Concept on Company Law - Assignment Point
Concept on Company Law
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The term Company is used to describe an association of a number of persons, formed for some common purpose and registered to the low relating to companies. Section 3 (1) (i) of the Companies Act, 1956 states that a Company means, “a Company formed and registered under this Act or an existing company.”


  • Statutory company
  • Chartered company
  • Registered company
  • Unregistered company

Sources of Data:

It is quite impossible to complete a report without data of secondary.

Secondary Sources are as follows:

–         Different statement

–         Consultation of related books and publications

–         Internet


Features of a company

The principal characteristics of an incorporated company can be summarised as follows:

  1. Registration : A company comes into existence only after registration under the companies act.
  2. Voluntary Association : A company is an association of many persons on a voluntary basis.
  3. Legal personality : A company is regarded by law as a single person.
  4. Contractual capacity : A shareholder of a company in its individual capacity.
  5. Management: A company is managed by the Board of Directors whole time Directors, Managing Director or Manager.
  6. Capital: A company must have a capital, otherwise it can not work.
  7. Permanent existence: The company has perpetual succession.
  8. Registered Office: A company must have a registered office.
  9. Common Seal: A company must have a common seal.
  10. Limited Liability: The liabilities of shareholder of company are usually limited.


The points of difference between a Partnership and’a Company can be summed up as follows.

A company is regulated in accordance with the Companies Act, 1956 and its subsequent amendments, while a partnership is regulated by the Indian Partnership Act, 1932.

Registration :

A company comes into existence only after registration under the Companies Act. In the case of a partnership, registration is not compulsory.

Minimum number of members:

The minimum number of persons required to form a company is 2 in the case of private companies and 7 in the case of public companies. The minimum number of persons required to form a partnership is 2.

Maximum number of members :

 A public company may have any number of members. A private company cannot have more than 50 members. A partnership carrying on banking business cannot have more than 10 members and partnership carrying on other types of business cannot have more than 20 members^

 Legal status :

A company is regarded by law as a single person. It has a legal personality. A partnership is a collection of individual. It is no considered to be a single person.

Authority of members:

The property of a partnership is the joint property of the partners. Each partner has authority to bind the firm by his acts. The property of the company belongs to the company. A shareholder in his individual capacity cannot bind the phony in any way.

Contractual capacity :

The shareholder of a company can enter into contracts with the company and can be an employee of the company. Partners can contract with other partners but rot with the firm as a whole.


A partnership firm is managed by the partners themselves. The work of management can be distributed among them in any manager they like. A company is managed by the Board of Directors or Whole Time Directors or Managing Directors or Manager who are selected in the manner provided by the A shareholder, as svcfa. cannot participate in the management.

Length of existence :

A company has perpetual succession. Tbe deah or insolvency of a member dots not affect its existence.

Types of Company

Private .Company

a private company is one which, by i(s articles, (a) restricts the right of the members to transfer their shares, if any ;•(&) limits the number of its members (not counting its employees) to 50 ; and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company.—Sec. 3(l)(iii), .Where two or more persons,  they snail, for the purposes of this definition^ be treated as a single member.

 Public Company

‘AH company other than private ”companies arc called public:

Public companies may be classified into three types : (i) companies limited by shares, (7) companies limited by guarantee, and (Hi) unlimited companies.

Private companies may be limited by shares or limited by guarantee. There cannot be a private company with unlimited liability.

Company Limited by Share :

In these companies there is a share-capital, and each share ha> a fixed nominal value which the shareholder pays at a time or by instalments. The member is not liable to pay anything more than the fixed value of the share, whatever may be the liabilities of the company. Most of the companies in India belong to this class,

Company Limited by Guarantee:

In these companies, -each member promises to pay a fixed sum of money in the event of liquidation of the company. This amount is called’ the  uarantee. Sometimes the members, are required to buy a share of a fixed value and also give a guarantee for a further sum in the ev.ent of liquidation. There is no liability to pay anything more than the value of the share (where there a share) and the guarantee.

