ASSIGNMENT : BUSINESS LAWTOPIC :2 FORMATION OF COMPANY[Birth of co.

/ Formation of a
Company PromotersDuties and Liabilities. Preliminary contractsSteps in formation of a company/Procedure for Incorporation (Documents required) Certificate of Incorporation Peels Case, Advantages of Registration.]

Submitted by :

Nisha Soans Shailesh Khodke

Roll No.10 Roll No.22

Ashish Kumar Ojha Roll No.29 Anil Patil Lokita Rathod Roll No.31 Roll No.38

Shweta Tasgaonkar

Roll No.51

Introduction: Formation of Company

The Companies Act of 1956 sets down rules for the establishment of both public and private companies. The most commonly used corporate form is the limited company, unlimited companies being relatively uncommon. A company is formed by registering the Memorandum and Articles of Association with the State Registrar of Companies of the state in which the main office is to be located. Foreign companies engaged in manufacturing and trading activities abroad are permitted by the Reserve Bank of India to open branch offices in India for the purpose of carrying on the following activities in India: # To represent the parent company or other foreign companies in various matters in India, for example, acting as buying/selling agents in India, etc. # To conduct research work in which the parent company is engaged provided the results of the research work are made available to Indian companies # To undertake export and import trading activities # To promote possible technical and financial collaboration between Indian companies and overseas companies. Application for permission to open a branch, a project office or liaison office is made via the Reserve Bank of India by submitting form FNC-5 to the Controller, Foreign Investment and Technology Transfer Section of the Reserve Bank of India. For opening a project or site office, application may be made on Form FNC-10 to the regional offices of the Reserve Bank of India. A foreign investor need not have a local partner, whether or not the foreigner wants to hold full equity of the company. The portion of the equity thus not held by the foreign investor can be offered to the public.

Incorporating a Company
The first step in the formation of a company is the 1Approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the company will maintain its Registered Office. This approval is provided subject to certain conditions: for instance, there should not be an existing company by the same name. 2The application should mention at least four suitable names of the proposed company, in order of preference. In the case of a private limited company, the name of the company should end with the words "Private Limited" as the last words. In case of a public limited company, the name of the company should end with the word "Limited" as the last word. The ROC generally informs the applicant within seven days from the date of submission of the application, whether or not any of the names applied for is available. 3 Once a name is approved, it is valid for a period of six months, within which time Memorandum of Association and Articles of Association together with miscellaneous documents should be filed. If one is unable to do so, an application may be made for renewal of name by paying additional fees. After obtaining the name approval, it normally takes approximately two to three weeks to incorporate a company depending on where the company is registered.

What is Memorandum of Association and Articles of Association?

The Memorandum of Association and Articles of Association are the most important documents to be submitted to the ROC for the purpose of incorporation of a company. The Memorandum of Association is a document that sets out the constitution of the company. It contains, amongst others, the objectives and the scope of activity of the company besides also defining the relationship of the company with the outside world. The Articles of Association contain the rules and regulations of the company for the management of its internal affairs. While the Memorandum specifies the objectives and purposes for which the Company has been formed, the Articles lay down the rules and regulations for achieving those objectives and purposes. The ROC will give the certificate of incorporation after the required documents are presented along with the requisite registration fee, which is scaled according to the share capital of the company, as stated in its Memorandum. A private company can commence business on receipt of its certificate of incorporation. A public company has the option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus, which provides

information about the company to potential investors. The Companies Act specifies the information to be contained in the prospectus. The prospectus has to be filed with the ROC before it can be issued to the public. In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a "Statement in Lieu of Prospectus" with the ROC. On fulfillment of these requirements, the ROC issues a Certificate of Commencement of Business to the public company. The company can commence business immediately after it receives this certificate.

Certificate of Incorporation
After the duly stamped Memorandum of Association and Articles of Association, documents and forms are filed and the filing fees are paid, the ROC scrutinizes the documents and, if necessary, instructs the authorised person to make necessary corrections. Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence. It takes one to two weeks from the date of filing Memorandum of Association and Articles of Association to receive a Certificate of Incorporation. Although a private company can commence business immediately after receiving the certificate of incorporation, a public company cannot do so until it obtains a Certificate of Commencement of Business from the ROC.

