Company Law and Business Formation

This assignment explores key aspects of company law relevant to new business formation. It delves into concepts like promoter roles, pre-incorporation contracts, the registration process, and the advantages of forming a company. The analysis is focused on providing a practical understanding of legal requirements for starting a business, illustrated with examples such as Anushka and Taiwo's venture.

Company law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................2
REFERENCES................................................................................................................................3

INTRODUCTION
Company act 2006 contains provision which helps in maintaining fair environment
within the organisation. The organization is the artificial judicial person which makes contract by
using their own name but in this case one of authority is required to sign on such contract
document. It prescribes the right and duty of director, promoter within the organisation. This
study consists of lifting veil which arise obligation to director for their illegal act. Further, pre
incorporation contract within organisation arise before company incorporate Moreover,
memorandum of association and article of association describes the main purpose for which the
company is incorporated. On other hands, ultra virus doctrine protect to managerial person.
TASK 1
Case: Anushka and taiwo is going to incorporate vintage car company so that they can sought
advice for legal formation and clarify some doubt which arise in mind of anuska and taiwo.
1. Corporate personality and lifting veil
Corporate personality – Company is the artificial judicial person which is different from
their owner because it makes contract by using common seal. Thus, director and promoter will
not be liable for the firm’s activities. However, it is the legal person in the eyes of law which has
the right to take decision by using its own name. Thus, Anushka and taiwo will not be liable for
any contract made by organization by using its own name.
Lifting veil – It Is doctrine which removes the veil of corporate personality in case of
Anushka and taiwo involved in unfair activities which are illegal in the eyes of law. This act
states that lifting veil protected to mangerial person from activities arise from loss or legal
procedure. Hence, Anushka and taiwo will be liable for illegal act by using the name of the
company.
2. Advantages and disadvantage of company and partnership
Basis of difference Partnership advantages Company disadvantage
Legal formality Formation of the partnership
required less formalities or no
legal formalities.
Formation of company is
required to follow the
complicated process.

Account It is required to maintain just
primary account for
understanding operational cost.
It needs to maintain account as
per the accounting standard.
Discloses
Partners are not mandatory to
disclose account at the
specified time period.
Company has to disclose their
account at the specified time
period.
Social responsibilities Partnership act is not obligated
to firm for spend profit for
social development.
As per company act 2006,
corporate are manatory
requred to spendsat least 1% of
total turnover for social
development.
Basis of difference Partnership disadvantages Company advantages
Liabilities In case loss occur then partner
have to bear loss as their firm
is unlimited liability
Company’s liabilities are
limited so member of the
organization is liable for
spending that amount only.
Tax benefit Government does not provide
any tax benefit for starting
partnership business.
Government provides tax
benefit for the incorporation.
Therefore, Anushka and taiwo has to choose from the company because it gives better tax
advantages at the time of incorporation. Along with, it has limited liability which are not
obligated for future time period.
3. Law on promoter and per-incorporation contract
As per the company act 2006, it states that promoter is the person who forms the
company by completing the legal formalities. He plays a main role in forming the organization
for accomplishing described target. Thus, Anushka and taiwo may be promoter when they from a

new company by completing the legal procedure. Further, name of promoter are mentioned in
the company prospectus. It is the duty of promoter to not hide any secret profit which is used at
the time of forming the company. Further, he should not disclose any confidential information to
any other person. Moreover, he should disclose all information which arise per-incorporation of
company.
Per-incorporation contract – any of the contract which made before incorporation of
the company. As per the company act provision state that contract expenses can be mention in
financial statement further, such expenses can be write off on basis of proportionate basis.
4. 4. Requirements for registration and commencement of trading
The registration requirement for following purpose such as: Payment security – Registration required for payment security when trader deal in credit.
It provided safety by various of provisions. International trad – Trader is mandatory required to registration for international trading. Legal obligation – Sometime is legal obligation for operation of business. Further,
registration treated as government requirement. Exception – government grant exemption to such firm which are legally registered.
 Permission – It is treated as permission by legal body for operate business.

TASK 1

REFERENCES
Books and journal