Marine Law Practitioners In Asia

“A proper balance of the rights of majority and minority shareholders is essential for the smooth functioning of the company” – explain and illustrate.

INTRODUCTION

The word “Company” has no strictly technical or legal meaning. In the term of the company act, a company a company formed under and registered under the company act. In common law company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives, of it members. Like any juristic person, a company is legally an entity apart from its member, capable of right and duties of its own; it becomes the owner of its capital and asset, and endowed with the potential of perpetual succession. But the company is not merely a legal institution. It is rather a legal device for the attainment o any social or economic end to a large extend publicly and socially responsible. It is there fore, a combine political, social, economic, and legal institution. Thus the term has been variously described. It is a means of co-operation in the conduct of an enterprise… corporate device is one form of associated enterprise. It is an intricate, centralized, economic administrative structure run by professional managers who hired capital from the investor.[1]

In a practical way, a company means a company of certain persons registered under the company act.[2] But in this case our purpose to define company in terms of legal identity and ownership of asset.

Company Types

Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders. The term privately company refers to ownership of a business company in two different ways-first, referring to ownership by non-governmental organizations and second, referring to ownership of the company’s stock by a relatively small number of holders who do not trade the stock publicly on the stock market. Private companies may be limited by shares or limited by guarantee. Degrees of status, as well as the rights and statutes which apply vary in accordance with several standards (as well as specialized designations).[3]

Degrees of status, as well as the rights and statutes which apply vary in accordance with several standards (as well as specialized designations).[4]

People are known by the company they keep. Companies are known by the people they keep

Georg C. Lichtenberg

Formation of Company

Starting of a company an exciting and a demanding time particularly in terms of the efforts involved in developing, planning, determining purpose, investment to achieve the specific objectives, purpose and goals. One of the most important things is to build up the structure that is associated with the business by all, determining the common purpose of their involvement with the company. Formation of company is essential to determine the company goals and objective.

Sole traders/Sole Proprietorship

Partnerships

Limited Liability Partnerships (LLPs)

Limited Companies

Shareholder Agreements

It can be subject to slavery and complete domination by its creator and the CORPORATION must obey its creator.[5]

Corporations are recognized by the law to have rights and responsibilities like actual people. Corporations can exercise human rights against real individual and state, and they may be responsible for human rights violation. The business now belongs to an institution. The entity of the enterprise becomes institutionalized.[6]

Rejection this, the court observed: “The company was a separate person; a separate body altogether from the shareholder and the transfer was as much a conveyance, a transfer of the property, as if the shareholder had been totally different persons”.[7]

Defining Company In Terms of Ownership of Asset

Assets are anything of value that is owned by a company or a person, whether fully paid for or not. These range from cash, inventory, and other “current assets” to real estate, equipment, and other “fixed assets.” Intangible items of value to a company, such as exclusive use contracts, copyrights, and patents, are also regarded as assets.[8]

When a company registrar under the law, the company, being a legal person, is capable of owning, enjoying and disposing of property of its own name. The company becomes the owner of its capital and asset. The shareholders are not the several or joint owner of the company’s property. The company is the real person in which all its property is vested, and by which it is controlled, managed and disposed of. A member does not even have an insurable interest in the property of the company. A person was a holder of nearly all the share, except one, of a timber company and was also a substantial creditor. He insured the company’s timber in his own name. The timber having been destroyed by fire, the insurance company was held not liable to him. No shareholder has any right to any item of property owned by the company, for he has no legal or equitable interest therein. Therefore, some of the cases stated that “The property of the company is not the property of the shareholders; it is the property of the company”.[9]