Miscellaneous Documents
The documents/forms stated below are filed along with Memorandum of Association and Articles of Association on payment of filing fees (depending on the authorised capital of the company): # Declaration of compliance, duly stamped # Notice of the situation of the registered office of the company # Particulars of Directors, Manager or Secretary # Authority executed on a non-judicial stamp paper, in favour of one of the subscribers to the Memorandum of Association or any other person authorizing him to file the documents and papers for registration and to make necessary corrections, if any # The ROCs letter (in original) indicating the availability of the name.

Tax Registration
Businesses liable for income tax must obtain a tax identification card and number [known as Permanent Account Number (PAN)] from the Revenue Department. In addition to this, businesses liable to withhold tax must necessarily obtain a Tax

Deduction Account Number (TAN). Both the PAN and the TAN must be indicated on all the returns, documents and correspondence filed with the Revenue Department. The PAN is also required to be stated in various other documents such as the documents pertaining to sale or purchase of any immovable property (exceeding Rs. five lakh), sale or purchase of a motor vehicle, time deposit (exceeding Rs. 5 lakh), contract for sale or purchase of securities (exceeding Rs. 10 lakh), to name a few.

Rules Applicable
Companies (Central Governments') General Rules and Forms, 1956

Filing Registering/Approving Authority

One copy has to be submitted along with a forwarding letter addressed to the concerned Registrar of Companies

I. On the basis of business activities undertaken:Companies

II. On the basis of liabilities of the members and directors:Companies

III. On the basis of membership pattern/sizeCompanies

(a)

(b)

Unlisted

Listed

(a)

(b)

Independent

Subsidiary of Public Co.

IV. On the basis of place of registration:Companies

(1) (2)

(Holding Company) (Subsidiary Company)

 Promoters
Promotion is the primary footstep in the development of a company. A promoter dwells in an exceptional position in the company. He is neither an agent nor a trustee of the company but has a fiduciary relationship with the company. A promoter is not allowed to make any undisclosed profits. In case he is found guilty of doing so he is bound to refund the money to the company. Added to this, the promoters are not permitted to obtain a profit from the sale of his own property to the company unless all material facts are revealed. Therefore, if promoter wants to sell his own property to the companies have to make a full revelation of his concern. The contracts which are entered before the incorporation of a company are called preliminary contracts. These contracts do not have any legal binding on the company as the company does not in exist at the time of the contract. Therefore, the company is not bound by any of the liabilities pertaining to such contracts. Promoter: Meaning & Importance Promoters take all the required steps for incorporating the company. The Companies Act has not defined the term promoters, but according to the need of an organization it is referred to the liabilities of the promoters. Many judicial decisions have defined the term promoter. L.J. Bowen has defined the term promoter is a term which is not of law but of business, gainfully summing up in a single word a number of business operations familiar to the profitable world by which a company is generally brought into life. Lord Blackburn defines that "the term promoter is a short and convenient way of designating those who set in motion the machinery by which the Act enables them to create an incorporated company". A company can have more than one promoter. The promoter can be an individual firm, an association of persons or a body corporate. Even if someone takes a very insignificant piece of work in the promotion activities, he could still be termed as a promoter. But a person cannot be termed as promoter just because he has signed at the memorandum or that he has given money for the payment of arrangement expenses. The promoters provide useful services in the formation of a company. They provide a very valuable service to society and they play an important role in the industrial development of countries. A promoter can be defined as "a creator of wealth' and "an economic prophet'. The promoters carry significant risk because if the idea goes wrong then the time and money spent by

