CORPORATE LAW - I

COURSE OUTLINE

SEMESTER V
B.A.LL.B. (HONS.)
SESSION: JULY TO NOVEMBER 2015
INTRODUCTION
Corporate form of ownership is the most important form of ownership of
business in the contemporary times. Its significance is due to many distinct
advantages it has over other forms of ownership of business. In order to regulate
various aspects of functioning of companies, the Company Act was enacted in the
year 1956. It had been the lengthiest piece of legislation ever passed by the
Indian Parliament. But now we have an entire new piece of legislation in front of
us in the form of Companies Act 2013. To make it more contemporary and
relevant to the present corporate regieme, regulators and other stakeholders in
India were trying to make few changes in the 1956 Act. As a result of that, the
Companies Bill, 2009 was introduced in the Lok Sabha, one of the two Houses of
Parliament of India, on 3 August 2009. This Companies Bill, 2009 was referred to
the Parliamentary Standing Committee on Finance, which submitted its report on
31 August 2010 and was withdrawn after the introduction of the Companies Bill,
2011. The Companies Bill, 2011 was also considered by the Parliamentary
Standing Committee on Finance which submitted its report on 26 June 2012.
Subsequently, the Bill was considered and approved by the Lok Sabha on 18
December 2012 as the Companies Bill, 2012 (the Bill). The Bill was then
considered and approved by the Rajya Sabha too on 8 August 2013. It received
the Presidents assent on 29 August 2013 and has now become the Companies
Act, 2013. The changes in the 2013 Act have far-reaching implications that are
set to significantly change the manner in which corporates operate in India. The
new Act is more concise, relevant and more responsive to the current scenario.
The emphasis in this course is on the fundamental principles of law relating to

basics of Corporate Law covering topics right from the pre-incorporation to the
establishment and management of a company.

DETAILS OF THE COURSE OUTLINE

MODULE I. COMPANY AS A MEDIUM OF BUSINESS
Company, as a form of ownership, developed in order to address the
requirement of business at that time. It is a statutory creation and it has different
forms to suit different requirements of business and trade. Law recognize veil by
dissociating members from company and also the grounds on which corporate
veil may be lifted.

History of Company Legislation - UK and India

Corporate personality Concept
Nature and Features of a Corporate Body
Theories of corporate personality.
Lifting of corporate veil
Classification of company
Company as distinguished from other forms of business

MODULE II. PRE-INCORPORATION PHASE

Being statutory creations, companies are created by promoters. Promoters
play a very strategic role. It is through their expertise and efforts that a company
is born. In cotemporary times, task of promotion has professionalized. Law has
the task of balancing the protection of their interests on the one hand and on the
other hand to protect the interest of the company. Further it maintains sanctity of
contracts entered into by promoters.

Promoters: Promotion of company

Promoters: Legal Position of a Promoter
Promoters: Duties and Liabilities
Procedure for Registration

Pre-incorporation contracts

MODULE III. INCORPORATION OF A COMPANY

A company is incorporated upon its registration. Registration confers many
advantages on the company. Both MoA (constitution of the company) and AoA
(rules for internal functioning) are necessary for getting a company registered.
Moa contains the fundamental conditions upon which the company is allowed to
be incorporated. The three common law doctrine protects the interest of different
stakeholders involved.

Memorandum of Association
Doctrine of Ultra Vires
Articles of Associations
Doctrine of Indoor Management
Doctrine of Constructive Notice
Incorporation and its consequences on Corporate
Transactions
o Certificate of Incorporation
o Certificate of Commencement

MODULE IV. PROSPECTUS

A company is bound to raise finances for its sustenance and growth.
Therefore, in finance a prospectus is a disclosure document that describes a
financial security for potential buyers. A prospectus commonly provides investors
with material information about different securities, mutual funds, stocks, bonds
and other investments. It also provides with information like description of the
company's business, financial statements, biographies of officers and directors,
detailed information about their compensation, any litigation that is taking place,
a list of material properties and any other material information.
Prospectus Meaning, Issue and Contents.

