Legal Status and Types of Registered Companies

(a)According to section 2(6) of the Companies Act, 2013 "associate company" in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

"Significant influence" means control of at least 20% of total share capital or of business decisions under an agreement.

In the instant case, Admenta Private Ltd. controls 22% of the sale and disposal of the output of Hipocam Ltd. Thus, Hipocam Ltd. is the associate of Admenta Private Ltd. But Hipocam Ltd. neither influences the business decision of Admenta Private Ltd. in any manner nor does it control at least 20% of the total share capital of Admenta Private Ltd. Hence, Admenta Private Ltd. cannot be called an associate of Hipocam Ltd.

(b)A company will not be liable for torts committed outside its objects.

In order to make the company liable for the torts/crime of its employees, it will have to be proved that:

•the tort was committed in the course of an activity which is in the purview of company’s memorandum, and

•it was committed by the employee within the course of his employment.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 4A(iii) (Syllabus 2022).

As per the provisions of section 2(68) of the Companies Act, 2013, a private company means a company, having a minimum paid up share capital as may be prescribed and which by its articles:

(a)restricts the right to transfer of its shares

(b)except in case of one-person company, limits the number of its members to two hundred, provided that:

(i)where two or more persons hold one or more shares in a company jointly, they shall be treated as a single member;

(ii)persons who are in the employment of the company and persons who having been in the employment of the company, were members of the company while in the employment and have continued to be members after the employment ceased, shall not be included in the number of members;

(c)prohibits any invitation to the public to subscribe for any securities of the company.

In view of the above provisions, for conversion of Smooth Products Ltd. into a private company, no actions for reduction of number of members will be required to be taken as 42 (10+32) employees and 28 ex-employees will be excluded for consideration of the limit of 200 members. After excluding employees and ex-employees, there will be 190 (260 less 70) members as per the above provisions, which is within the limit of 200 members as provided under Section 2(68) of the Companies Act 2013. Hence, the board resolution can be implemented without reduction of numbers of members of the company. In addition, relevant provisions of the Companies Act, 2013 and Companies (Incorporation) Rules, 2014 have to be complied with.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 4A(iii) (Syllabus 2022).

A ‘small company’ has been defined under section 2(85) of the Companies Act, 2013 as a company, other than a public company whose-

•paid-up share capital does not exceed 4 crore rupees or such higher amount as may be prescribed which shall not be more than 10 crore rupees; and

•turnover of which as per profit and loss account for the immediately preceding financial year does not exceed 40 crore rupees or such higher amount as may be prescribed which shall not be more than 100 crore rupees.

However, the definition excludes a holding company or a subsidiary company; a company registered under section 8; or a company or body corporate governed by any special Act.

In the instant case, Maximum Private Ltd. satisfies the turnover and paid-up share capital criteria to be a small company and is a ‘small company’.

As per Rule 8(12)(a) and 8(12)(b) of the Companies (Registration Offices and Fees) Rules, 2014, there is no necessity of certification of e-forms by a ‘small company’ from a practicing professional, the Chartered Accountant or the Company Secretary or as the case may be the Cost Accountant, in whole-time practice.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(b) (Syllabus 2022).

As per Section 2(87) the Companies Act, 2013 a “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company –

(i)Controls the composition of the Board of Directors; or

(ii)Exercises or controls more than one half of the total voting power either at its own or together with one or more of its subsidiary companies.

Explanation: For the purposes of this clause –

(a)a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b)the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c)the expression “company” includes anybody corporate;

(d)“layer” in relation to a holding company means its subsidiary or subsidiaries.

R Ltd. controls the composition of the Board of directors of X Ltd. Y Ltd. and Z Ltd. Therefore, these three companies are the subsidiary companies of R Ltd. The shareholding of X Ltd. Y Ltd. and Z Ltd. together in S Ltd. is 60%. As such, R Ltd. exercises or controls more than one half of the total voting power of S Ltd. through its subsidiary companies. Hence, R Ltd. qualifies as a holding company of S Ltd.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 2(e) (Syllabus 2022).

Following are the main points of distinction between a private company and a public company with specific reference to the Companies Act, 2013

1.Minimum Number of Members:

In case of a private company, the minimum number of persons to form a company are two, while it is seven in the case of public company. (Section 3)

2.Maximum number of Members:

In case of private company. the maximum number of members shall not exceed two hundred, whereas there is no such restriction on the maximum number of members in the case of a public company.

3.Transferability of Shares:

As per section 44 of the Companies, Act, 2013, the shares of any member in a company shall be movable property and transferrable in the manner provided by the Articles of Association of the company. In a private company, by its very definition, Article of Association of a private company must contain restrictions on transferability of shares.

