Company Law

COMPANY LAW

NATURE AND ADVANTAGES

Incorporation offers the following advantages to the business community as compared with all other kinds of business organisations.

1.     Independent Corporate Existence

The outstanding feature of a company is its independent existence.  A partnership has no existence apart from its members.  It is nothing but a collection of partners.  A company on the other hand, is in law a person.  It is a distinct legal persona existing independent of its members. By incorporation under the Act, the company is vested with a corporate personality, which is distinct from the members who compose it.  One of the effects of incorporation is stated in Section 34(2) of the Act.  It  says that upon the issue of the certificate of incorporation,  the subscribers to the memorandum and other persons who may from time to time be the members of the company, shall be a body corporate capable forthwith of exercising all the functions of an incorporated company and having perpetual succession and common seal.  Thus a company becomes a body corporate which is capable immediately of functioning as an incorporated individual.  A well known illustration of this principle is the decision of the House of Lords in Salomon  Vs.  Salomon  & Co. Ltd. (1897) 

Capacity to Contract

Capacity to contract

 One of the essentials of a valid contract, mentioned in section 10, is that the parties to the contract should be competent to make the contract.  According to section 11 :

“Every person is competent to contract who is of age of majority according to law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”

It means that the following three categories of persons are not competent to contract.

1. A person who has not attained the age of majority, i.e., one who is minor.
2. A person who is of unsound mind
3. A person who has been disqualified from contracting by some law.

Payment of Bonus Act 1965

Promulgated on May  26, 1965

Subsequently accepted by parliament and enacted in 1965

Main objectives are:  

– To impose statutory obligation on the employer of every establishment defined in the act, to pay bonus to all eligible employees working in the establishment.
–To outline the principals of payment of bonus according to prescribed formula.
–To provide for payment of minimum and maximum bonus .
–To provide necessary machinery ,to enforce the payment of bonus.

The Factories Acts, 1948

First factory act passed in 1881

Replaced by factories act 1934

Factories Act 1948 consolidated previous laws which was amended in 1954 and 1987

Meaning

Factory means any premises

10 workers working with power on any day in preceding 12 months

20 or more without power, should be involved in manufacturing process
Followings are Factories
Establishments which prepare articles of food and drink
Salt workers: with temporary shed
Railway workshops and not railway running shed
A water works for pumping of water is also a factory

The Trade Union Act, 1926

Objectives

–Provides for registration of trade unions with a view to render lawful organization of labor to enable collective bargaining

Scope and Coverage

–Extends to whole of India and applies to all kind of unions of workers and associations of employees which aim at regularizing the labor management relations

Meaning

As per section 2(u), a trade union means any combination, whether temporary or permanent, formed primarily to regulate the relations between workmen and employers or workmen and workmen or employers and employers and for imposing any restrictive conditions on the conduct of any trade or business
Salient Provisions

INDUSTRIAL DISPUTE ACT, 1947

Meanings

‘Industry’ means any business, trade, undertaking,  manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or a vocation of workmen

‘Industrial Dispute’ means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labor, of any person.

Boards of conciliation: 

Appropriate government may by notification in the official gazette constitute a Board of Conciliation consisting of a Chairman and two or four other members, as appropriate govt. thinks fit.

Courts of Inquiry: Inquiring into any matter appearing to be connected with or relevant to an industrial dispute

Labor courts: The appropriate govt. may, by notification in the Official Gazette constitute one or more labor courts for the adjudication of industrial disputes

Articles of Association

Articles of Association

Articles of association is the second document which has, in the case of some companies, to be registered along with the memorandum.  Companies which must have articles of association are :

1. Unlimited companies.
2. Companies limited by guarantee, and
3. Private companies limited by shares.

This document contains rules, regulations and bye-laws for the general management of the company. Schedule  I of the Companies Act, 1956, contains various model forms of memoranda and articles.  The Schedule is divided into several Tables. Each table serves as a model for one kind of company. A company limited by shares may either frame its own set of articles or may adopt all or any of the regulations contained in Table A.  But if does not register any articles,  Table  A applies, in so far as its regulations are not excluded.  The chief advantage of adopting  Table  A  is that its provisions are legal beyond all doubt.