Kinds of Prospectus Abridge Prospectus, Statement in lieu of

Prospectus; Shelf Prospectus, Deemed Prospectus.
Mis-statements in a Prospectus, Scope of Untrue Statement
Liability of Mis-statements in Prospectus

MODULE V. RAISING OF CAPITAL

In order to finance its activities the company needs capital. Capital of a
company is of different kinds. Capital can be raised at the time of formation of
the company for starting a business or later on, for expansion and diversification.
But once raised it becomes the permanent liability of the company. And such
capital is raised by issuing prospectus in the market which arouses interest of the
investors in the company and it induces them to invest in the company. It may be
generated through different means from various sources (e.g. public and private).
Shares / Share Capital
o Meaning and Nature
o Kinds of Shares
o Issue of shares IPO, Rights issue, Bonus Issue
o Allotment, Transfer, Forfeiture, Surrender of shares
o Membership of company: modes of acquisition, eligibility;
liability; Rights; Cessation of Membership;
o Alteration & Reduction of share capital.
Debenture / Debt Capital
o Concept, Meaning & Characteristics
o Shareholder vis--vis Debenture holder
o Kinds of Debentures
o Debenture Trustees, Debenture Trust Deed, Debenture Stock
Dividend
o Meaning
o Sources of declaration
o Interim Dividend

MODULE VI. CORPORATE MANAGEMENT (MEETINGS)

Protection of the investors is one of the primary objectives of Corporate

Law. One of the forum through which such an objective is fulfilled are the
meetings of a company and the business is also transacted through these
different kinds of meeting. Their procedure is well regulated through law. It is at
the meeting that majority and minority friction comes out in the open.

Meetings - Meaning and Need

Requisites of a Valid meeting
Kinds of Meeting
o General Body Meetings
o Board Meetings
Voting

BOOKS TO BE REFERRED

Ramaiyya, Guide to Companies Act, 1956

Charlesworth & Morse, Company Law
Gower & Davies, Principles of Modern Company Law
K. Majumdar, Dr. G. K. Kapoor Company Law & Practice, Taxman
T P Gosh, Companies Act 2013, Taxman
Pennington, Company Law
Palmer, Company Law
Taxmans Master Guide to Companies Act 2013
Nicholas Bourne, Principles of Company Law
Avtar Singh, Company Law

STATUTES & SEBI REGULATIONS TO BE REFERRED

Companies Act 2013

Companies Act, 1956
Securities and Exchange Board of India Act, 1992
(Issue of Capital and Disclosure Requirements) Regulations, 2009
Depositories Act, 1996
Securities Contract Regulation Act, 1956

CASES TO BE REFERRED
Saloman v. Saloman & Co. Ltd.(1895-99)AllER Rep.33
Lee v. Lee;s Air Farming Ltd.(1960)3 AllER 420

Dhulia Amalner Motor Transport Ltd v. R.R. Dharamsi AIR 1952 Bom. 337:
Daimler Co. Ltd. v. Continental Tyre & Rubber Co. Ltd. (1916-17) AllER Rep.
191
Bacha F. Guzadar v. CIT Bombay AIR 1955 SC 74
Gilford Motor Co. Ltd. v. Horne (1933) AllER 109
Workman v. Associates Rubber Industry Ltd. (1985) 4 SCC 114
Pratap Singh v. Bank of America (1976)46 Com. Cases 532
Babulal Chaukhani v. Caltex (India) Ltd. AIR 1967 Cal 205
Macaura v. Northern Assurance Co. Ltd, 1925 AC 619 HL
Minerva Mills Ltd. v. Govt. of Maharashtra (1975) 45 Com. Cases 1
Orient Paper Mills Ltd. v. State of Orissa AIR 1957 Orissa 232
Rank Film Distributors v. ROC AIR 1967 Cal 32
In re, Machinon Macknize & Co. (1967) ComLJ 200
Bell Houses Ltd. v. Citywall Properties Ltd. (1966) 2 AllER 674
A.L. Mudaliar v. LIC AIR 1963 SC 1185
Royal British Bank v. Turquand (1943-60) AllER Rep.435
Freeman v. Buckhurst Park Properties (1964)1AllER 630
Regal (Hasting) Ltd. v. Gulliver (1942) 1 AllER 378
Percival v. Wright (1902) 2 CH 421
Industrial Development Consultants Ltd. v. Cooley (1972) 2 AllER 162
Note:
1. The students are required to take both the two Acts (the 1956 and the
2013) into consideration at the time of preparation.
2.
Apart from the cases that have been mentioned above, the students are
also advised to take note of the other cases mentioned in the books and
discussed in the class.