1 . Evolution of concept of legal entity A division bench of Delhi High Court in J B Exports Ltd and another vs. BSES Rajdhani Power Ltd (2006 134 Comp cas 106 Del. decided on 3.3.2006) observed that “the concept that a company is a distinct legal entity apart from its shareholders, vide Salomon vs. Salomon & Co. (1897 AC 22 HL) had a historical purpose Company formation in İstanbul.
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Index to Parawise Contents
- Evolution of concept of legal entity
- Effect of Incorporation: Company as a separate legal person
- Limited Liability
- General Powers of Board
- Borrowing
- Finances
- Directors as agents
- A member of an association registered as a company shall not be personally liable for any liabilities incurred in such business
- A director shall not be personally responsible for any debts of the company unless the business of the company has been carried on for any fraudulent purpose and declared as such by the Tribunal under Section 339
- Directors, etc., with unlimited liability in limited company
- Registration of charges
- Director’s personal guarantee
- What agreements are contracts
13.1 “Free consent” defined
13.2 Object is lawful
- “Undue Influence”
14.1 Position of dominance necessary for presumption to arise
14.2 Inequality of bargaining power
14.3 Judicial intervention for rescuing parties from unreasonable terms
14.4 Agreement should be reasonable for the contract to be upheld legal
14.5 Serious terms of a contract must be specifically brought to the notice of the parties
- Evolution of concept of legal entity
A division bench of Delhi High Court in J B Exports Ltd and another vs. BSES Rajdhani Power Ltd (2006 134 Comp cas 106 Del. decided on 3.3.2006) observed that “the concept that a company is a distinct legal entity apart from its shareholders, vide Salomon vs. Salomon & Co. (1897 AC 22 HL) had a historical purpose. Its main purpose was to encourage entrepreneurs to start new business ventures and, thus, help in the process of industrialisation.” This background is so important that it merits consideration in detail as follows.
1.1 Delhi High Court further observed that “In every business there is a risk that the business may fail due to recession, competition, etc. Hence, businessmen were reluctant to set up new industrial ventures out of fear that if it failed, recovery would be issued in respect of the loans they had taken and thereupon even their household and personal effects may be sold in connection with the recovery. Hence, businessmen were reluctant to take risks and start new industrial ventures. To get over this hurdle and to encourage industrialisation the legal principle was created that if a company is incorporated under the Act, the liability of the shareholders becomes limited because the shareholders, directors, etc., are legally treated as being different from the company. A company was held to be a distinct legal entity separate from its shareholders and directors. This legal principle gave protection to businessmen who were otherwise reluctant to start new industrial ventures due to the risk involved. Thus, this legal principle was of great help to industrialisation in Eurpoe (where industrialisation first began during the Industrial Revolution) and there after all over the world. “