Unlimited Company:

In these companies. the liability of the shareholder is unlimited, as in partnership firms. Such companies are permitted under the Companies Act but are not known.

Statutory Public Company Sec p, 552

Non-Profit Associations

The Central Government may by licence, permit the omission of the words Limited or Private Limited in the case of companies which are formed for promoting commerce, art, science, religion, charity or any other useful object, and which are non-profit and non-dividend-paying organisations (e.g., Chambers of Commerce). The licence given may be withdrawn.if the company ceases to fulfil the conditions mentioned above.—Sec. 25.

At the time of granting the registration of such an association. the Central Government can provide restrictions on their working.

Differences between Private and Public Company.

Differences Between A Private Company  And A Public Company:

The main points of difference between the two types of companies are enumerated below.

Number of members :

The number of members in a private company cannot be less than two and cannot be more than fifty.

In a public company, the number of members cannot be less than seven but no maximum has been fixed. There may be any number of members.

Restrictions on transfer of shares :

In a private company there must be regulations restricting the transfer of shares. In a public company there need not be any. By restricting transfer, a private company can prevent the membership of persons or classes of persons who are considered to be undesirable.— Sec.3(l)0ii)(a).

Restriction on invitation to public :

A private company cannot invite the public to purchase its shares or debentures. A public company may do so.—Sec, 3(l)(iii)(c).

Restriction on name :

A private company must add the words, ^Private Limited” at the end of its name.—Sec. 13.

Prospectus :

A private company need not file a prospectus •or a statement in lieu of prospectus.—Sec. 70(3).

Wissite of rights shares :

When a public company proposes to increase its subscribed capital by the issue of new shares, it must be offered first to the existing equity shareholders pro rata, unless the members in a genera! meeting decide otherwise. This provision, does not apply to private companies.—Sec. 81(3).

Commencement of business :

A private company can commence business immediately on incorporation, whereas a public company has to wait until it obtains a certificate for the Commencement of Business.—Sec. 149(7).

Statutory Meeting und Statutory Report:

A private company need not hold the Statutory Meeting or file the Statutory Report.-. 165(10).

 Managerial Remuneration :

In the case of public companies there are certain limits to managerial remuneration. This rule does not apply to a private company which is not a subsidiary of a public company.—Sec. 189.

Number of directors :

The Act provides that a private company must have at least 2 directors and a public company

at least 3 directors.—Sec. 232.

Rules regarding directors :

The rules regarding directors are less stringent in the case of private companies which are not subsidiaries of public companies. Following examples are given : .

State is the main subject of international law. It is very difficult to define the term ‘Stated but certain jurists have made their endeavors to this respect; According to Saimond, State is a community of people which has been established for some objectives such as internal order and external security. In the view of Lawrence, State is a society which is politically organized and its members are bound with each other by being under some central authority and most of the people automatically follow the rules of this central authority. As pointed out by Oppenheim, the existence of State is possible only when people of State have settled under highest government authority and habitually follow its orders. According to Prof. H.L.A. Hart, “The expression ‘a State’ is  a way of referring to two facts : First, that a population inhabiting in a territory live under that form of ordered government provided by a legal system which its characteristic structure of Legislature, Courts, and primary rules ; and secondly, that the government enjoys a vaguely defined degree or independence. Starke has rightly pointed out that an ideal definition of the term ‘State’ is not possible. But in the modern period it is finally settled as to what-ape- essential elements of State.

Essential Elements of a State

According to Article 1 of Montevideo Contention, 1933, “The State as a person of international law should possess the following qualifications :

(a) A permanent population ;

(b) A defined territory ;

(c) A Government; and

(d) Capacity to enter into relations with other States”. Oppenheim6 has pointed out the following essential elements of a State :

(1) Population ;

(2) A definite territory ;

(3) Government; and

(4) Capacity to enter into relation with other Slates.