4.Prospectus:

A private company cannot issue a prospectus, the Act prohibits any invitation to the public to subscribe for any securities of the company. while a public company may, through prospectus, invite the public to subscribe for its securities. {Section 2(68)}

5.Minimum numbers of Directors:

A private company must have at least two directors on Board, whereas a public company must have at least three directors on Board. (Section 149)

6.Retirement of Directors:

Directors of a private company are not required to retire by rotation, but in case of a public company at least 2/3rd of the directors must be such whose period of office is subject to retirement by rotation. (Section 152)

7.Quorum for General Meetings:

Unless the Articles of Association of the company provide for a larger number, in case of public company the quorum for general meetings shall be:

i.five members personally present if the number of members as on the date of meeting is not more than one thousand.

ii.fifteen members personally present if the number of members as on the date of meeting is more than one thousand but up to five thousand.

iii.thirty members personally present if the number of members as on the date of the meeting exceeds five thousand.

In case of a private company, unless Articles of Association provide for a higher number, two members personally present. shall be quorum for a meeting of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 4A(i) (Syllabus 2022).

As per section 2(87) of the Companies Act, 2013, "subsidiary company" in relation to any other company (that is to say the holding company), means a company in which the holding company:

•controls the composition of the Board of directors; or

•exercise or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiaries.

The composition of company's Board of directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of director.

In the given case AV Pvt. Ltd is deemed to be subsidiary company of TV Ltd. as it controls the composition of board of directors of AV Pvt. Ltd. Further, subsidiary of a public company is deemed to be considered as a public company. Therefore, AV Pvt. Ltd is considered as a public company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 2A(iv) (Syllabus 2017).

According to the definition of private company under Section 2(68) of the Companies Act, 2013, a private limited company is prohibited to make an invitation to the public to subscribe for any securities of the company.

‘Securities’ has been defined under section 2(81) of the Companies Act, 2013 to mean the securities as defined in Section 2(h) of the Securities Contracts (Regulation) Act, 1956. As per Section 2(h) of the Securities Contracts (Regulation) Act, 1956, “Securities” include debentures, debenture stock or other marketable securities of a like nature.

However, under Section 42 of the Companies Act, 2013, a Private Company may issue such securities on private placement basis only to a selected group of persons who have been identified by the Board, and whose number shall not exceed 200 in the aggregate in a financial year excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option subject to prescribed conditions.

Further, as per Section 73 and 76 of the Companies Act, 2013, only the following may invite, accept or renew public deposits from the public:

•a banking company,

•non-banking financial company as defined in the Reserve Bank of India Act, 1934,

•to such other company as the Central Government may, after consultation with the Reserve Bank of India, specify in this behalf,

•Public company (Eligible Company) having Net worth not less than Rs. 100 Crores or Turnover not less than Rs. 500 Crores and which has obtained the prior consent of the company in general meeting by means of a resolution and also filed the said resolution with the Registrar of Companies before making any invitation to the Public for acceptance of deposits.

Thus, a Private Company cannot accept deposits from Public.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(a) (Syllabus 2017).

As per Section 2(87) of the Companies Act, 2013 the Subsidiary Company is a company in which the holding company

(i)controls the composition of the board of directors or

(ii)exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies.

As per Section 2(6) of the Companies Act, 2013, Associate company in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.

Explanation — For the purpose of this clause,—

(a)the expression "significant influence" means control of at least twenty percent. of total voting power, or control of or participation in business decisions under an agreement;

(b)the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 2(a) (Old syllabus).

In terms of Section 2(20) of the Companies Act, 2013 a “company” means a company incorporated under this Act or under any previous company law. Further, as per Section 9 of the Companies Act, 2013, from the date of incorporation, the company shall have perpetual succession with power to acquire, hold and dispose of property, both movable and immovable, tangible and intangible, to contract and to sue and be sued, by the said name. Since a corporate body (i.e. a company) is the creation of law, it is an artificial juridical person (i.e. created by law) and it is clothed with many rights, obligations, powers and duties prescribed by law. It is not a human being but it acts through human beings. It is considered as a legal person which can enter into contracts, possess properties in its own name, sue and can be sued by others etc. It is called an artificial person since it is invisible, intangible, existing only in the contemplation of law. It is capable of enjoying rights and being subject to duties. The company, though a legal person, is not a citizen under the Citizenship Act, 1955 or the Constitution of India.