Thus, incorporation helps the property of the company to be clearly distinguished from that of its members. The is vested in the company as a body corporate, however much, the shareholder may come and go, remain vested in the company, and the company can convey, assign, mortgage, or otherwise deal with it irrespective of these mutations. On the nationalization of the Cole mines of a company, it was found that it had sold an item of its immoveable property to the wife of one of its directors. The court rip open the veil to probe into the genuineness of the transaction and discovered its shames. The property continued to be that of the company and became vested in the government. The assets of the company were not allowed to be used for payment of a shareholder’s debt. Unless a company’s incorporation can be viewed as a sham, its property would fall outside the distribution of matrimonial assets on divorce. In a partnership, on the other hand, the distinction between the joint property of the firm and the private property of the partners is often not clear.[10]

Balance of the rights of majority and minority shareholders

Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders. The term privately company refers to ownership of a business company in two different ways-first, referring to ownership by non-governmental organizations and second, referring to ownership of the company’s stock by a relatively small number of holders who do not trade the stock publicly on the stock market. Private companies may be limited by shares or limited by guarantee. There cannot be a private company with unlimited liability.[11]

Public companies are companies whose shares can be publicly traded, often on a regulated stock exchange. All companies except private companies are called public companies.[12]

There are also some forms of companies. Companies are formed by determining some facts in mind. Companies can be divided into four categories on the basis of liability.

Companies limited by shares: In such companies, the liability of the shareholder is limited to the unpaid amount of the shares if any. During the existence as well as at the time of winding up, such liability can be enforced. If the shares are fully paid then there is no liability to the holder of the share.


Companies limited by guarantee:
In the case of companies limited by Guarantee, the liability of the member is limited to the amount which he undertakes to contribute in the event of winding up of the company. Thus, the liability shall arise only on the event of winding up.[13]

An Unlimited liability Companies: In such companies, liability of the members is not limited at all. They are bound to contribute the necessary amount in order to pay off company’s debts and liabilities. Such companies are not found in practice.

A limited-liability company: 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 contribution to the assets 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 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.[14]

A limited liability company (LLC) is a relatively new business entity in the United States. The first modern LLC statute was adopted in Wyoming in 1977 and by 1997 every state allowed the creation of a limited liability company. Its basic features are:

  • Its owners have limited liability for the entity’s debts and obligations, similar to the status of shareholders in a corporation or limited partners in a limited partnership, and
  • Its income and losses are normally passed through to the owners as if it were a partnership (or sole proprietorship, in the case of a single member LLC owned by an individual).

An LLC is probably most like a limited partnership, except that a limited partnership, unlike an LLC, is required to have at least one general partner which is liable for the debts and obligations of the partnership. In an LLC, there is no need for anyone to undertake personal liability for the entity.

There is no separate federal tax classification for an LLC. For federal tax purposes, an LLC is

12. Company.” Crystal Reference Encyclopedia. Crystal Reference Systems Limited. 27 Nov, 2007 treated as a sole proprietorship, a partnership, a corporation or an S corporation. Federal tax treatment depends upon a number of factors, including the number of members and whether certain tax elections were made.[15]

The Privilege of limiting liability for business debts is one of the principal advantages of doing business under the corporate from of organization. The company, being a separate person, is the owner of its assets and bound by its liabilities. Members, even as a whole, are neither the owners of the company are undertaking, or liable for its debts. Where the subscribers exercise the choice of registering the company with limited liability, members’ liability becomes limited or restricted to the nominal value of the shares taken by them or the amount guaranteed by them. No member is bound to contribute anything more than the nominal value of the shares held by him.

In a partnership, on the other hand, the liability of the partners for the debts of the business is unlimited. They are bound to meet, without any limit, all the business obligations of the firm. The whole fortune of a partner is at stake, as the creditors can levy execution even his private property. Speaking of the advantage of trading with limited liability. [16]

Other Issues

The discussion done in above, make it clear that “Company is a legal entity in the eye of law and it is the owner of its own asset”. Besides that company has some restriction as well as some responsibilities toward the shareholder, worker and society. As a legal person, company could not deal and produce any harmful or illegal product, such as drugs (yaba, heroin, cocaine…….), and arms or any illegal things. For this reasons the memorandum must state the object for which the proposed company is to be established. Company Act requires that in the case of the company in existence before this amendment, the object clause has simply to state the object of the company. [17] For doing something illegal company (Artificial person) could be sued as person and in some opposite cases company can sue other person, which is one of the fundamental of a person.