The famous jurist Holland has added one more essential element, namely, to some extent, ‘civilization’ because of which the State becomes the member of international community. Article 4 of Montevideo Convention on the Rights and Duties of States provides that States are juridical equal, enjoy the same rights and have equal capacity in their exercise. The rights of each one do not depend upon power which it possesses to assure its exercise, but upon the simple fact of existence of a person under international law. Further Article 6 provides” that the recognition of a State merely signifies that the State which reoefgnises it accepts the personality of the other with all the rights and duties determine international Law.

Recognition is unconditional and irrevocable of States.

Modern period has witnessed revolutionary changes in,  functions of a State. Previously there was the conception of a police State, according to which. The essential functions of a State were to maintain internal peace and order and to defend if from external aggression. It cannot be denied that even today these are the essential functions of a State but in the present period the conception of State has undergone significant changes. Instead of the conception of police State, the present conception is that State. That is to say, for the benefit of the people, State has to perform many social, economic, educational and cultural functions. But these functions do not come under the category of essential functions. They are in fact subsidiary functions. Nevertheless, these are also the functions of a State in the modern time and the importance of these functions is constantly increasing.

Concept   of  Sovereignty

In the view of jurists, only sovereign States are entitled to be the members of the Family of Nations. According to Austin, “If a determinate human superior, not in the habit of obedience to a like superior, receive habitual obedience from the bulk of a given socsetv that determinate superior is sovereign in that society, and the society, (including determinate superior) is a society political and independent”.

In International law of a good example of the application of the principle sovereignty is the ‘Theory of auto-limitation’. According to the theory, States follow international law because they have by their consent reduced their powers. This principle is based on the principle of State sovereignty. The chief exponents of this principle were Anzilotti and Triepel. It has been pointed out in an earlier chapter that the theory of auto-limitation suffers from several defects and does not appear to be correct. It has been severely criticized by many jurists. In the modern period, there have been revolutionary changes in respect of the theory of sovereignty of States, in the present time it is not proper to say that State sovereignty is indivisible and inimitable. Ordinarily over one and the same territory there can be only one sovereign In practice, however, there can be several exceptions such as the first and probably.

  1. the only real exception is the condominium which exists between two or more States exercising sovereignty jointly over a territory, e.g., condominium of Austria and Prussia over Schleswig Holstein Lanenburg from 1864 till 1866, andominiurr of Great Britain and Egypt over Sudan from 1898 to 1955 and condominium of Great Britain and France over the New Hebrides (now the independent State of Vanuatu) can be cited as example.
  2. One state exercising sovereignty which is, in law vested elsewhere, i.e., where a territory is administered by a foreign power with the consent of the ownerState. For example, Great Britain exercised sovereignty over TurkishIsland from “1878 to 1914.
  3. The third exception is that of giving territory on lease or pledge by the ownerState to a foreign power. For example, in 1998 China leased the district of Kiaochow to Germany, Wei-Hai-Wei and the land opposite the Island of Hongkong to Great Britain, Kuang-OKpuwan to France and Port Arthur to Russia.
  4. Where the use, occupation and control of the territory are granted in perpetuity by the grantorState to the other State. For example, in 1903 the Republic of Panama transferred to the United States of America a ten-mile territory for construction, administration and defence of the Panama Canal.
  5. The next exception is that of a federal State because sovereignty is divided between a federal State and its memberStates.
  6. The last exception is that of a mandated or trust territory. The State, which is given a mandate or a trust territory, exercises sovereignty over it although the territory is not its own.

