Page 217 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes Floatation: It means company can go ahead with raising capital sufficient to commence business
and to conduct it satisfactorily.
Memorandum of Association: The document that governs the relationship between the company
and the outside and one of the documents required to incorporate a company.
Promoter: The persons who assume the task of promotion are called promoters.

8.7 Review Questions

1. Who is a promoter of a company? Discuss, citing legal cases, his legal position in relation
to the company he promotes.
2. What are the liabilities of promoters under the Companies Act, 1956?

3. Describe the various stages of incorporation of a public company limited by shares. What
documents are required to be filed for incorporation? Discuss the nature and purpose of
such documents.

4. State the steps you would take to obtain a certificate of incorporation.
5. What are the conditions precedent to be complied with by a company for obtaining a
certificate to commence business? Are these conditions applicable to all classes of
companies?
6. What are the steps you would take to get hold of Certificate of commencement of business
in the case of a public limited company?
7. A promoter stands in a fiduciary relationship with the company he promotes. Explain.
8. Akash and Suman have been carrying on business in partnership as building contractors
in a small town for some years. They carry on most of the work themselves and only
occasionally employ labour. They have no plans to enlarge the area of their operations. It
has been suggested to them that they ought to trade as a private company limited by
shares. What are the alleged advantages of trading as a private company limited by
shares? Are there any disadvantages in so trading?
9. Shyam forges all the seven signatures on a memorandum of association, and he obtains a
certificate of incorporation. After some time, the registrar comes to know and wants to
revoke the certificate. Can he do so?
10. The registrar of companies issued a certificate of incorporation on 8 January, 2006. However,
by mistake, the certificate was dated 5 January, 2006. An allotment of shares had been
made on 7 January, 2006. Can the allotment be declared void on the ground that it was
made before the company was incorporated?

Answers: Self Assessment

1. Promotion 2. promoters
3. fiduciary 4. original
5. undesirable 6. conclusive

7. seven 8. private arrangement
9. certificate of incorporation 10. prospectus
11. Floatation 12. 149

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