Corporate Law: Legal Environment of Business

Topics: Corporation, Types of companies, Legal entities Pages: 17 (5005 words) Published: March 9, 2011
Institute of Business Administration (JU)
BBA (17th Batch)
Session: 2007-08
Course: Legal Environment of Business
Course Code: BUS 211
CT: Rumana Islam

Lecture-1 & 2

History and Background of Company Law in Bangladesh (outline only): The Companies Act of 1994 has been passed consolidating and amending the laws relating to companies and other associations. The present Act is based on the structure of Companies Act 1913. But the first statutory company legislation in this sub-continent was the British Companies Act 1850. Following that a comprehensive company law was passed in the year 1866 which was again recast in 1888. Several amendments were made and ultimately the Indian Companies Act of 1913 was passed. Until the adoption of the present Act in 1994 the Companies Act of 1913 remained in force in Bangladesh.

In 1977 to remove the lacuna in law and to meet the present problems especially with regard to foreign investments the Law Reform Committee suggested re-enacting the Companies Act of 1913.On basis of that recommendation the present law was enacted in the year 1994 and came into force with effect from the 1st day of January 1995.

✓ For a brief discussion of history of Company Law see Nirmalendu Dhar’s Company Law, pages 1-3.

Defining a ‘Company”
The word Company has no strictly technical or legal meaning. The dictionary meaning of Company is ‘assembly’ i.e. gathering of a number of persons together. Section 2(d) of the Companies Act 1994, defines a company as “ A Company means a Company formed and registered under the Companies Act 1994”. In the words of Justice Lindley, “An Association of members, the shares of which are transferable.” In Common Law a company is a legal person or legal entity separate from and capable of surviving beyond the lives of its members. Like any Juristic person it is capable of rights and duties of its own and endowed with the potential of perpetual succession. In National Textile Workers’s Union vs. PR Ramkrishna (1983) 1 SSC 228 a very precise definition of a company was given. In that case it was observed that, “A company is an association of persons for some common object or objects. A company has legal personality. It is an artificial person as opposed to a natural person. It comes into existence on its registration in accordance with law. The memorandum of a association and the articles of association of a company which are filed at the time of its registration are considered as the constitutional documents which contain the fundamental terms which govern it.”

A company on its ordinary and non technical sense means a body of individuals associated for a common objective, which may be a business for profit or some charitable purpose, accordingly the word is employed to represent associations formed to carry on some business not for profit or to promote art, science, education or some charitable purpose.

Nature & Advantages of Corporate Form

1. Independent Corporate Existence:

Under Section 24 (2) of The Companies Act – 1994, when a Company is registered is becomes a corporate legal entity distinct from its members.

So, a Company is an independent corporate existence; as soon as it is registered it becomes an individual with all legal rights, duties & liabilities. It is the foremost feature of a Company.

The independent corporate existence of a Company was established by the following landmark case— Saloman Vs Saloman & Co. Ltd (1897)

Facts of Soloman were as such, one Solomon was a boot and shoe manufacturer. His business was in sound condition and there was a substantial surplus of assets over liabilities. He incorporated a Company named Solomon & Co. Ltd for the purpose of taking over and carrying on his business. The seven subscribers to the memorandum were Solomon, his wife, his daughters and his four sons and they remained the only members of the Company Solomon and two of his sons constituted the board of directors. The business...
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