MODELS OF BUSINESS

PARTNERSHIP CORPORATE
[CA 1956]
Not a `separate Separate Person
person` Contracts in its own
Contracts in name
individual names of Risk of business
partners distinct from
Risk of business is Members
Risk of Partners Perpetual
Dissolution on Succession
cessation Accountability,
No requirement of Transparency,
Accounts/Audit Flexible 1
 ADVANTAGES OF
CORPORATE FORM OF
ENTERPRISE
• Corporate personality (juristic person)
• Limited liability
• Perpetual succession
• Transferable shares
• Separate property
• Capacity to sue
• Flexibility and Autonomy
DOCTRINE OF CORPORATE PERSONALITY
CASE EXAMPLE –
Salomon Vs Salomon & Co. Ltd. (1897)

2
 DOCTRINE OF LIFTING OF
CORPORATE VEIL
• Courts may lift or pierce corporate veil - to
probe into economic realities behind the scene
• Circumstances under Common Law
 To determine enemy character
 Daimler Co. Ltd Vs. Continental Tyre &
Rubber Co Ltd
 For checking fraud
 In re: Jones Vs. Lipman
 Against public policy
 R Vs Registrar of Companies ex p Attorney
General
 In the interest of revenue
CIT Vs. Sri Meenakshi Mills Ltd
3
 Doctrine of lifting of
corporate veil (Contd.)
Under the Companies Act, 1956
• Reduction in members below the statutory
minimum (Sec 45)
• Civil Liability in case of any mis-statement in
Prospectus (Sec 62)
• Failure to refund application money (Sec 69)
• Fraudulent conduct of business (Sec 542)
• Contracts made in personal names of directors
etc (Sec 147)
• Subsidiary Company (Sec 212)
• Ultra vires acts
Other legislations - similar provisions in
Income Tax Act, Wealth Tax Act, Estate Duty
Act 4
Government Foreign Section 25/
Company Company Charity
Company
CG/SG hold Incorporated Licence from
more than outside India RD
51% PUC Place of Exempted
`State` u/Art business in from suffixing
12 India `Ltd.`
Capital   Social welfare
intensive,
Mega projects
5
 PRIVATE LIMITED COMPANY
Min PUC - Rs. One Lakh
Min. No. Members – 02
Provision in AoA - Sec 3(1) (iii)
1. Restricts transfer of shares
2. Limits No. of member to 50 (excluded –
ex-employees and shareholders)
3. Prohibits –
i. Issuing shares to public
ii. Inviting /Renewing Deposits from
Public
6
 PUBLIC LIMITED COMPANY
Provision in AoA - Omission of Sec 3 (1)
(iii); becomes by default
Min. PUC - Rs. Five Lakhs
Min. No. of Members – 07
Min. No. of Directors – 03
Listed Company - listed at Stock Exchange
[CA 1956, SEBI Act 1992 and SCRA 1956
apply]
Unlisted Company – closely held [CA 1956]