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Questions and Answers
What is the role of directors in a company?
What is the role of directors in a company?
What does 'common seal' represent in a company?
What does 'common seal' represent in a company?
What change did the Companies (Amendment) Act, 2015 introduce regarding the common seal?
What change did the Companies (Amendment) Act, 2015 introduce regarding the common seal?
Which of the following statements about the common seal is true?
Which of the following statements about the common seal is true?
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If a company does not have a common seal, who has the authority to authenticate documents?
If a company does not have a common seal, who has the authority to authenticate documents?
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What defines a foreign company as per Section 2(42)?
What defines a foreign company as per Section 2(42)?
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What is the primary objective of companies formed under Section 8 of the Companies Act, 2013?
What is the primary objective of companies formed under Section 8 of the Companies Act, 2013?
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Which of the following is NOT true about Section 8 companies?
Which of the following is NOT true about Section 8 companies?
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How does the Central Government assist in the formation of Section 8 companies?
How does the Central Government assist in the formation of Section 8 companies?
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Which of the following is an example of a Section 8 company?
Which of the following is an example of a Section 8 company?
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What does the liability clause specify for a company limited by shares?
What does the liability clause specify for a company limited by shares?
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In a company limited by guarantee, what is the obligation of each member upon winding-up?
In a company limited by guarantee, what is the obligation of each member upon winding-up?
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What is stipulated in the capital clause for a company with share capital?
What is stipulated in the capital clause for a company with share capital?
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What is required from every subscriber when forming a company?
What is required from every subscriber when forming a company?
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Which clause concludes the Memorandum of a company?
Which clause concludes the Memorandum of a company?
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What does the term 'ultra vires' refer to in the context of company law?
What does the term 'ultra vires' refer to in the context of company law?
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In the case of Ashbury Railway Carriage and Iron Company Limited v. Riche, what was the main reason the contract was deemed null and void?
In the case of Ashbury Railway Carriage and Iron Company Limited v. Riche, what was the main reason the contract was deemed null and void?
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Which action can shareholders take if a contract is ultra vires the powers of the directors?
Which action can shareholders take if a contract is ultra vires the powers of the directors?
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What was a key interpretation made by the Court regarding the term 'general contractors'?
What was a key interpretation made by the Court regarding the term 'general contractors'?
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Which of the following statements is true regarding an ultra vires contract?
Which of the following statements is true regarding an ultra vires contract?
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What is the definition of subscribed capital according to the Companies Act, 2013?
What is the definition of subscribed capital according to the Companies Act, 2013?
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What penalty do a company and its officers face for failing to disclose subscribed and paid-up capital as required?
What penalty do a company and its officers face for failing to disclose subscribed and paid-up capital as required?
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Which capital refers to the total amount called for payment according to the Companies Act, 2013?
Which capital refers to the total amount called for payment according to the Companies Act, 2013?
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What constitutes paid-up capital as per the Companies Act, 2013?
What constitutes paid-up capital as per the Companies Act, 2013?
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How is a share defined in the context of the Companies Act, 2013?
How is a share defined in the context of the Companies Act, 2013?
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Study Notes
Artificial Legal Person
- Companies are legal persons, not natural people
- Companies function through human agents, such as directors
- Directors act on behalf of the company, not for its members
- Directors can authenticate company actions, either personally or through the company seal
Common Seal
- A company's common seal acts as its official signature
- It's used to authenticate company documents
- The Companies Act, 2015 has made common seals optional, allowing companies to use alternative authentication methods
- The amendment suggests that common seals are outdated and unnecessary
- Companies which choose not to have a common seal must use two directors or a director and company secretary for authentication
Types of Companies
- Foreign Company: A company registered outside India that conducts business within India, either directly or through agents
- Section 8 Company: A company formed for charitable purposes, such as promoting commerce, art, science, or social welfare
- Section 8 Companies: Do not pay dividends to members and focus on fulfilling their stated objectives
Company Capital Terms
- Authorized Capital: The total amount of share capital that a company is legally permitted to issue
- Issued Capital: The portion of authorized capital that the company has actually offered to its members for subscription, including shares issued for non-cash consideration
- Subscribed Capital: The portion of issued capital that has been taken up by members, representing the nominal value of shares they own
- Called-up Capital: The total amount of subscribed share capital that the company has requested payment for from its members
- Paid-up Capital: The total amount of capital that members have actually paid on their shares
Share Capital
- A share represents a proportional interest in a company's assets.
- The value of a share is determined by its relationship to the total capital paid to the company.
- Share capital contributes to the company's overall financial structure and provides funds for growth and operations
Doctrine of Ultra Vires
- This doctrine states that a company can only engage in activities authorized by its Memorandum of Association.
- Any action outside these stated purposes is considered ultra vires and invalid
- Shareholders can ratify ultra vires actions by the directors, or the company can amend its articles to allow for the activities
- Ultra vires acts cannot be made valid through estoppel, acquiescence, lapse of time, delay, or ratification
Memorandum of Association
- It outlines the fundamental terms and conditions for a company's existence
- Contains essential clauses:
- Liability Clause: Specifies the liability of members, either limited or unlimited
- Capital Clause: Specifies the authorized capital of the company, divided into shares of defined amounts with agreed-upon subscriber numbers
- Association Clause: Defines the company's subscribers and outlines their respective shareholdings
- In the case of a one-person company (OPC), the memorandum must identify the person who will become a member in the event of the subscriber's death.
Ashbury Railway Carriage and Iron Company Limited v. Riche (1875)
- This landmark case established the doctrine of ultra vires.
- The Ashbury Railway Carriage and Iron Company entered into a contract for financing a railway line in Belgium.
- The contract was challenged as being beyond the company's stated objects in its Memorandum of Association.
- The court ruled that the contract was ultra vires and therefore void.
- This highlighted the importance of adhering to the company's authorized objects and the consequences of exceeding those boundaries.
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Description
Test your understanding of artificial legal persons, the function of directors within companies, and the implications of common seals in business law. Explore the types of companies defined under the Companies Act, 2015, including foreign and Section 8 companies.