Author Name:   aarsha

Whether Company registered under the Companies Act have corporate personality...

Corporate Personality is the creation of law. Legal personality of corporation is recognized both in English and Indian law. A corporation is an artificial person enjoying in law capacity to have rights and duties and holding property.

A corporation is distinguished by reference to different kinds of things which the law selects for personification. The individuals forming the corpus of corporation are called its members. The juristic personality of corporations pre-supposes the existence of three conditions :
(1) There must be a group or body of human beings associated for a certain purpose.
(2) There must be organs through which the corporation functions, and
(3) The corporation is attributed will by legal fiction. A corporation is distinct from its individual members[1].

It has the legal personality of its own and it can sue and can be sued in its own name. It does not come to end with the death of its individual members and therefore, has a perpetual existence. However, unlike natural persons, a corporation can act only through its agents. Law provides procedure for winding up of a corporate body[2]. Besides, corporations the banks, railways, universities, colleges, church, temple, hospitals etc. are also conferred legal personality. Union of India and States are also recognized as legal or juristic persons [3].

In certain cases, the corpus of the legal person shall be some fund or estate which reserved certain special uses. For instance, a trust – estate or the estate of an insolvent, a charitable fund etc..; are included within the term ‘legal personality’.

Corporations are of two kinds :
1. Corporation Aggregate : Is an association of human beings united for the purpose of forwarding their certain interest. A limited Company is one of the best example. Such a company is formed by a number of persons who as shareholders of the company contribute or promise to contribute to the capital of the company for the furtherance of a common object. Their liability is limited to the extent of their share-holding in the company. A limited liability company is thus formed by the personification of the shareholders. The property is not that of the shareholders but its own property and its assets and liabilities are different from that of its members. The shareholders have a right to receive dividends from the profits of the company but not the property of the company[4]. The principle of corporate personality of a company was recognized in the case of Saloman v. Saloman & Co[5].

2. Corporation Sole : Is an incorporated series of successive persons. It consists of a single person who is personified and regarded by law as a legal person. In other words, a single person, who is in exercise of some office or function, deals in legal capacity and has legal rights and duties. A corporation sole is perpetual. Post – Master- General, Public Trustee, Comptroller and auditor general of India, the Crown in England etc are some examples of a corporation sole. Generally, corporation sole are the holders of a public office which are recognized by law as a corporation.. The chief characteristic of a corporation sole is its “continuous entity endowed with a capacity for endless duration”. A corporation sole is an illustration of double capacity. The object of a corporation sole is similar to that of a corporation aggregate. In it a single person holding a public office holds the office in a series of succession, meaning thereby that with his death , his property , right and liabilities etc., do not extinguish but they are vested in the person who succeeds him. Thus on the death of a corporation sole, his natural personality is destroyed, but legal personality continues to be represented by the successive person. In consequence , the death of a corporation sole does not adversely affect the interests of the public in general.

Advantages of Incorporation
1) Independent Corporate Existence: A corporate person shall have an independent corporate existence. It is in law a person . It is s distinct legal persona existing independent of its members. In case of a company, by incorporation it gains a corporate personality which is separate or distinct from the members who compose it. The property of the company belongs to it and not its members ; it may sue or be sued in its own name ; it may enter into contracts with third parties independently and even the members themselves can enter into contract with the company According to Section 34(2) of the Companies Act , upon issue of the certificate of incorporation , the subscribers to the memorandum and other persons , who may from time , be the members of the company, shall be a body corporate, which is capable of exercising all the functions of an incorporated company and having perpetual succession and a common seal. Thus the company becomes a body corporate which is capable immediately of functioning as an incorporated individual. With the incorporation, the entity of the company becomes institutionalized. This principle of the independent corporate existence and the principle of corporate personality of a company was recognized in the case of Saloman v. Saloman & Co [6]. In this case Salomon was a boot and shoe manufacturer. He incorporated a company named Salomon & Co Ltd , for the purpose of taking over and carrying on his business. The seven subscribers to the memorandum were Salomon, his wife, his daughter and four sons and they remained the only members of the company. The company went into liquidation within a year. The unsecured creditors contended that though incorporated under the Act, the company never had an independent existence, it was in fact Salomon under another name; he was the managing director, the other directors being his sons and under his control. It was held that Salomon & Co Ltd was a real company fulfilling all the legal requirements . It must be treated as a company , as an entity consisting of certain corporators , but a distinct and independent corporation. Thus it was decided in this case that a corporate body has its own existence or personality separate and distinct from its members and therefore, a shareholder cannot be held liable for the acts of the company even though he holds virtually the entire share capital. The case has also recognized the principle of limited liability of a company.

