Page 206 - DMGT407Corporate and Business Laws

Unit 7: Concept of a Company

Where a company has control over another company, it is known as the Holding Company Notes
and the company over which control is exercised is called the Subsidiary Company.

Foreign Company is a company incorporated in a country outside India and has a place of
business in India.

7.7 Keywords

Common Seal: It is the official signature of a company.

Holding Company: Where a company has control over another company, it is known as the
Holding Company.
Public Company: It means a company which is not a private; has a minimum paid-up capital of
` 5 lakhs.
Subsidiary Company: The Company over which control is exercised is called the Subsidiary
Company.

Unlimited Company: It is a company not having any limit on the liability of its members.

7.8 Review Questions

1. “The legal personality of a company is distinct from its members individually and
collectively”. Comment and point out the circumstances when the separate entity of a
company is disregarded by the courts.
2. Explain the meaning of ‘Perpetual Succession’ and ‘Common Seal’ in the case of a company.
3. Write explanatory notes on:

(i) Minimum number of members of a company
(ii) ‘Illegal Association’
(iii) Maintenance of minimum number of members of a company.

4. Savoy Ltd., had eight members at the time of incorporation. Within two months, two of
the members transferred their shares to one of the existing members. By the end of the
year, the company went into liquidation. All the shares are fully paid-up. The creditors of
the company sought to recover their dues from the company. The liquidator demanded
money from the shareholders, who refused to accept any liability; their shares being fully
paid-up. Explain the legal position.
5. A husband and wife who were the only two members of a private ltd., company were
killed in a motor accident. Does the company also die with them?
6. State the principles of law laid down in Salomon vs Salomon & Co.
7. What is the significance of the concept of limited liability?

8. What do you understand by ‘Corporate Veil’? When is this said to be lifted?
9. State the various classes of companies that can be formed under the act. Explain the
characteristics of each.

10. What does a private company have to do in order to become a public company?

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