In the present time, States have accepted many restrictions under international treaties and tn international institution whereby they have impliedly surrendered a part of their sovereignty. For example, the members of the United Nations and International Labour Organization, have accepted many obligations because of which their sovereignty has ceased to be illimitable and indivisible. Thus, “Sovereignty” has a much restricted meaning today than in eighteenth and nineteenth centuries, when, with the emergence of powerful highly nationalized States, few limits on State’s autonomy were acknowledged. At the present time there is hardly a State which in the interests of the International community, has not accepted restrictions on its liberty of action. Thus most states are members of the United Nations and the International Labour Organization (ILO), in relation to which they have undertaken obligations limiting their unfettered discretion in matters of international policy. Therefore, it-is probably more accurate today to say that the sovereignty of a State means the residuum of power which it possesses within the confines laid down by international law.” 9 Judge Lauterpacht has also rightly remarked : “International Law, whether codified or not, implies essentially a restriction of the sovereignties of States whose relations it governs.” 10 Though this is true, even new States do not accept this sound proposition in theory as well as practice. There is much force in the following words of Prof. Edward Hambro : “In the world of the twentieth century no frontal attack on national sovereignty will avail. The charter is based on the Sovereign equality of the Members. But—and this is very important indeed—no rule prevents the States from disposing of part of their freedom of action for the common good.” n ‘Sovereignty has been defined12 as “the supreme authority” in an independent political Society. It is essential, indivisible and illimitable. However, as remarked by Sabyasachi Mukharji, C.J. in Union of India v. Sukumar Sen Gupta. it is now considered and accepted as both divisible and limitable and we must recognise that it should be so. Sovereignty “is limited externally by the possibility of general resistance. Internal Sovereignty is paramount power over all action within, and is limited by the nature of power itself.

Principle of the Equality of States

As the members of the international community, in  principles-ail States are equal. This equality’s due to their international personality. Despite the dissimilarity in respect of their territories, population, power civilization, prosperity etc. All states as international personas are equal. According to oppenhim, following are the consequences of their legal equality.

  1. When any question is to be decided by consent, each State is entitled to have one vote. (But there are exceptions to this rule, such as the veto of the permanent members of the Security Council).
  2. Legally, the importance of the votes of the weak as well as strong nation is same. There are some exceptions of this rule also.
  3. No State can exercise jurisdiction over another State. The Courts have enforced this rule in many cases such as Duff Development Co. Ltd. v. Govt. of Kelantan. The Parliament Beige, Mighellv. Sultan of Johore, De Haberv. The Queen of Portugal. The Exchange v.McFaddon,21 Vavasseurv. Krupp and, The Constitution.
  4. Generally, the Courts of a State cannot challenge the validity of the official acts of anotnerState so far as these acts are related to the jurisdiction of that State. A.M. Luther Co. v. Sagor & Co., Russian Commercial and Industrial Bank v. Comptosird Escompte, Banque Internationale v. Goukassow, and Underhill v. Hernandez,deserve mention in this connection.

Although in principle all States are equal, in reality they are not equal. They are unequal in respect of their respective power, territory, property, etc. The U.N. Charter is based on the principle of ‘sovereign equality’ of States but as pointed out by P.A: Sorokin, in reality great powers are unequal to small States (and legally also because they possess the power of veto under the charter). Thus the equality of States is a general principle but there are several important exceptions of this principle.

Rights and Duties of States                                                                

The doctrine of basic or fundamental rights and duties was enunciated by the naturalist writers. In their view, the doctrine of fundamental rights and duties owns its existence to the Law of Nature. There are certain rights which are inherent in the very nature of States and may, therefore, be regarded as the fundamental rights of States holding and requiring territory^ of intercourse, and of good name and reposition.