The principle of distinct and independent existence of company consequent to its incorporation was recognized in India even before the decision in Salomon case. The High Court of Calcutta in a case observed that the company was altogether a separate person, different from its shareholders and therefore the transfer was as much a conveyance, a transfer of the property, as if the shareholders had been totally different persons[7]. In this case, the members transferred a Tea Estate to a company and claimed exemption from ad valorem duty on the ground that they themselves being the shareholders in the company, it was in fact a transfer to themselves in another name. The Court, however, rejected their contention and ruled that in the eyes of law the company was a distinct independent person, separate from its shareholders.

The Supreme Court in M/s. Electronics Corporation of India Ltd. v. Secretary, Revenue Department [8]., Government of Andhra Pradesh, inter-alia observed that a clear distinction must be drawn between a company and its shareholders, even though that shareholder may be only one i.e. the Central or a State Government. In the eyes of the law, a company registered under the Companies Act is a distinct legal entity other than the legal entity or entities that hold its shares.

2) Limited Liability : One of the principal advantages of an incorporated company is the privilege of limited liability. It is the main feature of registered companies which provides a special attraction to investors. The principle of limited liability implies that the liability of a member in the event of the company's winding up, in respect of the shares held by him is limited to the extent of the unpaid value on such shares. Thus the liability does not fluctuate but remains limited to the amount which, for the time being remains unpaid, whether from the original shareholder or the transferee of such shares as the case may be. limited liability of members extends only for company's debt in the event of its winding up. The company itself, being a legal persona, is always fully liable and therefore its liability is unlimited. In other words, it is liable to pay the debts so long as assets are available. The order of priority for payment of debt shall, however, depend on the class of creditors as laid down in the Companies Act. No member is bound to contribute anything more than the nominal value of the shares held by them [9]. Section 34(2) of the Companies Act, 1956 provides that in the event of the company being wound up, the members shall have liability to contribute to the assets of the company in accordance with the Act, In the case of limited companies, no member is bound to contribute anything more than the nominal value of shares held by him. The privilege of limiting the liability is one of the main advantages of carrying on business under a corporate organization.

3) Perpetual Succession : An incorporated company has perpetual succession, that is notwithstanding any change in its members, the company shall retain as the same entity with the same privileges and immunities, estate and possessions. the death or insolvency of individual member does not in any way, affect its corporate existence and the company shall continue its existence as usual until it is wound up in accordance with the provisions of the Companies Act, The perpetual existence of an incorporated company is well illustrated by proverbial saying, "members may come and members may go, but the company can go on for ever."

In Gopalpur Tea Co. Ltd. v. Penhok Tea Co, Ltd.[10], the court while applying the doctrine of company's perpetual succession observed that though the whole undertaking of a company was taken over under an Act which purported to extinguish all rights of action against the company, neither the company was thereby extinguished nor any body's claim against it.

4) Transferability of shares : Section 82 of the Companies Act, 1956, specifically provides that the shares or other interest of any member in a company shall be movable property, transferable in the manner provided by the articles of association of the company. Thus the member of an incorporated company can dispose of his share by selling them in the open market and get back the amount so invested. The transferability of shares has two main advantages, namely it provides liquidity to investors and at the same time ensures stability of the company. The transfer of shares of a company does not in any way affect its existence or management and the shareholder can conveniently get relieved of his liability by transferring his shares to some other person.

