Chapter 1 Nature and characteristics A company is that is registered will be able to establish a separate identity from that of its

members. Hence, a company will be referred as a person itself. Example- in case of reliance industries limited ambani family with many other small and big investors holds shares in the company. The individuals who are holding shares will not be responsible for the actions of the company. There shall not be generally accountable for the debts of the company. This characteristic of the company is well explained in the landmark case of SALOMAN VS SALOMAN. Solemn an

individual carried on a business as leather merchant and shoe manufacturer. This business was in the form of proprietership concern. Saloman thought that the business would do better if it were in the form of a company; hence he started a company to run the business. However, the business was already owned by a proprietorship concern hence the existing business was to be the transferred to the company. Salomon the sole proprietor of the business transferred the business to the company. The company had the following shareholders1) Salomon 2) Wife 3) Daughter 4) 4 sons All of them held one share each. Saloman agreed for a price of pounds 38,782. The price was paid by the company to Saloman in the following manner 1) Debentures worth pounds 10000 2) Equity shares worth pound 20000 3) And the balance is in cash.

The transaction was completed after the payment hence soloman became managing director and two of his sons were directors. The company started borrowing from other sources to run the business efficiently. This is when the company ran into difficulties and the secured creditors appointed a receiver/liquidator to initiate the liquidation process. Ay this junction or scenario the companys financial position was as following1) Assets were worth pounds 6050 2) Secured creditors pounds10000 3) Unsecured creditors pounds 8000. The unsecured creditors being the outsiders to the company claimed the entire sale proceeds of the assets (pounds 6050). They argued that saloman the majority holder of the shares also the debenture holder of the company was totally responsible for the companys ill financial position. And hence the right on the sale proceeds will vest with the outsiders (unsecured creditors).

Conclusion- the Trial Judge and the appellate court agreed with these contentions and decreed against saloman and then there was a historical judgement. Saloman then made an appeal to the House of Lords. The house of lords of careful observation of the case held the following1) Company has its own personality on registration. 2) It would be distinct from its members 3) A shareholder cannot be held liable for its acts though he virtually holds the entire 100% capital. 4) Though the subscribers are well related to each other the entity

would still be distinct. Limited liability- means the status of being legally responsible only to a limited amount for the debts of a company. The company as discussed

earlier being a separate person is the owner of assets and liabilities. The liability of a member (share holder) extends only to the unpaid portion of the nominal value of the shares held by him. Mr A holds of Rs 10 each aggregating to rupees one thousand. The company calls only Rs 5 on each share and Mr A duly pays it. However Mr A shall pay Rs 5 on each share to the company on the call made by it. However if the company is liquidated before then Mr As liability to the company and outsiders is limited to Rs 500. He has no further liability.

Sole proprietorship concern- started an owned by an individual. He uses his own capital skill and intelligence to carry out a business activity. He owns the profit and the losses. There is no requirement of disclosure of information to anyone. Suitability- sole trader is formed by one individual and is meant for a small family. Hindu undivided familymembers have a common ancestor.

Membership is obtained through birth. HUF acts through karta, the head of the family.HUF comes into existence by operation of law and not by contract. Partnership- As per section 4 of the partnership act 1932, partnership is a relationship between persons who have agreed to share profits of a business carried on by all or any of them acting for all. Features of partnership are1) Contractual relationship- partnership is formed with the help of a contract 2) Existence of business-( must carry out Business) 3) Sharing of business 4) Mutual agency Cooperation is a wider term that includes: 1. Indian companies 2. Foreign companies 3. Public financial institutions

4. Nationalised banks 5. Corporation formed under the acts of parliament 6. LLP- Limited Liability Partnership The word corporate or corporation doesnt include1) Corporation sole 2) Corporative society 3) Any other body corporate as may be specified by central government.