them will be a waste. Function of Promoters Promoters perform various functions in order to form a company and to locate in a perfect functional position. They perform functions like to originate the scheme for formation of the company, to secure the cooperation of the required number of persons willing to associate themselves with the project, to seek and obtain the consent of the persons willing to act as first directors of the company, to settle about the name of the company, to get the documents of the proposed company prepared, to appoint bankers, brokers and legal advisers for the company, to settle preliminary agreements for acquisition of assets, to enter into preliminary contracts with the vendors and to arrange for filing of the necessary documents with the Registrar. Legal position of Promoters The legal position of a promoter is to some extent unusual. The promoter is neither an agent nor a trustee of the company he only promotes. The legal position of a promoter can be described by saying that he has a fiduciary relationship which means that he has a relationship of faith and assurance in relation to the company he promotes. They create and mould the business. They have the power to shape, and supervise the organization. The promoter should not make, directly or indirectly, any profits at the expense of the company that he promotes, without the information and approval of company. Duties of Promoters The promoter in this fiduciary capacity has to perform various important duties they are 1) Not to make any undisclosed profit 2) To make full expos to the company of all relevant facts 3) To give the advantage of the discussions to the company: 4) To render duty as a promoter towards future allottees Liabilities of Promoters The liability of the promoter, under the Companies Act, under Section 56 clarifies the matters that should be declared and the information that should be set out in the prospectus. If this provision is not compiled with, the promoter may be held liable by the shareholders. Section 62 confers the civil liabilities for any misstatements in the prospectus. Section 63 talks about the criminal liabilities which say that he is not supposed to issue a prospectus which contains untrue statements. Section 478 defines the authority of the court to order public examination of all the promoters who are responsible of fraud in promotion or formation of a company. Section 543 of the Act clarifies the fact that the liability for breach of trust by misapplication of funds during the formation of the company.

Section 203 states that the court can postpone a promoter from taking part in the management of the company for a period of five years if he is found guilty of any offence in connection with the promotion, formation or management of a company. The promoters are in person answerable for pre-incorporation contracts yet the death of the promoter does not minimize his liability. Remuneration of Promoters Promoter has to make preliminary expenses in the process of incorporation. However, promoters do not have a right of any remuneration from the company. As a result, he is not allowed to have any remuneration for his services except for the fact that if company enters into a particular agreement with the promoter for the purpose. Even if the promoter has entered into a contract with the future directors before the incorporation, he has no valid claim against the company for remuneration. Therefore, the directors cannot enter into any contract on behalf of a company that is not incorporated so far. This remuneration may be paid to the promoters in various ways such as by selling his own belongings to the company and the price is higher than the valuation, when he has purchased a business or a property to be sold to the company, by allotting fully paid up shares of the company, by paying a an estimated amount for the services, giving commission on the sale of shares with fixed commission and by giving him an option to subscribe the unsold shares at par to him. Position of Preliminary Contracts The contracts which are entered into by the promoters with the third party for the projected company before its formation are called 'preliminary contracts '. These contracts do not have any legal binding on the company after its formation as company before incorporation is non-entity. The position of these contract is that they are not bound by the preliminary contracts and neither they can enforce preliminary contracts the company is not in a position to approve the preliminary contracts, and finally they are personally liable for these contracts as company is not into existence

Preliminary contract (Pre-Incorporation contracts)

Before a company commences business, it has to enter into several contracts and incur several initial expenses. Contracts which are entered into by promoters with parties to acquire some property or right for and on behalf of a company yet to be formed are called as pre-incorporation contracts or preliminary contracts. Legal status of Pre-incorporation contract The legal status of a pre-incorporation contract is not easy to define. Going by the definition of the contract, there have to be at least two parties/persons who enter