The life of the law has not been logic; it has been reason.
-Oliver Wendell Holmes

CONCLUSION   

Thus the company is define as legal entity and the term legal entity is a legal identity through which the law allows a group of natural persons to act as if they were a single composite individual for certain purposes, or in some jurisdictions, for a single person to have a separate legal personality other than their own. This legal fiction does not mean these entities are human beings, but rather means that the law allows them to act as persons for certain limited purposes—most commonly lawsuits, property ownership, and contracts.16 And the company gets the power of owner of asset when it is registered under the law. Law defines the company as a person (juristic person). Without some exception it enjoy all the facilities enjoy by a natural person, which is under the law. Therefore it could be stated for a company that “Whereas it is essential, if man is not to be compelled to have recourse, as a last resort, to rebellion against tyranny and oppression, that human rights should be protected by the rule of law.”[18]

Laws are not masters but servants, and he rules them who obey them.
-Henry Ward Beecher

The companies act is not exhaustive of the whole of company because the company is recognized as person (juristic person) and owner of its own asset. Therefore company law only amends and consolidates certain portion of company law. Common law has still a lot of role to play in this field. The duties of corporate directors and their social responsibilities, which are at present one of the most developing aspect of common law, are still largely governed by the principles of common law.[19]

BIBLIOGRAPHY

1.       Lee, Loevinger. The Law of Free Enterprise, [1949].

2.       Rahman, Mahfuzur. Principle of Commercial Law

3.       Singh, Avtar.  Company Law, Reprint [2008-09]

4.       The Companies Act (Bangladesh), 1994, (Published by Notification No. SRO 177-law dated 1-10-95. of Ministry of Commerce)

5. Juristic person, Retrieve on July 16, 2008 from http://en.wikipedia.org

6.       http://www.natural-person.ca/artificial.html.

7.       http://www.vakilno1.com/saarclaw/bangladesh/part1.htm>.

8.       http://en.wikipedia.org/wiki/Legal_status.

9.       http://www.natural-person.ca/artificial.html

10.   www.flipkart.com/introduction-company-law-avtar-singh/8170128757-wv23f9tm1c

11.   www.answers.com/topic/assets-industrial-engineering

[1] Singh Avtar , Company Law, Reprint [2008-09], p-01.

[2] Lee Loevinger, The Law Of Free Enterprise, [1949], pp- 59.

[3] http://en.wikipedia.org/wiki/Legal_status.

[4] http://en.wikipedia.org/wiki/Legal_status.

[5] http://www.natural-person.ca/artificial.html

[6]Singh Avtar , Company Law, Reprint [2008-09], pp-03

[7]www.flipkart.com/introduction-companylawavtarsingh/8170128757-wv23f9tm1c

[8] www.answers.com/topic/assets-industrial-engineering.

[9] http://www.artismc.com/company#

[10] Singh Avtar , Company Law, Reprint [2008-09], pp-09.

[11] Private theatricals: A concise manual giving special advice regarding the formation of companies by Charles Townsend (2005); pg-213

[12] Private theatricals: A concise manual giving special advice regarding the formation of companies by Charles Townsend (2005); pg-225

[13] http://en.wikipedia.org/wiki/Juristic_person.

[14] http://hubpages.com/hub/Company-form-of-business

[15] http://en.wikipedia.org/wiki/Answer.com

[16] http://en.wikipedia.org/wiki/Answer.com

[17] The Companies Act (Bangladesh), 1994, (Published by Notification No. SRO 177-law dated 1-10-95. of Ministry of Commerce) < http://www.vakilno1.com/saarclaw/bangladesh/part1.htm>

[18] http://www.natural-person.ca/artificial.html.

[19] Singh Avtar , Company Law, Reprint [2008-09], pp-03

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