Rights and duties of the  States are in fact the rights and duties which have been recognized by the community of States. Although there is much force in the above criticism, it cannot be accepted as a whole. Whether we call them basic or fundamental, there seems to be a general consensus in respect of certain rights and duties. Some of the more important of such rights include

(i)      Sovereignty ami-independence of States ;

(ii)      equality of States territorial jurisdiction ; and

(iii)        the duty to self-defence and self-preservation. So is the case with certain duties which include

(iv)         not to resort to war ulfil treaty obligations in good faith, and duty of non-intervention. At present sovereignty is deemed neither to be indivisible nor unlimited. In the interest of international community and on the basis of reciprocal rights and duties, no State can now claim absolute sovereignty. Independence of States denotes certain rights, powers and privileges under international law. Some of the rights, associated with the independence of a State are power exclusively to Control its own domestic affairs;

(v)         to admit or expel aliens ; ‘privileges and immunities of diplomatic envoys in other States, and jurisdiction over crimes committed within its territory. Certain duties are also associated with the independence of States

(vi)        The perform act of sovereignty on the territory of another State, duty not to allow in its territory preparations which are prejudicial to the security of another State, duty not to intervene in the affairs of another State, etc.

Different kinds of ‘States’ and ‘non-State entities’

Following-are different kinds of ‘States’ and ‘non-State entities’:

(i)           confederation.—Confederation is formed by independent States. Under international law confederation has no international personality. The aim and objective of confederation is to establish a sort of co-ordination among the States, leaving States independent in their internal and external matters. But under international law, these States are international persons.

(ii)          gyrederal State.—Generally a Federal State is formed by the merger of two or more than two sovereign States. Under international law; a FederalState is an international person. The FederalState exercises control and has rights not only over the member-States but also over the citizens of the States. In a FederalState, generally there is a division of powers between the central authority and the States through a contribution. States are generally autonomous in their internal matters but the federation or the central authority exercises control over them. The United States of America, Switzerland, India are good examples of the Federal States. The main difference between a Confederation and a FederalState is that while the FederalState in an international person under international law, a Confederation is not an international person.

(iii)        When two or more States exercise rights over a territory, it is callea Condominium. “A Condominium exists when over a particular territory joint dominion is exercised by two or more external powers.” xNew Hebrides is a good example of a Condominium. Both England and France exercised control and had rights over the territory of New Hebrides between 1914 and 1980. Thus there is a joint sovereignty of France and Britain over New Hebrides. Other examples of condominium are those of Austria and Prussia over Schleswig-Holstein and Lanenburg from 1864 till 1866, of Great Britain and Egypt over Sudan from 1898 to 1955, and of Great Britain and France over Islands of Canada and Endenbury after 1939. In respect of rivers, gulfs or bays also sometimes the idea of condominium is used.

(iv)        VassalState—A State which is under the Suzerainty of another State is called a VassalState. Its so restricted as scarcely.

(v)         Protectorate State.—According to Starke, “Although not completely independent, a ProtectorateState may enjoy a sufficient measure of sovereignty to claim jurisdictional immunity in the territory of another State, If may also still remain a State under international law. In the case of Ionian ship,40 the court held that a State may remain international person even though it is dependent upon some other State, Trve facts of this case are as follows:

The Treaty of Paris, 1815 declared the Ionian group of (stands as an undefended State under Britain. The treaty provided that the IonianState could independently perform its internal functions with the consent of Britain. This treaty had empowered Britain to declare war or peace on behalf of IonianState. In 1854 the German War broke out between Britain and Russia. During the war, the British warships apprehended some ships which were flying flags of IonianState. These ships were seized on the ground that they were carrying on trade with the enemy. It was contended that the inhabitants of the Ionian group of Islands are British subjects and consequently they cannot carry on trade with the enemies of Britain during the war period. The .Court had to decide mainly two questions. !n the first place, it was to be decided whether Ionian group of Islands is an independent State. Secondly, whether the inhabitants of the Ionian group of Islands were British subjects and consequently, whether they will be treated as enemies of Russia.