5) Separate Property : Incorporation helps the property of the company to be clearly distinguished from that of its members. The property is vested in the company as a body corporate , and no changes of individual membership affect the title. In case of a company, it being a legal person is capable of owning , enjoying and disposing of property in its own name. The company becomes the owner of its capital and assets. The shareholders are not the several or joint owners of company’s property. In Bacha F Guzdar v. CIT Bombay [11] it was held that the company is a real person in which all its property is vested , and by which it is controlled , managed and disposed of”. In Macaura v. Northern Assurance Co Ltd[12] it was held that “ the property of a company is not the property of the shareholders ; it is the property of the company”.

6) Corporate Finances : The shares of an incorporated company being transferable, it can raise maximum capital in minimum possible time. That apart, an incorporated company has the privilege of raising its capital by public subscriptions either by way of shares or debentures. The public financial institutions willingly lend loan to companies as it is generally secured by floating charge which is an exclusive privilege of a registered company.

In R.T. Perumal v. John Deavin,[13] it has been observed that a company is a real person in which all its property is vested, and by which it is controlled, managed and disposed of. Their Lordships further observed that "no member can claim himself to be the owner of the company's property during its existence or in its winding up."

7) Centralized Management : The shareholders have no direct concern with the management of the company. They exercise, only a formative control. Thus the management of the company is altogether different from its ownership. Independent functioning of managerial personnel attracts talented professional persons to work for the company in an atmosphere of independence thus enabling them to achieve highest targets of production and management leading to company's overall prosperity.

The management of the company generally vests in the directors who decide the policy matters in the meetings of the Board of Directors. With skilled professional managers supported by financial resources, companies are able to develop and carry on their business efficiently. In short, professional form of management of business disassociates the 'ownership' from control of business and thus helps to promote efficiency. Besides, it provides flexibility and autonomy to business undertakings within the framework of company law.

8) Capacity to sue and to be sued : A company being a body corporate can sue and can be sued in its own name.[14]. A criminal complaint can be filed by a company , but it should be represented by a natural person. A company has the right to protect its fair name. It can sue for such defamatory remarks against it as are likely to damage its business or property etc. A company has the right to seek damage where a defamatory material published about it affects its business. In TVS Employees Federation v. TVS & Sons Ltd [15] it was held that the preparation of a video cassette by the workmen of a company showing their struggle against the company's management and exhibition could be restrained only on showing that the matter would be defamatory. In R v. Broadcasting Standards Commission the court of appeal held that a company can complain under the Broadcasting Act, 1996 about unwarranted infringement of its privacy. In this case the complaint was about the secret filming of transactions in shops by the BBC and the allegation was that this constituted an infringement of the company’s privacy.

Disadvantages of Incorporation
1) Lifting or Piercing the Corporate Veil : A corporation is cloth with a distinct personality by fiction of law, yet in reality it is an association of persons who are in fact , in a way , the beneficial owners of the property of the body corporate. A company being an artificial person, cannot act on its own, it can act only through natural persons. The whole theory of incorporation is based on the theory of corporate entity but the separate personality of the company and its statutory privileges should be used for legitimate purposes only. Where the legal entity of the company is being used for fraudulent and dishonest purpose, the individuals concerned will not be allowed to take the shelter behind the corporate personality. The court in such cases shall break through the corporate shell and apply the principle of what is known as “lifting or piercing the corporate veil”. The corporate veil of a company may be lifted to ascertain the true character and economic realities behind the legal personality of the company. Undoubtedly, the theory of corporate entity of a company is still the basic principle on which the whole law of corporations is based. But the separate personality of the company, being a statutory privilege, it must always be used for legitimate business purposes only. Where the legal entity of a corporate body is misused for fraudulent and . dishonest purposes, the individuals concerned will not be allowed to take shelter behind the corporate personality. In such cases, the court will break through the corporate shell and apply the principle of what is known as "lifting or piercing the corporate veil". That is, the court will look behind the corporate entity.

