Business Laws: Companies Act (Part 1) || CA Foundation Sep 2024 || OTM Series

CA Wallah by PW・2 minutes read

The text provides an overview of the OTM Revision series, emphasizing syllabus completion by August 29, writing practice, sections of company law, and case law examples. It highlights key concepts like perpetual succession, limited liability, artificial personhood, and the importance of separating a company from its members, along with details on share transferability, member liability, and distinctions between public and private companies.

Insights

  • Perpetual succession is a fundamental aspect of company formation, ensuring continuity beyond individual members.
  • Limited Liability safeguards members, separating personal assets from company debts and obligations.

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Recent questions

  • What is the significance of perpetual succession in a company?

    Perpetual succession is crucial in a company's formation as it ensures that the company continues to exist even if the original members or shareholders change. This means that the company has a continuous and uninterrupted existence, allowing for stability and longevity in its operations.

  • How does limited liability protect members of a company?

    Limited liability ensures protection for members by limiting their financial responsibility to the amount they have invested in the company. This means that their personal assets are not at risk in case the company faces financial difficulties or legal issues beyond the investment made by the members.

  • What does the term "Corporate Veil" refer to in a company?

    The term "Corporate Veil" refers to the legal concept that separates a company from its owners or shareholders. It signifies that the company is considered a separate legal entity, distinct from its members, and is responsible for its own debts, obligations, and actions.

  • How are unsecured creditors prioritized in winding up a company?

    In winding up a company, unsecured creditors are paid first before secured creditors. This means that creditors who do not have collateral or security for their loans or debts are given priority in receiving payments from the company's assets during the liquidation process.

  • What are the restrictions in a private company?

    Restrictions in a private company include no public subscriptions, specific offers allowed, and no acceptance of public deposits. Additionally, the maximum membership limit in a private company is 200, with past and present employee members not counted in this limit. These restrictions are in place to maintain the privacy and control of the company's operations within a limited group of individuals.

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Summary

00:00

OTM Revision Series: Law Exam Preparation Tips

  • OTM Revision series for September 24 Examination released for September children
  • Focus on completing syllabus revision and writing practice
  • OTM series for revision and writing practice sessions
  • Schedule includes complete law revision by August 29
  • Analysis of A.B.C. and potential questions during revision
  • Emphasis on writing practice with important questions
  • Discussion on Section B as an important section
  • Features of a company: Perpetual succession, Limited liability, Artificial person, Separation of ownership from management
  • Transferability of shares in public and private companies
  • Common Seal as the official signature of the company, not compulsory with two directors' signatures
  • Case law example: Makora vs Northern Arenas Company Limited, highlighting company property ownership and insurance implications
  • Conclusion: Shareholders have no direct rights on company property, insurance company not liable to shareholder

17:47

"Company Formation and Legal Entity Protection"

  • Perpetual succession is crucial in a company's formation.
  • Limited Liability ensures protection for members.
  • A company is a legal and artificial entity, not created by natural birth.
  • The term "Corporate Veil" refers to the separation of a company from its members.
  • In the case of Solomon Versus. Selon & Co. Ltd., the company's actions are distinct from its members'.
  • In winding up a company, unsecured creditors are paid first, followed by secured creditors.
  • Lifting off Corporate Veil can lead to the company not being considered a separate legal entity.
  • In the case of Dollar Company Limited vs. Continental Tire and Rubber Company Ltd., the court considered the company and its members as one entity.
  • The obligation case of Workman Off. Associated Rubber Industries focuses on reducing the amount of bonus to avoid tax.
  • Forming a subsidiary to act as an agent can lead to the subsidiary and parent company being considered as one entity.

35:30

"Members' Liability, Private vs Public Companies"

  • Members' liability is that of the members, with no limit for children.
  • Membership continues until liability ends.
  • Unlimited liability arises when a company is winding up.
  • Members' liability is determined by the number of children.
  • Restrictions in a private company include no public subscriptions, specific offers allowed, and no acceptance of public deposits.
  • Maximum membership limit in a private company is 200.
  • Past and present employee members are not counted in the membership limit.
  • Public companies are distinct from private companies and can be subsidiaries of private companies.
  • One Person Company (OPC) requires a natural person, Indian citizenship, and no residency requirement.
  • OPC can convert into any other company, with no restrictions on paid-up capital or turnover.

53:21

"Company Relationships and Shareholder Influence Explained"

  • Children are automatically similar to their parents, like A and B being the same.
  • Subsidiaries of companies can double automatically if they are related.
  • Bacha Bati is the most scared number one.
  • Equity shares are the main focus, not preference shares.
  • Holding more than half of a company's equity shares is crucial.
  • Associate companies can have significant influence without being subsidiaries.
  • Voting rights above 20% can lead to a company becoming a subsidiary.
  • Joint Venture Companies are associates of each other.
  • Government companies require at least 51% of paid-up share capital to be held by the Central or State Government.
  • Section A companies promote non-profit objectives and can distribute dividends to members.

01:13:23

Company Act: Payment, Active vs. Dormant Companies

  • Payment will be made to the registrar from brother आ से for share allotment starting next A.
  • Active companies are those carrying out business operations for the past two financial years, while dormant companies are not.
  • Nidhi Company, a mutual benefit company, encourages savings habits among its members.
  • Important sections of the Company Act, such as Private Company, OPC, Small Company, Government Company, and others, are crucial to remember for the upcoming session.
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