1Companyis a statutory creation and it has different forms the suit differentrequirements of business and trade. Law recognize veil of incorporation bydistancing members from company and also the grounds on which corporate veilmay lifted. Discuss?Answer: 1. COMPANYINTRODUCTION: Theword ‘Company’ has no strictly technical or legal meaning. In the terms of theCompanies Act, a company means a company formed and registered under theCompanies Act. In common law a company is a ‘legal person’ or ‘legal entity’ separatefrom, and capable of surviving beyond the lives of, its members. Like anyjuristic person, a company is legally an entity apart from its members, capableof rights and duties of its own, and endowed with the potential of perpetualsuccession. But the company is not merely a legal institution.
It is rather alegal device for the attainment of any social or economic end and to a largeextent publicly and socially responsible. It is, therefore, a combinedpolitical, social, economic and legal institution. Thus the term has been variouslydescribed. 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 capitalfrom the investor. In a practical way, acompany means a company means a company of certain persons registered under theCompanies Act. Two or more persons who are desirous of carrying on jointbusiness enterprises, have the choice of either forming, a company or apartnership.
Partnership is a suitable device for a small scale business whichcan be financed and managed by a small group of partners who take personalinterest and there is mutual trust and confidence among them. But where theenterprise requires a rather greater mobilization of capital which theresources of a few persons cannot provide, the formation of a company is theonly choice. Even for a small scale business the choice of a company would bebetter, as this is the only form ofbusiness organization which offers theprivilege of limiting personal liability for business debts. Accordingly, thecompany has become the most dominant form of business organization. One of thebest assessments in reference to companies in the context of the moderneconomies in enshrined in the following words: “Companiesabound in the national economy.
Ranging from the small family or partnershipconcern to the faceless multinational corporation, they provide the structuralframework of the modern industrial society.” 2. CORPORATEPERSONALITY (CONCEPT): A body corporate duringthe 17th and 18th centuries could be brought intoexistence either by a Royal Charter or by a special Act of Parliament. Boththese methods were very expensive and dilatory. Consequently, to meet thegrowing commercial needs of the nation, large unincorporated partnerships cameinto existence, trading, however, in corporate form. The membership of eachsuch concern being very large, the management of the business was left to a fewtrustees.
This resulted in separation of ownership from management. Trusteeshad the opportunity of trading with other people’s money. Rules of law applicableto such companies were not yet developed. Consequently, fraudulent promoters hada unique opportunity of exploiting public money. Many spurious companies werecreated which would appear only to disappear resulting in loss to the investingpublic.
The English Parliament, therefore, passed an Act, known as the BubblesAct of 1720 which, instead of prohibiting the formation of fraudulentcompanies, made the very business of promoting companies illegal. This provedto be a great setback to the expanding trade and commerce. Yet the Act remainedon the statute book for over a century. It was repealed in 1825. But it wasonly in 1844 that registration and incorporation of large partnerships was madecompulsory.
The Joint Stock Companies Act of 1844 was the first legislativemeasure which facilitated registration, although the concerns registered underit were still known as partnerships and the principle of unlimited liabilitywas maintained. The right to trade with limited liability was granted in 1855and a year later in 1856 the whole law relating to such companies wasconsolidated. Since then Companies Acts have been considerably amended,enlarged and improved upon until we get to the English Acts of 1948 and 1985and of 1989. The history of IndianCompany Law began with the Joint Stock Companies Act of 1850. Since then thecumulative process of amendment and consolidation has brought us to the mostcomprehensive and complicated piece of legislation, the Companies Act, 1956. Buteven so it is not exhaustive of all the modes of incorporating businessconcerns.
Organisations for business or commercial purposes 3. NATURE AND FEATURES OF CORPORATE BODY: 4. CASE LAW I). Ii). 5.
THEORIES OF CORPORATE PERSONALITY: 6. PRE-INCORPORATION CONTRACTS: 7. PROMOTERS, POSITION, DUTIES, LIABILITIES: 8. INCORPORATION OF A COMPANY.
A. Memorandum of Association Doctrineof ultra vires B. Articles of Association Doctrineof Indoor manage meritC. Doctrine of Constructive notice: D. Veil of incorporation by distancing members. E). Grounds of lifting of corporate veil 9. CONCLUSION: