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8/6/2019 BL Assignment 1 & 2
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Business Law
Assignment
Submitted By:-
Aniruddh Tiwari
(Roll No :- 101104)
PGDBM (2010-2014)
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Assignment 1
Que 1 What are the stages with regard to formation of a company?
Ans Formation of a company is considered to be a responsible job. It involves
compliance with technical formalities of the provisions under the companies act
by the promoters who are the architects or founder fathers of the company.
The entire formation of a public limited company could be studied under
three heads. They are:-
1)Pre-Incorporation Stage i.e. prior to obtaining the certificate ofincorporation (section 35).
2)P
rovisional Stage i.e. the stage after obtaining the certificate ofincorporation but prior to obtaining the certificate of commencement of
business (section 149).
3)Perfect Stage i.e. the stage after obtaining the certificate ofcommencement of business (section 149).
The promotes who have to represent the company may have to transect several
matter right from procurement of property (land, building etc.) to finalization
with regard to the appointment of the directors. Each and every act a promoter
done for the sake of the company will have a binding effect on the company.
(i) Liability of the promoter in respect of pre-incorporation contracts:Any contract made by the promoter with the third parties will not be
binding on the company, since the company itself is not said to be in
existence at the time of contract.
(ii) Pre-Incorporation contracts cannot be enforced by companiescoming into existence (subsequently):
Any contract that has been entered into by a promoter on behalf of the
company, cannot be enforced by the company after it has come into
existence against such third party claims.
(iii) Promoters are personallyheldliable for contracts made on behalfofthecompany (yetto comeinto existence):
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Even third parties cannot file a suit against for monies due to them in
respect of the contracts entered by promoters on companys behalf.
(iv) Regularization ofPre-Incorporation Act:The regularization of the contracts entered by a promoter as foundunder the heading ofPromoter.
(v) Specific performance ofthePre-Incorporation contract:If the contract that has been entered into by the promoters on behalf of
the companies is warranted by the terms of incorporation. Then
specific performance may be obtained in respect to such contract. In
such cases, the company after having come into existence should have
accepted to abide by the terms of the contract.
ProvisionalStage ofIncorporation:
Public limited company must not only obtain certificates of incorporation but
they also must obtain certificate to commence business. Till obtaining the
certificate of commencement of business the company has to enter into several
transactions including entering agreements with the third parties. Such contracts
under the companies provision act are only treated as the Provisional Contracts.
They are regarded as temporary contracts. Such contracts have to necessa rily beapproved by the company before the date at which it is entitled to commence
business.
From this, it is clear that any contract entered into by a company
subsequent to incorporation with the third party is still not binding on the
company in the absence of obtaining the certificate to commence the business.
If the company fails to obtain this certificate, then the provisional certificate is
also lapsed. On the other hand if the certificate of commencement of the
business is obtained, the provisional certificate is automatically validated.
Nevertheless in the statutory meeting, which are convened by the public limited
companies, these type of contract are also placed before the general body to get
their tacit approval. Provisional contract become binding on the co mpany
provided the terms and the conditions contained therein are not oppressive,
fraudulent or found to be irregular.
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PerfectStage
Obtaining the certificate of business is a necessary condition for a public limited
company for doing business. Perfect stage signifies the period after the
company obtains the certificate of commencement of business. A public limited
company is prohibited from carrying on any business without obtaining thecertificate of commencement of business.
Obtaining the certificate of commencement of business is so important for a
public limited company that it cannot convene a statutory meeting without it.
Public limited companies should compulsorily convene a statutory meeting in
every six (6) months for the date which it has obtained the certificate of
commencement of business. The following conditions must also be fulfilled: -
(i) Minimum subscription should have been obtained against the sharesthat are to be allotted according the guidance prescribed by SEBI.
(ii) The directors should have paid in cash the application money andallotment money that is due and payable to the company as against the
shares agreed to be taken by them.
(iii) No money should become refundable by the company to theapplicants by its reason of its failure to apply for permission on any
recognised stock exchange.
(iv) A declaration that the above requirements have been complied withmust be signed by any of the director of the company. The abovementioned declaration must be filled with the registrar.
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Assignment 2
Que State the difference between the following terms:
(i) SaleIn sale the ownership passes from the seller to the buyer. Forconsidering the transaction as a sale, delivery of goods, and payment
of price, need not take place simultaneously. Sale does not mean
delivery of goods for a price which is to be paid immediately or fore
with.
(ii) Agreement To SaleAn agreement to sell is the agreement where the transfer of the
ownership of the goods is to take place at a future time or subject to
fulfilment of some condition.
(iii) PledgeA pledge is something about a transaction where the borrower delivers
the possession of a movable property as security for the loan advanced
or to be advanced by the lender as security. There is transfer of
possession of goods of the borrower to the lender as securities.
(iv) ChargeSometimes a movable or immovable properties are given as securities
to the lender without delivering possession of the same with an
undertaking that the goods given as securities shall not be sold or
transferred without notice to the lender.
(v) Charge withhypothecationA charge may also be created by hypothecation, where the borrower
not only gives his movable or immovable property as security without
delivering possession of it to the lender, but he also gives a declaration
that the right to sell the property given as security shall only be
exercised by the lender. In short the borrower not only gives his
movable or immovable property but he also transfers the right to sell
the property in case he defaults the payments.
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(vi) InstalmentPurchaseDelivery of goods may take place immediately but price may become
payable at suitable instalments, convenient to the buyer.
(vii) H
ireP
urchaseOn certain occasions, goods are taken for hire on an agreement that on
payment of the last instalment, the ownership of the goods passes to
the buyer. Even if the buyer commits default in payment of hire for
one instalment, the seller is at liability to revoke the agreement and
resume the possession of goods.
(viii) Contract For LaboursIn this type of transaction, the buyer pays money not for the material
but for the valuable work which is considered precious. For example,when a person purchases a painting on a canvas, the value he pays is
not towards the purchase of the canvas, but it is meant only for the
painting done on the canvas. Hence in this nature of transaction, work
alone pays a major role and is re garded as a contract of work and
labour.
(ix) MortgageIn mortgage, the interest in immovable properties is given or
transferred as securities by the borrower (owner) in favour of thelender (mortgagee). There is no transfer of ownership but only transfer
of interest in a specific immovable property in the case of mortgage.
Que Differentiate between sale and agreement to sell
Sale Agreement To Sell
1) In a sale the ownership passes tobuyer from the seller
1) In an agreement to sell,ownership does not pass to the buyer, but it is subjected tofulfilment of certain conditions.
2) Sale creates right in rem. 2) Agreement to sale creates Right to personam
3) In a sale if the buyer fails to payfor thee goods, the seller maysue for the price.
3) In an agreement to sell, if thebuyer fails to accept and pay forthe goods, the seller can sue for
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damages.
4) In a sale, if the good is in possession of the seller havingbecome damaged, the loss has to be borne by the buyer, unless
the seller occupies the positionof the bailey.
4) In an arrangement to sell, evenif the goods are in possession ofthe buyer if they get damaged.The loss has to be borne by the
seller since ownership has notpassed to the buyer.
5) In a sale, if the seller has become insolvent, the official
assignee cannot proceed againstthe goods, since they are owned
by the buyer.
5) In an agreement to sell, if thebuyer has become insolvent, the
official assignee cannot proceedagainst the goods in the
possession of the buyer , sincethe buyer has not yet become
the owner.
6) A sale is said to be on executedcontract.
6) An agreement to sell is said tobe an executor contract.
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