into contract with each other. So, the general principle goes that no contract is there if one of the parties to the contract is not in existence at the time of entering into the contract. Hence, the company cant enter into a contract before it comes into existence, and it comes into existence only after its registration. It may be argued that, the pre-incorporation contract is entered into by the promoters on behalf of the company. But here also, is a tangle. The promoters, while entering into the contract, act as agents of the company. But when the principal, i.e. the company is itself not in existence, how can it appoint an agent to act for it? So, the promoters, themselves and not the company, become personally liable for all contracts entered into by them even though they claim to be acting for the prospective company. But, u/s 230 of the Indian Contract Act, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them if he specifies clearly, at the time of making the contract, that he is only acting as an agent and he is not personally liable under the contract. So if this principle is applied, the contract becomes in fructuous as neither of the parties is liable under the contract. However, u/s 15 (h) and u/s 19 (e) of the Specific Relief Act of 1963, lies the solution to our problem. These provisions, while deviating from the common law principles to some extent, make the pre-incorporation contracts valid. U/s 15 (h), Except as otherwise provided by this Chapter, the specific performance of a contract may be obtained by-(a)any party thereto; (b) the representative in interest or the principal, of any party thereto Provided that where the learning , skill, solvency or any personal quality of such party is a material ingredient in the contract, or where the contract provides that his interest shall not be assigned, his representative in interest or his principal shall not be entitled to specific performance his part of the contract, or the performance thereof by his representative in interest, or his principal, has been accepted by the other party; when the promoters of a company have, before its incorporation, entered into a contract for the purposes of the company, and such contract is warranted by the terms of the incorporation, the company. U/s 19 (e), Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against the company, when the promoters of a company have, before its incorporation, entered into a contract for the purpose of the company and such contract is warranted by the terms of the incorporation. In Weavers Mills Ltd. v. Balkies Ammal [AIR 1969 Mad 462], the Madras High Court extended the scope of this principle through its decision. In this case, promoters had agreed to purchase some properties for and on behalf of the company to be promoted. On incorporation, the company assumed possession and constructed structures upon it. It was held that even in absence of conveyance of property by the promoter in

favor of the company after its incorporation, the companys title over the property could not be set aside.

Steps in formation of a company/procedure of incorporation:

For the formation of a company, a company passes through the following three stages:-

1. Promotion Stage. 2. Incorporation Stage. 3. Commencement of business stage.

1. Promotion Stage: The stage of thinking about an idea and its working is termed as promotion of a company. The person involved in this task is termed as Promoter. There are certain important decisions which are taken before the formation of the company. One has to decide whether the company being formed is a Private company or a Public company. When it has been decided to form a Private Company 2 persons and where it has been decided to form a Public Company at least 7 persons shall subscribe their names to a Memorandum of Association and they shall also comply with the other formalities in respect of the registration of the company under the Indian Companies Act, 1956. Document to be filed with the Registrar: It is necessary to know from the Registrar (Registrar of the State in which the Registered office of the company shall be situated) of the companies that whether the proposed name of the company shall be approved if registration is sought for a new company with such name. An application for the registration of the company has been presented to the Registrar of the State in which the registered office of the company shall be situated. The application along with necessary fee shall be presented along with the following documents: (1) The Memorandum of Association. (2) The Articles of Association. (3) Any agreement with the individual persons who are proposed to appointed as Managers, Directors or Managing Director of the company. (4) A statement of the nominal capital of the Company. (5) A notice of address of the registered office of the company. (6) A list of the Directors who have agreed to become the first Directors of the company along with their consent to act as Directors and to take up the qualification shares of the company in the case of a public company.

(7) A declaration that all the requirements of the Companies Act have been complied with, shall also be submitted, which shall be signed by one of the following persons: (i) An advocate of the Supreme Court or High Court, or (ii) An attorney or a pleader entitled to appear before a High Court, or (iii) A Secretary or a Chartered Accountant in whole time practice in India, who is engaged in the formation of the company, or (iv) A person named in the Articles as a Directors, Manager or Secretary of the company. When the Registrar of Companies is satisfied that all the requirement have been complied with, he will register the company and enter the name of the company in the Register of Companies. (Meaning of MOA & AOA- On receipt of the name approval letter from the ROC the MOA and the AOA are required to be drafted. The MOA states the main, additional / subsidiary and other objects of the proposed company. The AOA contains the rules and procedures for the routine conduct of the proposed company. It also states the authorized share capital of the proposed company and the names of its first / permanent directors. After the MOA and AOA are required to be stamped. A stamp duty is required to be paid on the MOA and on the AOA. The stamp duty depends on the authorized share capital) 2. Incorporation Stage: Where the Registrar of Companies is satisfied that all the requirements have been complied with, he will register the company, and enter the name of the company in the Register of Companies. When a company is registered and its name in entered in the register of companies, the Registrar will issue a Certificate of Incorporation in which he certifies that the company is incorporated under his hand and in the case of a limited company that the company is a Limited Company. Thereafter, a Certificate of Incorporation is issued by the ROC, from which date the company comes in to existence. It takes about one to two weeks from the date of filing Memorandum of Association and Articles of Association to receive a Certificate of Incorporation. 3. Commencement of business stage. A Private company can commence business on receipt of its certificate of incorporation. A Public company has the option of inviting the public for subscription to its share capital. Accordingly, the company has to issue a prospectus, which provides information about the company to potential investors. The Companies Act specifies