In State Trading Corporation of India Ltd. v. C.T.O., A.I.R. 1963 S.C. 1811, the Supreme Court held that the State Trading Corporation though a legal person, was not a citizen and can act only through natural persons. Nevertheless, it is to be noted that certain fundamental rights enshrined in the Constitution for protection of “person”, e.g., right to equality (Article 14) etc. are also available to company. Section 2(f) of Citizenship Act, 1955 expressly excludes a company or association or body of individuals from citizenship. Though it is established through judicial decisions that a company cannot be a citizen, yet it has nationality, domicile and residence.

In Gasque v. Inland Revenue Commissioners, (1940) 2 K.B. 88, Macnaghten. J. held that a limited company is capable of having a domicile and its domicile is the place of its registration and that domicile clings to it throughout its existence. A body corporate has no domicile. It is quite true that a body corporate cannot have a domicile in the same sense as an individual. But by analogy with a natural person the attributes of residence, domicile and nationality can be given to a body corporate

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 1(a) (Old syllabus).

Exceptions to the principle of “Limited Liability” are as under-

•If at any time the number of member of a company is reduced, in the case of a public company, below seven ,in the case of private company, below two and company carries on business for more than six months while the number of member is also reduced, every member of the company during the time that it so carries on business after the those six months and is cognizant of the fact that it is carrying on business with less than seven or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefore. [Section 3A of the Companies Act, 2013]

•When the company is incorporated as an Unlimited Company under section 3(2)(c) of the Act.

•Where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants, direct that liability of the members of such company shall be unlimited. [Section 7(7)(b)]

•Where in the course of winding up it appears that any business of the company has been carried on with an intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal may declare the persons who were knowingly parties to the carrying on of the business in the manner aforesaid as personally liable, without limitation of liability, for all or any of the debts/liabilities of the company. [Section 339]

•Where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person who was director at the time of issue of prospectus or has been named as a director in the prospectus or every person who has authorized the issue of prospectus or every promoter or a person referred to as an expert in the prospectus shall be personally liable, without any limitation of liability, for all or any of the losses or damaged that may have been incurred by any person who subscribed to the securities on the basis of such prospectus. [Section 35(3)]

•Where a company fails to repay deposit or part thereof or any interest thereon referred in section 74 within the time specified or further time as may be allowed by the Tribunal and it is proved that deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible, without any limitation of liability, for all or any of the losses or damaged that may have been incurred by the depositors. [(Section 75(1)]

•Where the report made by an inspector states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in form of any asset, property or cash or in any other manner, the Central Government may file an application before Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, officer or other person liable personally without any limitation of liability. [Section 224(5)]

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 1(a) (Syllabus 2017).

The company, being a separate person, is the owner of its assets and bound by its liabilities. The liabilities of a member as shareholder, extends to the contribution to the capital of the company up to the nominal value of the shares held and not paid by him. Members, even as a whole, are neither owners of the company's undertaking, nor liable for its debts. In other words, a shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets. This means that the liability of a member is limited. If a person holds fully-paid shares, he has no further liability to pay even if the company is declared insolvent. In case of a company limited by guarantee, the liability of members is limited to a specified amount of the guarantee mentioned in the memorandum.

The exceptions to the principle of limited liability are –

a.As per section 3A of the Companies Act, 2013 (the Act), if at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on the business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.

b.When the company is incorporated as an unlimited company under section 3(2)(c) of the Act.

c.As per section 7(7)(b) of the Act, where a company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants, direct that liability of the members of such company shall be unlimited.

d.Under section 339(1) of the Act, wherein the course of winding up it appears that any business of the company has been carried on with an intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal may declare the persons who were knowingly parties to the carrying on of the business in the manner aforesaid as personally liable, without limitation of liability, for all or any of the debts/liabilities of the company.

e.Under section 35(3) of the Act, where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person who was a director at the time of issue of the prospectus or has been named as a director in the prospectus or every person who has authorised the issue of prospectus or every promoter or a person referred to as an expert in the prospectus shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such prospectus.

f.As per section 75(1) of the Act, where a company fails to repay the deposit or part thereof or any interest thereon referred to in section 74 within the time specified or such further time as may be allowed by the Tribunal and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall, without prejudice to other liabilities, also be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors.

g.As per section 224(5) of the Act, where the report made by an inspector states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate order disgorgement of such asset, property, or cash, and also for holding such director, key managerial personnel, officer or other person liable personally without any limitation of liability.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 1(b) (Syllabus 2017).

Section 3A of the Companies Act, 2013 provides that if at any time the number of members of a company is reduced, in the case of a public company, below seven or in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognizant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued there for.

