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Unit 3: Kinds of Companies

3.6 One Man Company Notes

A member may hold virtually the entire share capital of a company. Such a company is known
as a ‘one-man company’. This can happen both in a private company and a public company. The
other member/members of the company may be holding just one share each. Such other members
may be just dummies for the purpose of fulfilling the requirements of law as regards minimum
membership [Salomon v. Salomon & Co. Ltd.].

3.7 Incorporation of Company

Section 12 provides for incorporation of companies which need not have a share capital.
A guarantee company is an example of a company without a share capital. However, with the
introduction of the requirement of minimum paid up share capital for a public company and a
private company, the concept of companies without a share capital has become redundant since
2000. However, a company registered under section 25 is not required to have minimum paid up
share requirement. [s. 3(6)]

3.8 Illegal Association

Any company association or partnership carrying on banking business with more than ten
members or carrying on any other business with more than twenty members that has for its
object the acquisition of gain, without being registered under the Companies act, shall be
considered an illegal association.
Exceptions:
Joint family carrying on a business as such is not illegal association.
Stock exchange is not considered an illegal association since it is not formed for the
purposes of carrying on any business.
Disabilities of an Illegal Association:
It cannot enter into any contract, nor can it sue any member or outsider.
It cannot contract any debts.

It has no legal existence. However, it can get registered any time and become legal.
Every member shall be personally liable to unlimited extent for all liabilities incurred in
such business.

Every member shall be punishable with fine which may extend to 10,000.
It cannot be wound up under the Act.
Its members have no remedy against each other for contribution or apportionment in
respect of partnership dealings and transactions.

Self Assessment

State whether the following statements are true or false:
11. A subsidiary company does not control the composition of the board of directors of its
holding company.
12. A subsidiary company does not hold any shares in its holding company.

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