Page 29 - DCOM106_COMPANY_LAW

Company Law

Notes 6. Minimum Membership: The minimum number of persons required to form a partnership
is two. The minimum number required to form a private company is two and in the case
of a public company the minimum number is seven.
7. Maximum Membership: A partnership cannot be formed by more than twenty persons.
The number is limited to ten in the case of a banking business. In the case of a public
company, there is no limit to the maximum number of members. However, a private
company cannot have more than fifty members.

8. Audit: The audit of the accounts of a firm is not compulsory, whereas the audit of accounts
of a company is mandatory.
9. Use of the Words ‘Limited’ and ‘Private Limited’ not Allowed: Section 631 provides that if
any person or persons trade or carry on business under any name or title of which the
words, “Limited” or “Private Limited” are the last words, that person or each of these
persons shall, unless duly incorporated as a public or a private company, as the case may
be, be punishable with fine which may extend to 500 for every day upon which that name
has been used.

Self Assessment

State whether the following statements are true or false:
11. The corporate veil can be lifted where the main object of forming a company is tax evasion.

12. The corporate veil can be lifted where it has been formed by the promoters to avoid their
contractual obligation.
13. An illegal association means a company formed to pursue illegal objects.

14. The corporate veil can be lifted where the company is formed against public policy.
15. A holding company and its subsidiary company are not separate legal entities.

Case Study Company’s Responsibilities in different prospective

he Carbolic Smoke Ball Company made a product called the “smoke ball”. It claimed
to be a cure for influenza and a number of other diseases. The smoke ball was a
Trubber ball with a tube attached. It was filled with carbolic acid (phenol). The tube
was then inserted into the user’s nose. It was squeezed at the bottom to release the vapours
into the nose of the user. This would cause the nose to run, and hopefully flush out the
cold. In fact the inflammation caused by the device would have probably increased
susceptibility to catching influenza.
The Company published advertisements in the Pall Mall Gazette and other newspapers
on November 13, 1891, claiming that it would pay £100 to anyone who got sick with
influenza after using its product according to the instructions set out in the advertisement.

£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the
increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball
three times daily for two weeks, according to the printed directions supplied with each ball.

Contd...

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