In New Horizons Ltd. v. Union of India and others,[16] the appellant company when seen through the veil covering the face of New Horizons Ltd. was found to be a joint venture created as a result of reorganization in 1992. Sixty per cent of its share capital was owned by an Indian group of companies and forty per cent share capital was owned by a Singapore based foreign company. The Government had invited tenders for distribution of State largesse. The appellant's tender was not considered on the ground that the experience of its constituents was not the same as that of the appellant and because of inadequate experience, the respondent's tender was accepted as they had long experience and had also offered a much lower amount of royalty. The appellants pleaded the experience of constituents of the joint venture company should be treated as its own experience and corporate veil should be seen through for this purpose. Allowing the appeal, the Supreme Court ruled that the action of the State Government in determining the eligibility of tender’s was not in consonance with the standards or norms and was arbitrary and irrational. The Court further observed that in case of a joint venture corporation, the Court can see through the corporate veil to ascertain the true nature of a company. The doctrine of lifting the corporate veil is invoked when the corporate personality is found to be opposed to justice, convenience or interest of revenue.

The principle of 'lifting the corporate veil' has found statutory recognition in certain provisions like Sections 45, 147, 212, 247 and 542 of the Companies Act. Corporate veil is said to be lifted when the court ignores the company and concerns itself directly with the members or managers. The courts have found it necessary to disregard the separate personality of a company,4 in the following situations :—

(a) Determination of Real character of a company
At the time of war, it may become necessary to lift the corporate veil of a company to determine whether the company has an enemy character. In such a case the courts may in their discretion examine the character of persons who are in real control of the corporate affairs of the company.

In a case[17] a company was incorporated in England for the purpose of selling tyres manufactured in Germany by a German company, all the shares except one were held by the German subjects residing in Germany. The remaining one share was held by a British subject who was the Secretary of the company. Thus the real control of the English company was in German hands. During World War I, the company commenced an action to recover trade debts. The question therefore was whether company had become an enemy company consequent to World War I. The House of Lords, inter alia observed :

“But it can assume enemy character when persons in de facto control of its affairs are residents in any enemy country or, wherever resident, are acting under the control of enemies. therefore held that the company was an enemy company for the purpose of trading and therefore it was barred from maintaining the action.”

In an American case [18] it was held that the Courts may refuse to pierce the corporate veil where there is no danger to public interest. In this case certain lands were transferred by an Englishman to another perpetually restraining the transferee from selling the said property to coloured persons i.e. Negroes. The transferee, however, transferred the land to a company which was exclusively composed of Negroes. Thereupon, the petitioners brought an action against the company for annulment of the conveyance on the ground of breach of condition. Rejecting the contention of the petitioners the court held that members individually or employment was terminated under an agreement. Thereafter he started a new company to carry on the business of solicitation and solicited plaintiffs customers. The court held that the defendant company was a mere cloak or sham and channel used by defendant to obtain advantage of the customers of the plaintiff company for his own benefit and therefore it ought to be restrained from carrying on the business.

The Supreme Court in Subhra Mukherjee & Another v. M/s. Bharat Coking Coal Ltd. (BCCL) & others[19] has observed that the Court will be justified in piercing the veil of incorporation in order to ascertain the true nature of the transaction as to who were the real parties to the sale and whether it was between husbands and wives behind the facade of separate entity of the company.

(b) For the benefit of revenue : The court has the power to disregard corporate entity if it is used for tax evasion or to circumvent the tax obligation[20]. In this case the assessee was a wealthy man , enjoying huge dividends and interest income. He formed four private companies and agreed with each to hold a block of investment as an agent for it. Income received was credited in the accounts of the company, but the company handed back the amount to him as pretended loans. The court held that the company was formed by the assessee purely and simply as a means of avoiding super – tax and the company was nothing more than the assessee himself.