Difference  between  Protectorate and  Vassal  Stats

Following are the main points of difference between a ProtectorateState and a “Vassal-State :

  1. Often through a treaty, a ProtectorateState entrusts its matters of security, defence and external affairs to another State. A VassalState is autonomous in its internal matters, but is completely dependent upon other State in external matters.
  2. A ProtectorateState may become a member of the international community. A Vassal States not regarded a member of the international community.
  3. 3.           A Protectorate State is not completely sovereign and in fact its sovereignty is taken by the country of which it becomes a Protectorate State. A Vassal State is a semi-sovereign State.
  4. If the protecting State declares a war against any country, then the ProtectorateState is not necessarily involved in thai war. Thus, the treaty entered by the State is not binding upon the ProtectorateState. In the case of a VassalState, it is bound by the treaty entered into by the protectinaState.
  5. ProtectorateState may remain a State, but a VassalState is completely under the suzerainty of another State and has no separate and Independent existence under international law.
  6. TrustTerritories. — Trust territories have been discussed in detail entitled ‘The Trusteeship Council” therefore, see that Chapter.

International Position of Bhutan, Tibet, Holy Sec or Vatican City and Commonwealth of Nations


Bhutan is a protectorateState of India. It is a hilly region in, North-East of Nepal. In 1949, through a treaty Bhutan entrusted the matter of foreign affairs and defence to India. It thus became a protectorateState of India. Since a protectorateState retains a sufficient measure of sovereignty, Bhutan remains a State under international law. In 1971, Bhutan became, a member of the United Nations.


In Simla Conference, 1914, Tibet was declared a protectorateState of China. This was further confirmed by the Treaty of 1951. China accepted Dalai Lama as the spiritual head of Tibet. Tibet was autonomous in its internal matters, but China started interfering in the internal matters of Tibet. In 1959, the situation deteriorated so much that the conflict took the form of war between China and Tibet. China ruthlessly suppressed the movement of the people and Dalai Lama was compelled to leave Tibet. He fled away from Tibet and took asylum in India. China criticised action of India in granting asylum to Dalai Lama and claimed that it was an interference in her internal affairs. At its very face this argument is absurd because as a sovereign State, India was within her rights to grant asylum to Dalai Lama and his followers within her territory.

Holy See or Vatican City.

Holy See or Vatican City is a place where Pope resides. In the middle of 19th century the rulers of Italy seized the territory of Pope and occupied his capital Rome. He, therefore, fled to his residential place called Vatican City. In 1871 Italy granted some guarantees to Pope. Next important change took place in 1929 when a treaty was concluded between Pope and Government of Italy. Vatican City comprising of 100 acres of land was accepted as a State and Pope was treated as a sovereign of this State. The present position of Vatican City is that it is an international person and possesses all the rights and duties of a sovereign State.


This report is a very effective conduct to study a problem. It helps us to know a company formed. This report makes us possible to find out new things and ideas and make accessible us accurate and consistent information which can be used as basis for making decision for immediate and future actions. All the way through the report we can reach the solution of an exacting difficulty.

The rise of the modern state system was closely related to changes in political thought, especially concerning the changing understanding of legitimate state power. Early modern defenders of absolutism such as Thomas Hobbes and Jean Bodin undermined the doctrine of the divine right of kings by arguing that the power of kings should be justified by reference to the people. Hobbes in particular went further and argued that political power should be justified with reference to the individual, not just to the people understood collectively. Both Hobbes and Bodin thought they were defending the power of kings, not advocating democracy, but their arguments about the nature of sovereignty were fiercely resisted by more traditional defenders of the power of kings, like Sir Robert Filmer in England, who thought that such defenses ultimately opened the way to more democratic claims.

These and other early thinkers introduced two important concepts in order to justify sovereign power: the idea of a state of nature and the idea of a social contract. The first concept describes an imagined situation in which the state – understood as a centralized, coercive power – does not exist, and human beings have all their natural rights and powers; the second describes the conditions under which a voluntary agreement could take human beings out of the state of nature and into a state of civil society.

Book Refference:

Books NameAuthors Name
AnIntroduction To International LawI J Stark
Public International LawM P Tandon
International Law and Human RightsS k Kapor
The Law of NationsJ. H. Brierly
Commercial Law & Industrial Law.Prof. Sakti Mukherjee

 Company Law

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