of Prospectus Abridge Prospectus, Statement in lieu of Prospectus; Shelf
prospectus.
o Liability of misstatements in Prospectus
Shares / Share Capital
o Meaning and Nature
o Kinds of Shares
o Issue of shares IPO, FPO, Rights issue, Bonus Issue
o Allotment, Transfer, Forfeiture, Surrender of shares
o Membership of company: modes of acquisition, eligibility; liability; Rights;
Cessation of Membership;
o Alteration & Reduction of share capital.
Debenture / Debt Capital
o Meaning & characteristics
o Kinds of Debentures
o Debenture Trustees, Debenture Trust Deed, Debenture Stock
Dividend declaration; payment; interim dividend

MODULE V. CORPORATE MANAGEMENT (DIRECTORS)

The institution of the company is composed of two organs, the general body of
shareholders and the board of directors. The board in other words can be described as the
managerial body and it is constituted by the general body. Directors perform multitude of
functions in a company. They make policies and execute them. It is their duty to ensure
compliance with all laws. In fact their role is the principal component of emerging
structures of corporate governance. Their liability continues to be the highly contentious
issue.
Directors

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Concept and Definition

Kinds of Directors
Powers and Duties of Directors
Qualification, Appointment, Removal.

MODULE VI. CORPORATE MANAGEMENT (MEETINGS)

Protection of the investors is one of the primary objectives of Corporate Law. One of
the forum through which such an objective is fulfilled are the meetings of a company and
the business is also transacted through these different kinds of meeting. Their procedure is
well regulated through law. It is at the meeting that majority and minority friction comes
out in the open.
Meetings
o Meaning
o Kinds of Meeting
o Voting

BOOKS TO BE REFERRED

Ramaiyya, Guide to Companies Act, 1956

Charlesworth & Morse, Company Law
Gower & Davies, Principles of Modern Company Law
K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman
Pennington, Company Law
Palmer, Company Law
K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman
Avtar Singh, Company Law
Nicholas Bourne, Principles of Company Law

STATUTES & SEBI REGULATIONS TO BE REFERRED

Companies Act, 1956
Securities and Exchange Board of India Act, 1992

 (Issue of Capital and Disclosure Requirements) Regulations, 2009

Depositories Act, 1996
Securities Contract Regulation Act, 1956

CASES TO BE REFERRED

Saloman v. Saloman & Co. Ltd.(1895-99)AllER Rep.33

Lee v. Lee;s Air Farming Ltd.(1960)3 AllER 420
Dhulia Amalner Motor Transport Ltd v. R.R. Dharamsi AIR 1952 Bom. 337:
Daimler Co. Ltd. v. Continental Tyre & Rubber Co. Ltd. (1916-17) AllER Rep. 191
Bacha F. Guzadar v. CIT Bombay AIR 1955 SC 74
Gilford Motor Co. Ltd. v. Horne (1933) AllER 109
Workman v. Associates Rubber Industry Ltd. (1985) 4 SCC 114
Pratap Singh v. Bank of America (1976)46 Com. Cases 532
Babulal Chaukhani v. Caltex (India) Ltd. AIR 1967 Cal 205
Macaura v. Northern Assurance Co. Ltd, 1925 AC 619 HL
Minerva Mills Ltd. v. Govt. of Maharashtra (1975) 45 Com. Cases 1
Orient Paper Mills Ltd. v. State of Orissa AIR 1957 Orissa 232
Rank Film Distributors v. ROC AIR 1967 Cal 32
In re, Machinon Macknize & Co. (1967) ComLJ 200
Bell Houses Ltd. v. Citywall Properties Ltd. (1966) 2 AllER 674
A.L. Mudaliar v. LIC AIR 1963 SC 1185
Royal British Bank v. Turquand (1943-60) AllER Rep.435
Freeman v. Buckhurst Park Properties (1964)1AllER 630
Regal (Hasting) Ltd. v. Gulliver (1942) 1 AllER 378
Percival v. Wright (1902) 2 CH 421
Industrial Development Consultants Ltd. v. Cooley (1972) 2 AllER 162

Note: Apart from the cases that have been mentioned above, the students are also advised to
take note of the other cases mentioned in the books and discussed in the class.