(c) Fraud or improper conduct : The courts will refuse to uphold the separate existence of the company where it is formed to defeat or circumvent law, to defraud creditors or to avoid legal obligations. In Gilford Motor Co v. Horne [21] , Horne was appointed as a managing director of the plaintiff company on the condition that he shall solocite or entice away the customers of the company at any point of time. He was employed under an agreement. Shortly he opened a business in the name of a company which solicited the plaintiff’s customers. It was held that the company was mere cloak or sham for the purpose of enabling the defendant to commit a breach of his covenant against the solicitation.

In P.N.B. Finance Ltd. v. Shital Prasad Jain,[22] the court held that "the doctorine of piercing the corporate veil may be invoked whenever necessary by the court in the interest of justice, to prevent the corporate entity from being used as an instrument of fraud, and the fundamental principle of corporate personality itself may be disregarded having regard to the exigencies of the situation and for the ends of justice.

(d) Government Companies : A company at times loose their individuality in favour of its principal and ,may be treated as an agent or trustee. In Re F.G. (Films) Ltd.[23], an American company produced a film called 'MANSOON' in India technically in the name of a British company. This British company had a capital of £ 100 out of which majority was held by the President of the American company which financed the production of the film. In these circumstances the Board of Trade refused to register the film as a British film on the ground that in the instant case the British company acted merely as the nominee or agent of the American company. This view was upheld by the Court. The court may, in some circumstances, treat a holding company and its subsidiary as a single entity. This inference does not flow automatically from the relationship of holding and subsidiary company. There must be evidence that the business of the two is combined.

In Smith Stone & Knight Ltd. v. Birmingham Corporation, it was observed that the courts find it difficult to go behind the corporate entity of a company to determine whether it is really independent or is being used as an agent or trustee. If a parent company and a subsidiary company are distinct legal entities under the ordinary rules of law and in the absence of an agency contract between the two companies one cannot be said to be the agent of the other. If one company is held liable as a principal for the acts of another company, the relationship of agency should be substantially established, as was the case in the instant decision.

In India, a large number of private Companies have a tendency to register themselves as Government companies under the Companies Act with President and few other officers as the shareholders. They do so with a view to availing certain advantages in their commercial ventures. The Courts are, therefore, confronted with the problem of deciding the true nature of a Government company in a number of cases. The Supreme Court has decided once for all that a Government company is neither an extension of the State, nor its agent.

The Supreme Court has ruled that Life Insurance Corporation cannot be treated as an instrumentality of the State when it is exercising its ordinary right as a majority shareholder in a company for removing the existing management and reconstituting the Board of Directors of that company[24]

(e) To punish the real persons in Quasi-Criminal cases against the Company
The courts have sometimes applied the doctrine of lifting the corporate veil in quasi-criminal cases relating to companies in order to look behind the legal person and punish the real persons who have violated the law.

(f) To prevent abuse of Process of Law
The doctrine of lifting the corporate veil can also be used to prevent abuse of process of Court. Thus in Bijay Kumar Agarwal & others v. Ratanlal Bagaria & others,[25] the Court observed that although broadly speaking the principle of lifting the corporate veil will be available in the statute like Companies Act, and other financial and taxing statutes etc. but admittedly one cannot rule out the applicability of the principle elsewhere if the situations are falling under the following categories : (a) depend upon the relevant statutory or other provisions; (b) the object sought to be achieved; (c) the impugned conduct; (d) the involvement of the element of public interest; (e) the effect on parties who may be affected. It, therefore, logically follows that the doctrine of lifting the corporate veil or principle analogous thereto cannot be ruled out from being used as a tool of judiciary in adjudicating over the dispute between two parties. Thus the "Lifting of corporate veil' or principle analogous thereto cannot be monopoly of any particular statute. It can well be used by the judiciary or the Court to prevent the abuse of process of Court of Law.

