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B.A. LL.B. (Five Years) Sem 6 Company Law 2018 Jun Question Paper with Solutions - KSLU

KSLU Solved Question Papers

Company Law

Previous Year Question Paper with Solution

B.A. LL.B. (Five Years) · Sem 6

2018 Jun Examination

munotes.in

Mumbai

First published on munotes.in on 21 October 2026.

Published by munotes.in, Mumbai.

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The Paper as Set

The questions in this volume are the questions asked at the 2018 Jun examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.

Duration 3 hours · Total marks 100 · 13 questions answered

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Read the original question paper

Q1Define 'Company'. Explain its kinds.[16]

Answer

For full marks, cover: the definition of "company" (section 2(20) of the Companies Act 2013) and its features; the kinds, classified (1) by mode of incorporation: chartered, statutory, registered; (2) by liability (section 3(2)): limited by shares, limited by guarantee (with or without share capital), unlimited; (3) by number of members: One Person Company, private, public, with the deemed public company; (4) by control: holding, subsidiary, associate; (5) by ownership: government company; (6) by purpose: section 8 company, Nidhi, producer company; (7) by size and activity: small company, dormant company; (8) by listing and nationality: listed, foreign company; Salomon, State Trading Corporation, Tata Engineering and Vodafone; a table.

What a company is

Section 2(20) of the Companies Act 2013 defines a company as a company incorporated under the Act or under any previous company law. In substance, it is an association of persons registered under the Act for a common purpose.

Its features.

Separate legal person. On registration it becomes a body corporate, distinct from its members (section 9). Salomon v. A. Salomon and Co. Ltd., [1897] AC 22, held a company to be a person distinct even from the member who held almost all its shares.
Perpetual succession. It continues whatever happens to its members.
Limited liability. Members of a company limited by shares are liable only for the amount unpaid on their shares.
Transferable shares. Shares are movable property, transferable as the articles provide (section 44).
Own property, and the right to sue and be sued in its own name.

Companies are of many kinds. The law classifies them in several ways, and one company may fall into several classes at once.

1. By mode of incorporation

Chartered company: created by a royal charter, such as the East India Company. None are formed in India now.

Statutory company: created by a special Act of Parliament or a State legislature. Examples are the Life Insurance Corporation of India and the Reserve Bank of India. Its constitution is in its own Act.
Registered company: formed by registration under the Companies Act. Almost all companies are of this kind.

2. By liability of members (section 3(2))

Company limited by shares (section 2(22)): a member's liability is limited to the amount, if any, unpaid on his shares. This is the commonest form.
Company limited by guarantee (section 2(21)): each member undertakes to contribute a fixed amount to the assets on winding up. It suits clubs, chambers of commerce and charities. It may be formed with or without a share capital. If it has a share capital, members are liable both for the unpaid amount on shares and for the guarantee.
Unlimited company (section 2(92)): there is no limit on the members' liability. They must contribute whatever is needed to pay the debts on winding up.

3. By number of members

One Person Company (section 2(62)): a company with only one member. Its memorandum must name a nominee who will become the member on the subscriber's death (section 4(1)(f)). It need not hold an annual general meeting (section 96(1)).
Private company (section 2(68)): by its articles, it restricts the right to transfer its shares. It also limits its members to two hundred, not counting employee members, and prohibits any invitation to the public to subscribe for its securities. It needs at least two members and two directors, and its name ends with "Private Limited".
Public company (section 2(71)): a company that is not a private company. It needs at least seven members and three directors. Its securities are freely transferable (section 58(2)). Its name ends with "Limited".
Deemed public company: a private company that is a subsidiary of a public company is treated as a public company (proviso to section 2(71)).

Salomon is the root of the One Person Company. Salomon used family members to make up the statutory seven. The 2013 Act now lets one person form a company openly.

4. By control

Holding and subsidiary company (sections 2(46) and 2(87)): a company is a subsidiary of another that controls the composition of its Board. It is also a subsidiary if the other controls more than half of its total voting power, alone or with its subsidiaries. The controlling company is the holding company.
Associate company (section 2(6)): a company in which another has significant influence, but which is not its subsidiary. Significant influence means control of at least twenty per cent of the voting power, or participation in business decisions under an agreement.

Vodafone International Holdings B.V. v. Union of India, (2012) 6 SCC 613, shows how groups are treated. Vodafone bought a single share of a foreign company and so gained control of Indian operations. The Supreme Court held that a genuine holding structure is respected. Each company in a group is a separate person unless the arrangement is a sham.

5. By ownership: government company (section 2(45))

In a government company, at least fifty-one per cent of the paid-up share capital is held by the Central Government, a State Government, or both. A subsidiary of a government company is also a government company.

State Trading Corporation of India Ltd. v. Commercial Tax Officer, AIR 1963 SC 1811. The State Trading Corporation, wholly owned by the Union, claimed fundamental rights under Article 19 against sales-tax assessments. The Supreme Court held that a corporation is not a citizen, so it could not claim those rights. Tata Engineering and Locomotive Co. Ltd. v. State of Bihar, AIR 1965 SC 40, applied the same rule to private companies. The veil would not be lifted to give them their shareholders' citizenship.

6. By purpose

Section 8 company: formed to promote commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment or similar objects. It must apply its profits to those objects and may pay no dividend to its members. It is registered under a licence from the Central Government, and need not use the word "Limited".
Nidhi (section 406): a company the Central Government declares to be a Nidhi or Mutual Benefit Society. It borrows from and lends to its own members.
Producer company: formed by primary producers, such as farmers, to process and market their produce. It is governed by special provisions in the Act.

7. By size and activity

Small company (section 2(85)): a private company whose paid-up capital and turnover are within the limits prescribed by the rules. The Act caps those limits at ten crore and one hundred crore rupees. Holding and subsidiary companies, section 8 companies and companies under special Acts are excluded. A small company enjoys lighter compliance.
Dormant company (section 455): a company formed for a future project, or to hold an asset or intellectual property, with no significant accounting transaction. An inactive company may also apply. It may obtain dormant status from the Registrar and file fewer returns.

8. By listing and nationality

Listed company (section 2(52)): a company any of whose securities are listed on a recognised stock exchange. It is also subject to SEBI's regulations.
Foreign company (section 2(42)): a company incorporated outside India that has a place of business in India, physically or electronically. It also conducts business activity in India. It must register its particulars and comply with Chapter XXII.

The kinds at a glance

Basis	Kinds	Key provision
Incorporation	Chartered, statutory, registered	Section 2(20)
Liability	By shares, by guarantee, unlimited	Section 3(2)
Members	One person, private, public	Sections 2(62), 2(68), 2(71)
Control	Holding, subsidiary, associate	Sections 2(46), 2(87), 2(6)
Ownership	Government company	Section 2(45)
Purpose	Section 8, Nidhi, producer company	Sections 8, 406
Size and activity	Small, dormant	Sections 2(85), 455
Listing and origin	Listed, foreign	Sections 2(52), 2(42)

Conclusion. A company is a body corporate registered under the Act and separate from its members, as Salomon established. It may be classified by how it was formed, by its members' liability and by the number of its members. It may also be classified by who controls or owns it, by its purpose, by its size and activity, and by listing and origin. Each kind has its own rules, but all share the same separate personality. As Vodafone and State Trading Corporation show, that separateness is respected even for group and government companies.

B.A. LL.B. (Five Years) Sem 6 Company Law 2018 Jun Question Paper with Solutions

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