sem v corporate law i

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CCOOR R PPOOR R AATTEE LLAAWW -- II

COURSE OUTLINE

SEMESTER V

______________________________________________________________________

IINNTTR R OODDUUCCTTIIOONN

Corporate form of ownership is the most important form of ownership of business in

the contemporary times. Its significance is due to many distinct advantages it has over other

forms of ownership of business. In order to regulate various aspects of functioning of

companies, Company Act was enacted in the year 1956. Till date this has been the lengthiest

piece of legislation ever passed by the Indian Parliament. The emphasis in this course is on

the fundamental principles of law relating to basics of Corporate Law covering topics right

from the pre-incorporation to the establishment and management of a company.

DETAILS OF THE COURSE OUTLINE

MMOODDUULLEE II.. CCOOMMPPAANNYY AASS AA MMEEDDIIUUMM OOFF BBUUSSIINNEESSSS

Company, as a form of ownership, developed in order to address the requirement of

business at that time. It is a statutory creation and it has different forms to suit different

requirements of business and trade. Law recognize veil by dissociating members from

company and also the grounds on which corporate veil may be lifted.

History of Company Legislation - UK

Corporate personality – Concept

Nature and Features of a Corporate Body

Theories of corporate personality.

Lifting of corporate veil

Classification of company

Company as distinguished from other forms of business

MMOODDUULLEE IIII.. PPR R EE--IINNCCOOR R PPOOR R AATTIIOONN PPHHAASSEE

Being statutory creations, companies are created by promoters. Promoters play a very

strategic role. It is through their expertise and efforts that a company is born. In


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cotemporary times, task of promotion has professionalized. Law has the task of balancing

the protection of their interests on the one hand and on the other hand to protect the interest

of the company. Further it maintains sanctity of contracts entered into by promoters.

Promoters - Promotion of company Promoters: Position, Duties and Liabilities

Pre-incorporation contracts

MMOODDUULLEE IIIIII.. IINNCCOOR R PPOOR R AATTIIOONN OOFF AA CCOOMMPPAANNYY

A company is incorporated upon its registration. Registration confers many

advantages on the company. Both MoA (constitution of the company) and AoA (rules for

internal functioning) are necessary for getting a company registered. Moa contains the

fundamental conditions upon which the company is allowed to be incorporated. The three

common law doctrine protects the interest of different stakeholders involved.

Memorandum of Association

Doctrine of Ultra Vires

Articles of Associations

Doctrine of Indoor Management

Doctrine of Constructive Notice

Incorporation and its consequences on Corporate Transactions

o Certificate of Incorporation

o Certificate of Commencement

MMOODDUULLEE IIVV.. R R AAIISSIINNGG OOFF CCAAPPIITTAALL

In order to finance its activities the company needs capital. Capital of a company is

of different kinds. Capital can be raised at the time of formation of the company for starting

a business or later on, for expansion and diversification. But once raised it becomes the

permanent liability of the company. And such capital is raised by issuing prospectus in the

market which arouses interest of the investors in the company and it induces them to invest

in the company. It may be generated through different means from various sources (e.g.


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public and private). Each mean is well regulated through a combination of Companies Act,

1956 and different regulations made by SEBI for this purpose.

Prospectus –

o

Meaning, Issue and Contents.o Kinds of Prospectus – Abridge Prospectus, Statement in lieu of Prospectus; Shelf

prospectus.

o Liability of misstatements in Prospectus

Shares / Share Capital –

o Meaning and Nature

o Kinds of Shares

o Issue of shares – IPO, FPO, Rights issue, Bonus Issue

o

Allotment, Transfer, Forfeiture, Surrender of shareso Membership of company: modes of acquisition, eligibility; liability; Rights;

Cessation of Membership;

o Alteration & Reduction of share capital.

Debenture / Debt Capital –

o Meaning & characteristics

o Kinds of Debentures

o Debenture Trustees, Debenture Trust Deed, Debenture Stock

Dividend – declaration; payment; interim dividend

MMOODDUULLEE VV.. CCOOR R PPOOR R AATTEE MMAANNAAGGEEMMEENNTT ((DDIIR R EECCTTOOR R SS))

The institution of the company is composed of two organs, the general body of

shareholders and the board of directors. The board in other words can be described as the

managerial body and it is constituted by the general body. Directors perform multitude of

functions in a company. They make policies and execute them. It is their duty to ensure

compliance with all laws. In fact their role is the principal component of emerging

structures of corporate governance. Their liability continues to be the highly contentious

issue.

Directors


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o Concept and Definition

o Kinds of Directors

o Powers and Duties of Directors

o Qualification, Appointment, Removal.

MMOODDUULLEE VVII.. CCOOR R PPOOR R AATTEE MMAANNAAGGEEMMEENNTT ((MMEEEETTIINNGGSS))

Protection of the investors is one of the primary objectives of Corporate Law. One of

the forum through which such an objective is fulfilled are the meetings of a company and

the business is also transacted through these different kinds of meeting. Their procedure is

well regulated through law. It is at the meeting that majority and minority friction comes

out in the open.

Meetingso Meaningo Kinds of Meetingo Voting

B OOKS T O B E R EFERRED

Ramaiyya, Guide to Companies Act, 1956

Charlesworth & Morse, Company Law

Gower & Davies, Principles of Modern Company Law

K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman

Pennington, Company Law

Palmer, Company Law

K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman

Avtar Singh, Company Law

Nicholas Bourne, Principles of Company Law

S TATUTES & SEBI R EGULATIONS T O B E R EFERRED

Companies Act, 1956

Securities and Exchange Board of India Act, 1992


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(Issue of Capital and Disclosure Requirements) Regulations, 2009

Depositories Act, 1996

Securities Contract Regulation Act, 1956

C ASES T O B E R EFERRED

Saloman v. Saloman & Co. Ltd.(1895-99)AllER Rep.33

Lee v. Lee;s Air Farming Ltd.(1960)3 AllER 420

Dhulia – Amalner Motor Transport Ltd v. R.R. Dharamsi AIR 1952 Bom. 337:

Daimler Co. Ltd. v. Continental Tyre & Rubber Co. Ltd. (1916-17) AllER Rep. 191

Bacha F. Guzadar v. CIT Bombay AIR 1955 SC 74

Gilford Motor Co. Ltd. v. Horne (1933) AllER 109

Workman v. Associates Rubber Industry Ltd. (1985) 4 SCC 114

Pratap Singh v. Bank of America (1976)46 Com. Cases 532

Babulal Chaukhani v. Caltex (India) Ltd. AIR 1967 Cal 205

Macaura v. Northern Assurance Co. Ltd, 1925 AC 619 HL

Minerva Mills Ltd. v. Govt. of Maharashtra (1975) 45 Com. Cases 1

Orient Paper Mills Ltd. v. State of Orissa AIR 1957 Orissa 232

Rank Film Distributors v. ROC AIR 1967 Cal 32

In re, Machinon Macknize & Co. (1967) ComLJ 200

Bell Houses Ltd. v. Citywall Properties Ltd. (1966) 2 AllER 674

A.L. Mudaliar v. LIC AIR 1963 SC 1185

Royal British Bank v. Turquand (1943-60) AllER Rep.435

Freeman v. Buckhurst Park Properties (1964)1AllER 630

Regal (Hasting) Ltd. v. Gulliver (1942) 1 AllER 378 Percival v. Wright (1902) 2 CH 421

Industrial Development Consultants Ltd. v. Cooley (1972) 2 AllER 162

Note: Apart from the cases that have been mentioned above, the students are also advised to

take note of the other cases mentioned in the books and discussed in the class.

sem v corporate law i

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