The Supreme Court in Delhi Development Authority v. Skipper Construction Co. (P.) Ltd[26]has observed that the lifting or piercing the corporate veil can be undertaken by Court to see the real men behind the veil who are involved in defrauding others by corrupt and illegal means in deliberate defiance of Court's order. In the instant case, the company was defrauding others in deliberate disobedience of Supreme Court's orders which amounted to contempt of Court. Disposing of the appeal, the Supreme Court observed that imposition of punishment for contempt would not denude the Court of its power to issue directions and make appropriate orders to grant relief to the persons aggrieved in order to do complete justice. For this purpose, the Court can lift the corporate veil of the company to took into the misdeeds of its officials and punish them i.e. the contemnors. That apart, the Court may also order the contemnors to restore the illegally derived benefit to the persons who are defrauded so that the contemnors are not able to retain the fruits of the contempt. The Court may also order forfeiture/attachment of the properties acquired by the illegal and corrupt means by the real men behind the corporate as also the properties of their family members.

2. Personal Liability of Directors or Members
Secondly, the company law imposes personal liability on the directors or members of a company in certain cases notwithstanding the cardinal principles of 'separate personality' and 'limited liability'. There are certain statutory provisions, in the Companies Act, 1956 , apart from the liability of the company as an independent legal person, those cloaked behind it are also made liable. Such cases are :—

(a) Reduction of membership (Section 45)
Section 45 of the Companies Act, 1956 specifically provides that if at any time the number of members of a company falls below the statutory minimum i.e.. seven in case of a public company and two in the case of a private company, and the company carries on business for more than six months while the number is so reduced, every person who is a member of that company during the time the company so carries on business after those six months and is aware of that fact, shall be severally liable for the payment of company's debts contracted during that time. Thus, in such cases, the privilege of limited liability is denied to the shareholders.

(b) Misdescription of name (Section 147)
Where an officer of a company signs on behalf of the company any contract, Bill of exchange, hundi, promissory note, cheque or an order for money goods, such person shall be personally liable to the holder if the name of the company is not fully or properly mentioned in the instrument.

(c) Fraudulent conduct of business (Section 542): This section imp[ose liability for fraudulent conduct of a company’s business. According to the section if it is found that a business is found to be carried on with the intent to defraud the creditors of the company or any other person , or for any fraudulent purpose, those who were knowingly parties to this business shall be personally held liable for all or any of the debts of the company.

(d) Subsidiary company (Sections 212 and 214)
As required by Sections 212 and 214 of the Act, a holding company has to disclose to its members, the accounts of its subsidiaries. Though in the eyes of law a subsidiary company is a separate legal entity under certain circumstances, the court may not treat the subsidiary company as an independent entity in a particular situation. There may be two situations when a subsidiary company may lose its independent identity to a certain extent, namely, (1) the law may brush aside the legal forms and require companies in a group to present a joint picture in order to give better information of the financial position of the group as a whole to the public, creditors and share­holders ; and (2) where the control and conduct of business of a subsidiary company rests solely in the nominees of the holding company, it may be inferred that the subsidiary company is merely a branch of holding company and has no separate identity of its own.

(e) Failure to Return Application Money (Section 69(5 )
The provision contained in clause (5) of Section 69 of the Companies Act, 1956 makes the director of a public company personally liable to pay the money with interest if the application money is not repaid within thirty days in the event of minimum subscription not having been received or company not having obtained certificate of commencement of business by the company.

(f) Misrepresentation in Prospectus (Section 62)
In case of misrepresentation in the prospectus of a company, every director, promoter, and every other person who authorizes issue of such prospectus, incurs liability towards those who subscribe for shares on the faith of untrue statement.

(g) Ultra vires acts
The directors of a company shall be personally liable for all those acts done by them on behalf of the company if they are ultra vires the company.

(h) Non-payment of Tax
In the event of winding up of a private company, if any tax assessed on the company whether before or in course of liquidation in respect of any income of any previous year cannot be recovered, every person who was director of that company at any time during the relevant previous year, shall be jointly and severally liable for payment of such tax.

3. Expenses and formalism : Incorporation of a company is an expensive affair. Besides, it involves completion of a number of formalities. Moreover, the administration of a company has to be carried on strictly in accordance with the provisions of the company law and activities are limited by its memorandum which at times creates problems in its progress.