In view of the above provision, if the company continued to carry on the business with that reduced membership (i.e. 6) beyond six months period, only those members who are cognisant of the fact that it is carrying on business with less than seven members shall be severally liable for the payment of the whole of debts of the company contracted during that time, and may be severally sued therefor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 3(c) (Syllabus 2017).

According to section 3A of Companies Act, 2013, if at any time the number of members of a company is reduced, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than two members, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.

Hence in the given case of Raman Pvt. Ltd., out of the two shareholders X and Y, X sold all his shares to Y and the company carried on its business activities thereafter, pursuant to the referred section where the company carries its business for more than six months, Mr. Y shall be severally liable for the payment of the whole debts of the company contracted after those six months, and may be severally sued therefor.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 1(a) (Syllabus 2017).

i)As per Section 7(5) of the Companies Act, 2013, if any person furnishes any false or incorrect information or suppresses any material information for registration of a company, he shall be liable for fraud under section 447 of the Act.

ii)As per Section 7(6) of the Companies Act, 2013, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first Directors of the company, and the professionals making declaration shall be liable for punitive action for fraud under section 447 of the Act.

In addition to the above, under section 7(7) of the Companies Act, 2013, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,—

(a)pass such orders, as it may think fit, for regulation of the management of the company including changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or

(b)direct that liability of the members shall be unlimited; or

(c)direct removal of the name of the company from the register of companies; or

(d)pass an order for the winding up of the company; or

(e)pass such other orders as it may deem fit:

iii)According to Section 447 of the Act, fraud” in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss.

Section 447 states that without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:

Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to fifty lakh rupees or with both.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 2(c) (Syllabus 2022).

According to Section 7(7) of the Companies Act, 2013, where a company has got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company or by any fraudulent action, the National Company Law Tribunal may on an application made to it, on being satisfied that the situation so warrants:

(a)Pass such orders as it may think fit for regulation of the management of the company including changes, if any, in its Memorandum and Articles, in public interest or in the interest of the company and its members and creditors; or

(b)Direct that the liability of the members shall be unlimited; or

(c)Direct removal of the name of the company from the register of companies; or

(d)Pass an order for winding up of the company; or

(e)Pass any such orders as it deems fit.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 2A(i) (Syllabus 2017).

Section 19(1) of the Companies Act, 2013 provides that a subsidiary company shall not either by itself or through its nominees, hold any shares in its holding company and no holding company shall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares of a company to its subsidiary company shall be void.

The reference in the above mentioned section w.r.t. the shares of a holding company which is a company limited by guarantee or an unlimited company, not having a share capital, shall be construed as a reference to the interest of its members, whatever be the form of interest.

Therefore, no subsidiary company shall hold any interest in its holding company.

However, following are the circumstances where a subsidiary company can hold the shares of its holding company:

(a)Where the subsidiary company holds such shares as the legal representative of a deceased member of the holding company; or

(b)Where the subsidiary company holds such shares as a trustee; or

(c)Where the subsidiary company is a shareholder even before it became a subsidiary company of the holding company.

Accordingly, in the present case Z Ltd. cannot acquire shares of its holding company XY Ltd.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(c) (Old syllabus).

International Financial Service Centre (IFSC) is a hub of financial services within a country, which has laws and regulations different from the rest of the country. Usually these centres have low tax rates and flexible regulations for securities and currency trading, banking and insurance, which makes them attractive for foreign investment. It can be said that these centres deal mainly with the flow of money, financial products and services across borders. An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders. London, New York and Singapore can be counted as global financial centres. Many emerging IFSCs around the world, such as Shanghai and Dubai, are aspiring to play a global role in the years to come. India announced in budget 2015 that the first IFSC centre in India shall be set up in Gujarat International Finance Tec- City (GIFT City), near Ahmedabad. It will be set up under Section 18(1) of Special Economic Zones Act, 2005. Establishment of an IFSC in Special Economic Zones means that separate regulations shall be formed for an IFSC which shall be different from the rest of India

Specified IFSC private company: A private company which is licensed to operate by the RBI or the SEBI or the IRDAI from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 are referred to as “Specified IFSC private company”.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 6(a) (Old syllabus).

Legal Principle:

A company incorporated under the Companies Act, 2013 is a separate legal person and can sue for defamation if any publication harms its reputation. This was affirmed in Floating Services Ltd. v. MV San Fransceco Dipaloa (2004) 52 SCL 762 (Guj), where the court held that a company is entitled to sue for libel or slander.

Relevant Case Law:

In TVS Employees Federation v. TVS and Sons Ltd. (1996) 87 Comp Cas 37, workmen had prepared video cassettes depicting their struggle against the management. The court refused to grant an injunction as the company failed to show that the content was prima facie defamatory. The court held that mere apprehension of defamation does not justify restraining publication.

