Nature

Of
Company
 Characteristics of Company

Incorporated Free Transferability

Association of Shares

Separate Legal
Entity Separate Property

Limited
Liability Capacity to Sue
Perpetual
Succession
Common Seal
Separate Legal
Entity

Case: Saloman v/s

Saloman and Co. Ltd.

Case: Lee v/s Lee Air

farming Co. Ltd.
Separate Property

Case: Macura v/s

Northern Assurance
Co. Ltd.
 Lifting the Corporate Veil
A. Common Law Exceptions
1. Determination of Character of Co.
Case: Daimler Co Ltd v Continental Tyre and
Rubber (GB) Ltd (1916)
• C, A Pvt Co. was incorporated in england
for the purpose of selling tyres manufactured
in Germany by a German Co.
• The German Co. held the bulk of the
shares in Co.
• During Ist world war, C Co. commenced
an action to recover trade debt
• The house of Lord helds that the company
C was an enemy Co. as control was in
enemy hands.
• Held: The Co. was an alien enemy and the
payment of debt to it would amount to
trading with the enemy, So Company was
not allowed to proceed.
2. Where the company is a sham
Case: Gilford Motor Co Ltd v Horne (1933)
• H was a car salesman, and left G.
• His contract stated that he wasn’t allowed to
sell to G’s customers for a period after leaving.
• H set up a company which then approached
his former customers;
• H argued that firstly his company was
approaching the customers, not him; and
• secondly, if there was wrongdoing, his
company was liable and not him.

Held: The courts held that the company was

sham, and granted an injunction against
his company as well as him.
3. Protection of revenue
Case: Sir Dinshaw Maneckjee Petit A.I.R
• D was a wealthy man getting huge
dividend and interest income.
• He formed 4 Pvt companies and agreed
with each to hold a block of investments as
an agent for them.
• Dividend received were credited in the
account of company and amount was
handed back to him as a loan
Held: The court held that as the companies
did no business, the four companies were
nothing more than he himself
4. Prevention of fraud or improper conduct
Case: Jones v. Lipman
L agreed to sell a certain land to J.
He subsequently changed his mind and to
avoid the specific performance of contract
he sold it to a company which was formed
specifically for the purpose.
The Co. had L and a clerk of his solicitors
as the only members. J brought an action
for the specific performance against L and
the Co.
• Held: The court looked to the reality of the
situation, ignored the transfer and ordered
that the company should convey the land
to J
5. When the courts recognize an agency
relationship.
Case: Re F.G Films Ltd.
An english Co.was formed with a capital of
$100 in $1 shares, 90 of which were held
by an American the director of United
States Film Co. and 10 were held by an
another director, a British subject.
The company produced a film called
monsoon the production of which was
financed by the company.
Held: The court refused to agree that the
film was made by the British Co. and the
co Was merely the nominee or agent of
United States Film Co
6. Avoidance of Welfare legislation:
Case: Workmen of Associated Rubber
Industry v. Associated Rubber Co.
A subsidiary was formed to split the profits of
the company so that the incidence of
bonus in the hands of parent company will
be reduced.
Held: The court disregarded the existence of
a separate company for the purpose of
working out bonus for its employees
Statutory Exceptions
1. Number of members below statutory limit
2. Failure to refund application money
3. Misdescription of company’s name
4. Fraudulent trading
5. Holding and subsidiary Company
Company distinguished from Partnership
1. Regulating Act
2. Mode of creation
3. Legal status
4. Liability of member
5. Management
6. Transferability of interest
7. Authority of members
8. Powers
9. Restriction on powers
10. Insolvency of firm and winding up
11. Debts
12. Dissolution
13. Number of members
14. Maintenance of books
 THANK YOU

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