Question No.1

is a statutory creation and it has different forms the suit different
requirements of business and trade. Law recognize veil of incorporation by
distancing members from company and also the grounds on which corporate veil
may lifted. Discuss?

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1.                 COMPANY


word ‘Company’ has no strictly technical or legal meaning. In the terms of the
Companies Act, a company means a company formed and registered under the
Companies Act. In common law a company is a ‘legal person’ or ‘legal entity’ separate
from, and capable of surviving beyond the lives of, its members. Like any
juristic person, a company is legally an entity apart from its members, capable
of rights and duties of its own, and endowed with the potential of perpetual
succession. But the company is not merely a legal institution. It is rather a
legal device for the attainment of any social or economic end and to a large
extent publicly and socially responsible. It is, therefore, a combined
political, social, economic and legal institution. Thus the term has been variously
described. It is a means of co-operation in the conduct of an enterprise.
Corporate device is one form of associated enterprise. It is an intricate, centralized,
economic administrative structure run by professional managers who hire capital
from the investor.

                        In a practical way, a
company means a company means a company of certain persons registered under the
Companies Act. Two or more persons who are desirous of carrying on joint
business enterprises, have the choice of either forming, a company or a
partnership. Partnership is a suitable device for a small scale business which
can be financed and managed by a small group of partners who take personal
interest and there is mutual trust and confidence among them. But where the
enterprise requires a rather greater mobilization of capital which the
resources of a few persons cannot provide, the formation of a company is the
only choice. Even for a small scale business the choice of a company would be
better, as this is the only form ofbusiness organization which offers the
privilege of limiting personal liability for business debts. Accordingly, the
company has become the most dominant form of business organization. One of the
best assessments in reference to companies in the context of the modern
economies in enshrined in the following words:


abound in the national economy. Ranging from the small family or partnership
concern to the faceless multinational corporation, they provide the structural
framework of the modern industrial society.”


2.                 CORPORATE


                        A body corporate during
the 17th and 18th centuries could be brought into
existence either by a Royal Charter or by a special Act of Parliament. Both
these methods were very expensive and dilatory. Consequently, to meet the
growing commercial needs of the nation, large unincorporated partnerships came
into existence, trading, however, in corporate form. The membership of each
such concern being very large, the management of the business was left to a few
trustees. This resulted in separation of ownership from management. Trustees
had the opportunity of trading with other people’s money. Rules of law applicable
to such companies were not yet developed. Consequently, fraudulent promoters had
a unique opportunity of exploiting public money. Many spurious companies were
created which would appear only to disappear resulting in loss to the investing
public. The English Parliament, therefore, passed an Act, known as the Bubbles
Act of 1720 which, instead of prohibiting the formation of fraudulent
companies, made the very business of promoting companies illegal. This proved
to be a great setback to the expanding trade and commerce. Yet the Act remained
on the statute book for over a century. It was repealed in 1825. But it was
only in 1844 that registration and incorporation of large partnerships was made
compulsory. The Joint Stock Companies Act of 1844 was the first legislative
measure which facilitated registration, although the concerns registered under
it were still known as partnerships and the principle of unlimited liability
was maintained. The right to trade with limited liability was granted in 1855
and a year later in 1856 the whole law relating to such companies was
consolidated. Since then Companies Acts have been considerably amended,
enlarged and improved upon until we get to the English Acts of 1948 and 1985
and of 1989.

                        The history of Indian
Company Law began with the Joint Stock Companies Act of 1850. Since then the
cumulative process of amendment and consolidation has brought us to the most
comprehensive and complicated piece of legislation, the Companies Act, 1956. But
even so it is not exhaustive of all the modes of incorporating business
concerns. Organisations for business or commercial purposes






4.         CASE LAW












A.        Memorandum of Association

of ultra vires


B.        Articles of Association


of Indoor manage merit

C.        Doctrine of Constructive notice:


D.        Veil of incorporation by distancing members.


E).       Grounds of lifting of corporate veil


9.         CONCLUSION:




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