1.
Corporate Law
By
Cheshta (03)
Shubham (169)

2.
This Presentation Is All About
Company…..
Meaning
Definition
Characteristics
Lifting of Corporate
Veil
Kinds of Company

3.
Meaning of Company
It is an artificial person
having separate entity
from
its members with
perpetual
succession and common
seal.

4.
Definition of a Company
According to the Companies Act 1956, a
company means “A company formed and
registered under the Companies Act 1956
or an existing company:
[Section 3(1)(i)].An existing company
means a company formed and registered
under any of the former Companies Acts.”

5.
Characteristics OF Company
Artificial Personality
Separate Legal Entity
Voluntary Incorporated
Association
Number of
Members/Subscribers
Perpetual Succession
Common Seal
Limited Liability

6.
Classificationofcompanies
Classification on the basis of
Incorporation;
Classification on the basis of
Liability;
Classification on the basis of
number of members;
Classification on the basis of
Control;
Classification on the basis of
Ownership

7.
Classification on the basis
of
Incorporation
1. Chartered Companies-A Company
which have formed and incorporated
under a special charter granted by the
king or queen.
2. Statutory Companies-Companies which
are incorporated by special act.
3. Registered Formed and registered with
registrar of companies under the Companies
Act.

8.
Classification on the basis of
Liability
A.) Limited by Shares: Is the one where the
liability of members is limited to the face value
of shares that the members have in the
Company.
B.) Limited by Guarantee: Is the one where the
liability of members is limited to a fixed amount
which they have guaranteed on. This is where
members have agreed to contribute their assets
to pay the outstanding liabilities of the
company in the event of winding up.
C.) Unlimited Co: Is the one where the liability
of members is unlimited. They have to pay the
liabilities of the company from their personal
assets.

9.
Classificationonthebasisof
Control
1.Holding Companies-A company is
known as the holding company Of
another company if it has control
over that company.
2. Subsidiary Companies-A company
is known as a subsidiary of another
company when control is exercised
by the latter over the former
called a subsidiary company.

10.
Classification on the basis
Of
Ownership
A.) Government Co: Is the one which the
central government, state governments or the
central government together with one or more
state governments partly owns not less than
51% of the share capital of the company.
B.) Non government Company: Is the one that
is owned and managed by private investors.

11.
 On the Basis
Of
Members
A.) Private Company: It is defined as the
one with a minimum of twenty members
but with a maximum of 200 members.
B.) Public Company: Is defined as the one
with a minimum of seven members but
with no maximum number of members.

12.
LiftingThe CorporateVeil
Lifting of corporate veil is a
fiction
of law, which means disregarding
the separate legal entity of a
company and identifying the
realities which lay behind the
legal façade

13.
Exceptional cases
#1-Excess or
Violation of
Statutory
Provisions
#2-Judicial
Interpretation

14.
Statutory Provisions
#1-Investigation in the affairs of a company – if an
inspector has been appointed under Sec
210,121,or213 of the companies act to investigate
the affairs of any other related company under the
same management.
#2-For investigation of ownership of company-
Under Sec 216 the central government may appoint
an inspector to investigate the membership of any
company for the purpose of determining the
persons who have financial interest in the company
and control or materially influence its policies.
#3-Liability of promoters for pre-incorporation
contracts- Promoters will be personally liable for all
those pre-incorporation contracts which are not
adopted by the company after incorporation.

15.
#4-Directors with unlimited liability- Sometimes when the directors, through a
written agreement ,agree to have their liability made unlimited they become
personally liable for all the debts of the company.
#5-Misrepresentation in prospectus- If there is misrepresentation in prospectus
then every promoter,director or any other person who authorises the issue of such
a prospectus shall be liable to the investors who purchased the shares on the basis
of misleading prospectus . They shall also be criminally liable under Sec 34 and
punishable under Sec 447 for fraud.
#6-Failure to return application money – If minimum subscription is not received
within a period of 30 days from the date of issue of prospectus,or such other
period as specified by SEBI the application money should be returned in such time
and manner as may be prescribed Sec 39(3). In case of default,company and its
officer who is in the default shall be liable to a penalty for each default of Rs1000
for each day during which default continues or Rs100,000 whichever is
less.[sec39(5)].

16.
Judicial Interpretations
#1-For the protection of revenue – The court will ignore
the separate entity of the company if the company has been
formed for the purpose of evading income-tax.
•Case:- Dinshaw Maneckjee Petit: In this case, the assesseeformed
four companies and transferred his investments to eachof these
companies in exchange for shares. Now the companies received
his income but they handed back the amount to him as pretended
loan. His income was divided into four parts reducing his tax
liability. It was held that the companies did no business and were
created by the assessee simply as the means for avoiding tax.

17.
#2-Fraud or improper conduct- The court has lifted corporate veil where the company
seems to have been formed to defraud creditors or to avoid legal obligations.
•Case:-Gilford Motor Co. vs. Horne: In this case, Horne was appointed as the Managing
Director of Gilford Motor Co., under an agreement that contained a condition that he shall
not solicit away the customers of the company. But Horne formed a company which
resorted to solicitation in violation of the contract. The court restrained the company.
#3-For determination of the enemy character of the company-Sometimes it becomes
necessary to find out whether the individuals running the company are friends or
enemies, especially during war.
•Case:-Daimler Co. Ltd. vs. Continental Tyre and Rubber Co. (GreatBritain) Ltd.: In this
case, a company was incorporated in England for the purpose of selling their tyres
manufactured in Germany by a German company. Its majority shareholders and all the
directors were Germans. On declaration of war between England & Germany in 1914,
the persons in control of its affairs became alien enemies and accordingly the company
was declared to be an enemy company. During the war period the company filed a suit
to recover a trade debt, which was dismissed by the court and observed that such
payment would be a trading with an enemy company and to allow alien enemies to trade
under the corporate façade will be against public policy.