the information to be contained in the prospectus. The prospectus has to be filed with the ROC before it can be issued to the public. In case the company decides not to approach the public for the necessary capital and obtains it privately, it can file a statement in lieu of prospectus with the ROC. On fulfillment of these requirements, the ROC issues a Certificate of Commencement of business to the public company. The company can commence business immediately after it receives this certificate

Company

Summary of steps involved in forming A

Obtaining approval for the proposed name of the company from ROC on payment of prescribed fees

Drawing up the Memorandum of Association and payment of government duties

Drawing up the Article of Association and payment of government duties

Getting the appropriate person to subscribe to the Memorandum (a minimum of 7 for the Public companies and 2 for private company) and procurement of an office

Payment of Registration Fee to the ROC

Receipt of Certificate of Incorporation

Obtain a Certificate of Commencement of business from the ROC

Certificate of Incorporation
A certificate of incorporation is a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. It is the legal document issued by the Registrar of Co-operatives when incorporation has been approved. A co-operative legally comes into existence on the effective incorporation date stated on this certificate. This document certifies that a certain corporation is officially registered with a state and that it will obey those particular state statutory laws when conducting business.

A corporation must be approved or recognized by some type of government entity. A certificate of incorporation is a document that shows that a company has received that recognition. The circumstances for obtaining such a document are often contained in body of law. A certificate of incorporation is a document that names a business that has become a legal entity. In order for this naming to occur, it is commonly required that the business name first be researched for duplicates and then reserved.

In some cases, the certificate of incorporation carries a great deal of legal importance. In other cases, it serves more as proof of registration. The degree of importance often varies by country. Being a legal entity commonly means that this type of business is recognized by the law in a similar manner as an individual. It also means that the individuals who are part of the business have limited personal liability for the overall responsibilities and duties of the corporation. If, for example, the corporation is sued, the individuals assets are not usually considered for paying damages or debts.

Template:

CERTIFICATE OF INCORPORATION OF This Certificate of Incorporation of (the Agreement) is made and effective this xxth day of xxxxx, xxxx,

BY: [Company Name] (the 'Incorporator'), a corporation organized and existing under the laws of the [STATE] with its head office located at: [street], [city], [state] [zip code]

AND: [Company Name] (the 'Company'), a corporation organized and existing under the laws of the [STATE] with its head office located at: [street], [city], [state] [zip code]

1. NAME OF CORPORATION The name of the corporation is [Name of Corporation].

2. ADDRESS OF CORPORATION The address of the registered office of the corporation in the State of [State / Province]. The name of its registered agent at that address is [name].

3. PURPOSE OF CORPORATION

The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the [General Corporation Law] of the State of [State / Province].

4. TOTAL NUMBER AND VALUE OF SHARES The total number of shares of stock which the corporation has authority to issue is [number] shares, all of which shall be Common Stock, [amount] par value per share.

5. BOARD OF DIRECTORS The Board of Directors of the corporation shall have the power to adopt, amend or repeal By-Laws of the corporation, but the stockholders may make additional ByLaws and may alter or cancel any By-Law whether adopted by them or otherwise.

