The new concept of producer companies
TILL RECENTLY, the Companies Act, 1956 (the Act), recognized only three types of companies, namely, companies limited by shares (sub-divided into public limited and private limited companies), companies limited by guarantees and unlimited companies. With the coming into force on February 6 of the Companies (Amendment) Act 2002, (1 of 2003), a fourth category, `producer companies,' finds a place in the Act.
For this, a new Part IXA, divided into 12 chapters, has been included in the Act, comprising 46 sections, interestingly numbered as 581A to 581Z and 581ZA to 581ZT. However, the section that defines the various types of companies that can be incorporated under the Act remains unaltered.
The new concept
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The members have necessarily to be `primary producers,' that is, persons engaged in an activity connected with, or related to, primary produce.
What is primary produce? In terms of the Act it is a produce of farmers arising from agriculture including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products: produce of persons engaged in handloom, handicraft and other cottage industries: by - products of such products; and products arising out of ancillary industries.
The 46 new sections respectively deal with incorporation of producer companies: their management; general meetings; share capital and members rights; finance, accounts and audit; loan to members and investments; penalties; amalgamation, merger or division; resolution of disputes; and reconversion of producer company to inter-State cooperative society. A few salient features are now briefly
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The Act has not so far made it compulsory for limited companies to carry out internal audit, although listed companies, by virtue of the clause in the listing agreement relating to corporate governance, are to have a full-scale internal audit system.
Resolution of disputes
Any dispute relating to the formation, management or business of producers companies is to be settled by conciliation or by arbitration under the Arbitration and Conciliation Act, 1996 as if the parties to the dispute have consented in writing to such procedure. The arbitrator's decision shall be final. This seems to be inequitable since usually an arbitration award can be appealed against in high courts.
Inter-State cooperative societies
With objects not confined to one State may make an application to the Registrar for recognition as producer companies. The statute also provides for reconversion of such producer companies to their former status as inter-State cooperative societies subject to the approval of High
A company is separate from its employees, shareholders or members in that the connection between them is usually a mere contract of employment which may be terminated leaving both parties to go their own ways. The same generally applies however to those businesses which are not companies. There is also more importantly usually a separation between the company and its owners.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
A registered company, as an artificial person is separate from its members and exists only by virtue of the Companies Act under which it is incorporated. When a business is incorporated, it becomes a separate legal entity and, therefore, can be sued and sue without affecting the shareholders personal assets. This was established in “Salomon v A Salomon Co.Ltd”. Separate legal personality is known as the veil of Incorporation. This protects the shareholder and places the responsibility of the company onto the directors. These duties are outlined in the Companies act 2014.
... (English) Companies Act 1985; subject to High Court of Justice in England and Wales and Corus' shareholders approvals being obtained.
There are many types businesses in this world; these include Sole trader, Plc, Ltd, Partnership, Co-op and franchise. These types of businesses are all different from each other. Some of them need just one owner, some have hundreds.
The Companies Ordinance 1984 does not define the word 'promoter' any how attempts have been made in various judicial decisions. The persons who take initiative in the formation of the company are called promoters of the company. The prepare certain legal document and take all necessary steps necessary for the registration of the company. They convince responsible persons to act as first director of the company.
...tion have distinguished that subsidiary organization is a separate lawful substance yet despite the fact that holding organization control the subsidiary organizations and particular business of the organization inside a gathering however it is settled rule that business of subsidiary is divided from the Holding organization.
In summary, the rule in the Salmon case that upon incorporation, a company is generally considered to be a new legal entity separate from its shareholders has currently continued to be the law in courts or common law jurisdictions. The case is of particular significance in company law, firstly; it establishes the canon that when a company acts, it does so in its own name and right and not merely an agent of its owner, secondly; it establishes the important doctrine that shareholders under common law are not liable for the company’s debts beyond their initial capital
The English Judiciary has made several attempts to define the term ‘promoter’. In the case of Twycross v. Grant, the term promoter was defined as a person who undertakes to form a company with reference to a given project, and to set it going, and who takes the necessary steps to accomplish that purpose.
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
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