Analysis and Conclusion:

Although the company has the right to protect its reputation, an injunction can be issued only when a prima facie case of defamation is established. As per the given information the video disk has the defamatory contents. Hence, applying the principle from TVS Employees Federation (supra), the Company Secretary will be successful only if he demonstrates and proves that the video contains defamatory material. But if he fails to establish this before the court, the court is unlikely to restrain the trade union or workmen from publishing the video on social media or otherwise.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 1(d) (Syllabus 2022).

i)In a celebrated case law Solomon v Salomon & Co Ltd (1897) A.C.22, it was established that once a company has been validly constituted under the Companies Act, it becomes a legal person distinct from its members.

The House of Lords have observed that, inter alia, the company is a different person altogether different from the subscribers to the memorandum. The same principle has been upheld in a number of cases including an earlier case Kondoli Tea Co. Ltd., (1886) ILR 13 Cal.43 et al.,

ii)The company being a separate legal person distinct from its members is capable of owning, enjoying and disposing of properties in its own name. In other words, no members can claim ownership of any of the assets of the company.

iii)In a noted case H.C.Sastri v Dolphin Canpack Pvt Ltd ( I 998), the Delhi High Court held that neither the shareholder nor a Director has any right in the property and assets of a company which is a separate juristic person distinct from its shareholders

The Court held that the shareholder who buys shares in a company does not buy an interest in the property of the company. In other words, the shareholder as an investor becomes entitled to participate in the profits of the company only as and when the company declares any dividend.

iv)In the present case, the shareholders of the company Vijay and Purnima have tried to use the cash balance of the company for paying for their personal expenses to be incurred for an international holiday.

v)Hence, as the CFO and Company Secretary of the company, you can decline to pay for the personal expenses of the directors from the coffers of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 3(b) (Syllabus 2022).

The facts of the case is similar to the case Re. Kandoli Tea Co Ltd (1886) ILR 13 Cal 43, which is even earlier than the celebrated case law in Salomon v Salomon Co Ltd, the Calcutta High Court rejected their plea and observed that the company was a separate person, a separate body altogether different from the shareholders and the transfer was as much a conveyance, a transfer of property, as if the shareholders were totally different persons.

It was recognized as the principle of “Lifting of the corporate veil.” According to this principle the company is a separate legal entity which confers its own rights and duties.

Based on the well settled principle that a company is a separate, distinct juristic person different from its shareholders, the argument of Amar and others, are not tenable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 2(a) (Syllabus 2017).

The Statement is correct.

A company though a legal person, is not a citizen under the:

•Constitution of India; or

•Citizenship Act, 1955

However, company has "nationality", domicile and "residence".

In the matter of State Trading Corporation of India ltd. vs. C.T.O., the Supreme Court has held that State Trading Corporation though a legal person, was not a citizen and can act only through natural persons. Nevertheless, it is to be noted that certain fundamental rights enshrined in the Constitution for protection of “person”, e.g., right to equality (Article 14) etc. are also available to company. Section 2(f) of Citizenship Act, 1955 expressly excludes a company or association or body of individuals from citizenship.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 2(b) (Syllabus 2017).

Distinguish between:

Company and Hindu undivided family.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 2(a) (Old syllabus).

“The privilege of limited liability for business debts is one of the principal advantages of doing business under the corporate form of organisation.” The company, being a separate person, is the owner of its assets and bound by its liabilities. The liability of a member as shareholder, extends to the contribution to the capital of the company up to the nominal value of the shares held and not paid by him.

Members, even as a whole, are neither the owners of the company’s undertakings, nor liable for its debts. In other words, a shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company exceed its assets. This means that the liability of a member is limited. For e.g. If A holds shares of the total nominal value of ₹1000 and has already paid ₹500 (or 50% of the value) as part payment at the time of allotment, he cannot be called upon to pay more than ₹500, the amount remaining unpaid on his shares.

Hence, Shareholders are only liable to pay on the money due on shares, even if the assets of the company exceeds its liabilities.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 4(b) (Old syllabus).

A Company, being an artificial person, has a right to sue and be sued. They have right to seek damages where a defamatory material published about them, affects their business. However, where the material published does not defame the company, they do not have any right to restrain the other party from publicizing such material.

In the case of TVS Employees Federation Vs TVS & Sons Ltd, where the video cassettes were prepared by the workmen of the company showing their struggle against the company’s management, it was held to be not actionable unless shown that the contents of the cassette would be defamatory.

Hence in the above case, the Brave Ltd. cannot succeed.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 3(c) (Old syllabus).