Law Marathon Part 1 176 256
Law Marathon Part 1 176 256
Companies Act
Definition of company (Sec.2(20))
Company
Incorporated Or Under any
under this Act other
previous law
1913
2013
1942
1956
Sec. 1 of Companies Act, 2013
Incorporated Association • Comes into existence once registered under companies Act.
I
C Capacity of sue or being sued • In his own name
• Metallic seal in which name of Co. engraved.
C Common Seal • Used where signature required
• Now not compulsory instead 2 director or 1 dir + 1secretary can authorize
Question
In the Flower Fans Private Limited, there are only 5 members. All of
them go in a boat on a pleasure trip into an open sea. The boat
capsizes and all of them died being drowned. Explain with reference to
the provisions of Companies Act, 2013:
(i) Is Flower Fans Private Limited no longer in existence?
(ii) Further is it correct to say that a company being an artificial
person cannot own property and cannot sue or be sued? [RTP June
2023] [MTP Jun 2022(3 Marks)]
Answer
(i) Perpetual Succession – A company on incorporation becomes a separate legal
entity. It is an artificial legal person and have perpetual succession which
means even if all the members of a company die, the company still continues
to exist. It has permanent existence.The existence of a company is
independent of the lives of its members. It has a perpetual succession.
In this problem, the company will continue as a legal entity. The company's
existence is in no way affected by the death of all its members.
(ii) The statement given is incorrect. the company being a separate legal
entity can own property, have banking account, raise loans, incur liabilities and
enter into contracts. Even members can contract with company, acquire right
against it or incur liability to it. It can sue and be sued in its own name. It can do
everything which any natural person can do except be sent to jail, take an oath,
marry or practice a learned profession. Hence, it is a legal person in its own
sense.
Macaura vs Nothern Assurance Co. Ltd.
Fact of Macaura was holder of nearly all shares and also major creditor of Co.
Case M insured Co.’s timber in his own name
Timber lost in fire
Can M claim insurance compensation
Ltd. by
Ltd by shares Both
Guarantee Liability of
members is
Issue shares Accept Issue shares unlimited to
and make guarantee and and accept
make guarantee to extent of
members
members make liability of
members members company
members
liable only
liable only for Members
for unpaid unpaid value liable for both
value of of guarantee unpaid value
shares of shares and
guarantee
Classification on basis of listing
Note: -To be listed company only it’s equity shares should be listed that too
in India.
Question
Explain listed company and unlisted company
as per the provisions of the Companies Act,
2013.
[Nov. 2022 (2 Marks)]
GOVERNMENT COMPANY SEC. 2 (45)
Means any company in which not less than fifty- one per cent. of the paid-up share
capital (having voting rights ) is held by-
i. the Central Government, or
iii. partly by the Central Government and partly by one or more State Governments,
Specified Notified
a) LIC
Rules to notify
b) Infrastructure development
a) Constituted under any Central
finance company ltd. or State Act
c) UTI b) Not less than 51%
d) Institutions already notified ↓
under 1956 Act
Paid up Capital
e) Any other notified by CG in ↓
consultation with RBI
CG/SG/ Partly by CG and partly by SG
DORMANT COMPANY
Note - “Inactive company” means a company which has not been carrying on any
business or operation, or has not made any significant accounting transaction
during the last two financial years, or has not filed financial statements and annual
returns during the last two financial years
Question
3. MTK Private Limited is a company registered under
the Companies Act, 2013 on 5th January, 2021. The
company has not started its business till now. On 7th
April, 2023, a notice has been received from ROC for
non-filing of FORM No-INC-20A. Identify under which
category MTK Private Limited company is classified.
Explain the definition of the category of the company in
detail.
[Dec 2023(3 Marks)]
Answer
“Inactive company” means a company which has not been carrying on any business or
operation, or has not made any significant accounting transaction during the last two
financial years, or has not filed financial statements and annual returns during the last
two financial years. [Explanation (i) to Section 455 of the Companies Act, 2013]
“Significant accounting transaction” means any transaction other than—
(a) payment of fees by a company to the Registrar;
(b) payments made by it to fulfil the requirements of this Act or any other
law;
(c) allotment of shares to fulfil the requirements of this Act; and
(d) payments for maintenance of its office and records.
[Explanation (ii) to Section 455 of the Companies Act, 2013]
In the instant case, MTK Private Limited was registered on 5th January, 2021 and
has not started its business till now. On 7th April, 2023, a notice has been received from
ROC for non-filing of Form No. INC-20A. Since the Company has not started its business
and a period of more than two years have already elapsed, it will be treated as an
inactive company.
Nidhi Company [Sec. 406]
• created mainly to cultivate habit of
Cost thrift & saving
Amounts it’s members
• Main function to Borrow money
Among it’s members
Lend money
Conclusion -In the given question, Quick Finance Limited being external to the
company, need not enquire whether the necessary resolution was passed
properly. Even if Aarna Limited claims that no resolution authorizing the loan was
passed, Aarna Limited is bound to repay the loan to Quick Finance Limited.
Exceptions to Indoor Management
1. Knowledge of Howard vs Patent Ivory Manufacturing company
irregularity
2. Negligence Anand Bihari Lal vs Dinshaw & Company
Suspicious
Circumstances or
unusual magnitude of
transactions
3. Forgery Ruben vs Great Fingall Consolidated Company
Subscribed Unsubscribed
• That part of issued capital that has been That part of issued capital that has not
subscribed by members been subscribed
• Two types
Called up Uncalled
• That part of subscribed capital that has been That part of subscribe capital that
called for payment has not been called payment
• two types
Paid Unpaid
That part of called up capital which is paid that part of called up capital which is
by members unpaid by members
*Shares
Share means share in share capital of company
Movable property (Sec 44)
Every share have distinct no. (Sec. 45)
except in demat form
Two types of shares (Sec. 43)