6. ELECTION OF DIRECTORS Election of directors need not be by written ballot except and to the extent the ByLaws of the corporation shall so provide.

7. LIABILITIES To the fullest extent permitted by law, no director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the [General Corporation Law] is hereafter amended to authorized the further elimination or limitation of the liability of a director, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the [General Corporation Law], as so amended. Neither any amendment nor repeal, nor the adoption of any provision of this Certificate of Incorporation inconsistent, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

INCORPORATOR COMPANY Stephen Cochran President Bruce Jacobs President

Peels Case :
Incorporation and Objects, THE COMPANIES ACT, 1900. 1. 1. (1.) A certificate of incorporation given by the registrar in respect of any association shall be conclusive evidence that all the requisitions of the Companies Acts in respect of registration and of matters precedent and incidental thereto have been complied with, and that the association is a company authorized to be registered and duly registered under the Companies Acts. (2.) A statutory declaration by a solicitor of the High Court engaged in the formation of the company or by a person named in the articles of association as a director or secretary of the company of compliance with all or any of the said requisitions shall be produced to the registrar, and the registrar may accept this declaration as sufficient evidence of such compliance. (3.) The incorporation of a company shall take effect from the date of incorporation mentioned in the certificate of incorporation. (4.) This section applies to all certificates of incorporation, whether given before or after the passing of this Act. "A certificate of incorporation," &c. The object of this section is to preclude all questions as to the conclusiveness and operation of a certificate of incorporation. The Acts prescribe various conditions that must be complied with prior to the issue of the certificate, and as Lord Cairns said in Peel's Case (1867), 2 Ch. 674: "When

once the memorandum is registered and the company is held out to the world as a company undertaking business, willing to receive shareholders, and ready to contract engagements, then it would be of the most disastrous consequences if, after all that has been done, any person was allowed to go back and enter into an examination (it might be years after the company had commenced trade) of the circumstances attending the original registration, and the regularity of the execution of the document." The section is a re-enactment with amplifications of the concluding words of sect. 18 of the Companies Act, 1862 (which words are repealed by sect. 33, infra}. It also takes the place of sect. 192 (also repealed) of the Act of 1862. This applied only to companies registered under Part VII. of that Act. The words of sect. 18 thus repealed are "The certificate of incorporation of any company given by the registrar shall be conclusive evidence that all the requisitions of this Act in respect of registration have been complied with." In relation to this enactment it was long since held that the words "the requisitions of this Act in respect of registration meant " the requisitions and conditions precedent and incidental to registration," and, accordingly, that once the certificate of incorporation was given, the company named therein as incorporated was to be taken to be duly and effectually incorporated, and all reference to prior matters was precluded. Thus, in Peel's Case (1867), 2 Ch. 674. The memorandum of association had, after signature and before registration, been altered without the privity of the signatories so materially that, in the words of Lord Cairns," the alteration entirely neutralized and annihilated the original execution and registration of the document." The company was, however, registered, and the registrar gave his certificate of incorporation ; subsequently the question arose whether this certificate was conclusive, seeing that according to sect. 6 of the Act the memorandum before registration has to be subscribed "by seven or more persons associated for any lawful purpose," whereas here the signature had been entirely annihilated. Nevertheless, it was held that the registrar's certificate of incorporation was conclusive. The certificate of incorporation," said Lord Cairns, "is not merely a prima facie answer, but a conclusive answer to such objections ... when once the certificate of incorporation is given nothing is to be inquired into as to the regularity of the prior proceedings." And shortly afterwards, Lord Chelmsford, L.C., dealing with the same point in Oakes v. Turquand, L. E. 2 H. L. 323, said: "I think that the certificate prevents all recurrence to prior matters essential to registration, amongst which is the subscription of a memorandum of association by seven persons, and that it is conclusive that all previous requisitions have been complied with." And shortly afterwards, Lord Chelmsford, L.C., dealing with the same point in Oakes v. Turquand, L. E. 2 H. L. 323, said: "I think that the certificate prevents all