4. Company is not a citizen
Though a company is a legal person, it is not a citizen under the constitutional law of India or the Citizenship Act, 1955. The reason as to why a company cannot be treated as a citizen is that citizenship is available to individuals or natural persons only and not to juristic persons. The question whether a corporation is a citizen was decided by the Supreme Court in State Trading Corporation of India v. Commercial Tax Officer[27]. Since a company is not treated as a citizen, it cannot claim protection of such fundamental rights as are expressly guaranteed to citizens, but it can certainly claim the protection of such fundamental rights as are guaranteed to all persons whether citizens or not. In Tata Engineering Company v. State of Bihar[28] it was held that since the legal personality of a company is altogether different from that of its members and share­holders, it cannot claim protection of fundamental rights although all its members are Indian citizens. Though a company is not a citizen, it does have a nationality, domicile and residence. In case of residence of a company, it has been held that for the purposes of income tax law, a company resides where its real business is carried on and the real business of a company shall be deemed to be carried on where its Central management and control is actually located.

Statutory Corporations or Companies
Companies and undertakings concerned with public utility such as railways, roadways, docks, electricity etc. are usually incorporated by special Acts of the Legislature. They are mostly invested with extensive powers. The examples of statutory corporations are the Reserve Bank of India established by the Reserve Bank of India Act, 1934, the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948, Air India incorporated under the Air Corporation Act, 1953, the Life Insurance Corporation of India created by the Life Insurance Corporation of India Act, 1956 and so on.

Therefore a statutory corporation is a public enterprise which comes into existence by a special Act of Parliament. The Act would define its p[owers and functions, rules and regulations governing its employees and its relationship with the government department. They are financially independent.

Though the Parliament and the State Legislatures have power to create statutory trading or non-trading corporations for even private purposes as per Entry 44 of List I and Entry 32 of List II of Seventh Schedule of the Constitution of India, any group or association desiring to seek incorporation for other than public purposes is generally expected to get itself incorporated by registration under the Companies Act.

One Man Company
A one man company means a single person owns the whole or practically the whole of share capital. There may or may not be other members. The other members shall be acquaintances like friends, relatives or nominees. The central person shall have the full control over the company. These types of company enjoy a corporate status and has limited liability of the company. They also have a legal status. The concept of one man company was accepted in Saloman’s case
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[1] Section 34 of Companies Act, 1956.
[2] Section 433 to 526 of Companie Act, 1956.
[3] Art 300 of Constitution of India.
[4] Colonial Bank v. Whilley, (1885) 30 Ch. D. 261.
[5] (1887) AC 22.
[6] [1895 – 99] All ER Rep 33.
[7] Re Kondoli Tea Co. Ltd, (1886) ILR 13Cai. 43.
[8] AIR 1999 SC 1734.
[9] J.H. Rayner Ltd v. Deptt of Trade and Industry , (1989) 3 WLR 969 HL.
[10] (1982) 52 Comp. Out. 238,
[11] (1955) 1 SCR 876.
[12] 1925 AC 619 HL.
[13] AIR 1960 Mad. 43.
[14] Union Bank of India v. Khaders International Constructions Ltd , [1993] 2Comp Lj 89 Ker.
[15] (1996) 1 WLR 132 (CA).
[16] (1995) 1 SCC 478
[17] Daimler Co. Ltd. v. Continental Tyre & Rubber Co., (1916)2 AC 307.
[18] People's Pleasure Park Co. v. Rohleder, (1908) 109 Va 439.
[19] AIR 2000 SC 1203.
[20] Juggilal v. CIT , (1969) 2 SCC 376.
[21] [1944] 1 Ch 935.
[22] (1983)53Comp. Cas.66.
[23] (1953) All ER 615,
[24] Life Insurance Corporation v. Escorts Ltd., (1986) 1 SCC 264.
[25] AIR 1999 Cal. 106, (107).
[26] AIR 1996 SC 2005.
[27] AIR 1963 SC 1811.
[28] AIR 1965 SC 40.

The  author can be reached at: aarsha@legalserviceindia.com

ISBN No: 978-81-928510-1-3
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