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Company Law
Notes 4.6 Form of Contracts made by Companies
Section 46 provides that a company can, in general, contract in the same form as an individual.
Thus, a contract which, if made between private persons, is required to be in writing, may be
made on behalf of the company also in writing. It should be signed by a person acting under the
express or implied authority of the company. Such contracts may also be varied or discharged in
the same manner. Also, a contract which would be valid if made between private persons
although made orally or by parol on behalf of the company by any person acting under express
or implied authority. Such contracts could also be varied or discharged in the same manner.
Some contracts are required to be under seal and, therefore, s.147 requires every company
incorporated under the Act to have a common seal upon which its name should be engraved in
legible characters.
Under s.50, a company may obtain power through its articles to have an official seal, for use
outside India. This is in addition to a common seal.
Self Assessment
State whether the following statements are true or false:
9. A promoter stands in a fiduciary relationship with the company he promotes.
10. The validity of a certificate of incorporation cannot be disputed on any grounds whatsoever.
11. After the grant of certificate of incorporation, if all the subscribers to the memorandum
die, the certificate of incorporation automatically gets cancelled.
12. Unlike a private company, a public company cannot commence business immediately
after incorporation.
13. A certificate of incorporation is conclusive evidence that all the requirements of the
Companies Act, as regards registration have been complied with.
Case Study Company Differences
t would have been business as usual at multinational drug-maker Pfizer’s annual
shareholder meeting, but for a dissenting LIC representative who opposed two enabling
Iproposals to increase the salary of the managing director and the commission of two
Indian non-executive directors, respectively.
LIC totally holds 14.38 per cent in Pfizer, and the LIC representative told that he was
communicating the decision taken by the corporation. He was, however, unable to give
reasons behind the decision. Market observers indicated that LIC could push for a poll on
the proposal, given its equity holding.
One of the enabling resolutions was regarding Pfizer’s Managing Director in India,
Mr. Kewal Handa’s salary, proposing that it be increased from its 2007-level of 1.80 crore
to a maximum of 2.50 crore a year.
The other enabling resolution was with reference to resident non-executive directors
Mr. R. A. Shah and Mr. Pradip Shah, seeking to raise their commission, at the rate of one
per cent of the company’s profit, up to 50 lakh a year.
Contd...
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