recurrence to prior matters essential to registration, amongst which is the subscription of a memorandum of association by seven persons, and that it is conclusive that all previous requisitions have been complied with." See also in Salomons. Salomon Sf Co., (1897) A. C. 22. The Court of Appeal, whilst holding that the defendant company had been formed "for an illegitimate purpose," and for objects not authorized by the Act," nevertheless held the certificate of incorporation conclusive, although, as we have seen, sect. 6 requires that the subscribers should be persons associated together for some "lawful purpose." On the other hand, in Re National Debenture Corporation, (1891) 2 Ch. 505,a learned judge refused to treat a certificate of incorporation as conclusive where he found as a fact that the memorandum of association had been subscribed by six persons only instead of seven ; thus in effect treating the words " conclusive evidence " as meaning "prima facie evidence," although the Legislature had purposely used the words" conclusive evidence" in contradistinction to the words "prima facie evidence" used by it in sects. 31 and 37 of the same Act. This decision, however, was reversed on appeal on the ground that the evidence did not establish the fact so found. Unfortunately, however, the judges of the Court of Appeal let fall some dicta to the effect that if the judge below had been right as to the facts, his decision would have been correct in point of law. The Court, however, had no power to overrule Peel's Case, and of course these mere dicta could in no way derogate from the authority of the decision in that case. With reference to these dicta, Yaughan Williams, J., in Laxon $- Co. (2), (1892)3 Ch. 555, said that he did not understand how they could be reconciled with the decision and words of the judgment of Lord Cairns in Peels Case, ubi supra. And it is to be noted that the Court of Appeal in Salomon v. Salomon <$f Co., as appears above, followed Peel's Case. And in Ladies' Dress Association v. Pulbrook, (1900) 2 Q. B. 376, 381, where these dicta were relied on, Eomer, L. J., whilst holding them not applicable, significantly added that " if it were not so it might be necessary for us to consider whether these dicta could be justified."However, the existence of the dicta was considered a sufficient reason for removing any doubts occasioned thereby. Hence this section, which makes it clear beyond all cavil that the certificate of incorporation is conclusive, even as Lord Cairns decided in 1867. So far, therefore, as regards certificates issued prior to the 1st January, 1901, the enactment is in effect declaratory of the law as it stood prior to that date.

Registration of a company: It is issued by the Registrar of companies when the procedure for registration of a company under the act is compiled with.

Advantage of Registering a Company

Safe Guard of Trade Name or Existence: One huge advantage of registration with state and local government is safeguarding your business name. No one else can register a business with that same name. Imagine the confusion if you do not register a name like "Ron's Plumbing," and then another "Ron's Plumbing" opens, doing inferior work. Customers will inevitably confuse the two and believe you are the inferior firm. Legal Liability Protection: If company is registered, individual will not be held personally responsible for certain accidents and other liabilities. Thus, it is easier to obtain business insurance, or attract investors, since no individuals are not personally responsible for the company's well-being. Or we can say, as the company has the separate legal existence independent of its member, It is not affected by death or insolvency of a member. It has a perpetual existence or succession. Limited Liability of Member: The Liability of member is limited to the amount of shares subscribed in the companys share capital. In case of company limited by guarantee, the liability of the member is limited to the extent of the amount guarantee by each member. Continuity: A benefit of registration is the business continuing even if anyone die or become ill. A registered business is an entity in its own right; thus, another can assume ownership or control or ones business can be sold. Neither is possible without registration. Capacity of sue and be sued: A company being a registered can sue and be sued in its own name. Separate Property: After registration, though the capital and assets are contributed by the member of shareholder, the company is the owner of the capital and assists and it can enjoy and dispose off property in its own name. Transferable Shares: After registration, Shares can transfer easily without consent of the other member. Management: After registration, Management of the company can be vested in professionals and the member of the company can appoint capable person to manage the affairs of the company to the general interests of the shareholders. Employee of the company can also become its shareholder. Members & Company: After registration, companies being separate legal entity it can sue its member in the ordinary way, can give the loans to member of the company and enter into contracts to members of the company.