ICSI Notes: Elements of Company Law | Legal Aptitude for CSEET PDF Download

 Page 1


265
Legal Aptitude  
and Logical Reasoning
ELEMENTS OF  
COMPANY LAW
LESSON 4
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265
Legal Aptitude  
and Logical Reasoning
ELEMENTS OF  
COMPANY LAW
LESSON 4
266
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
MEANING OF COMPANY
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it 
originally referred to an association of persons who took their meals together. In the leisurely past, 
merchants took advantage of festive gatherings, to discuss business matters. Now a days, the business 
matters have become more complicated and cannot be discussed at length at festive gatherings. 
Therefore, the word company has assumed greater importance. It denotes a joint stock enterprise in 
which the capital is contributed by a large number of people. Thus, in popular parlance, a company 
denotes an association of like-minded persons formed for the purpose of carrying on some business or 
undertaking. A company is a corporate body and a legal person having status and personality distinct 
and separate from that of the members constituting it.
It is called a body corporate because the persons composing it are made into one body by incorporating 
it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the 
Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by the 
process other than natural birth. It is, for this reason, sometimes called artificial legal person. As a legal 
person, a corporate is capable of enjoying many of the rights and incurring many of the liabilities of a 
natural person.
In the legal sense, a company is an association of both natural and artificial persons incorporated 
under the existing law of a country. In terms of the Section 2(20) of the Companies Act, 2013, Company 
means a company incorporated under this Act or under any previous company law. In common law, a 
company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives 
of its members. However, an association formed not for profit acquires a corporate life and falls within 
the meaning of a company by reason of a licence under Section 8 of the Act.
But a company is not merely a legal institution. It is rather a legal device for the attainment of any social 
or economic end. It is, therefore, a combined political, social, economic and legal institution. Thus, the 
term company has been described in many ways. “It is a means of cooperation and organisation in 
the conduct of an enterprise”. It is “an intricate, centralised, economic and administrative structure 
run by professional managers who hire capital from the investor(s)”. Lord Justice James has defined a 
company as “an association of many persons who contribute money or money’s worth to a common 
stock and employ it in some trade or business and who share the profit and loss arising therefrom. The 
common stock so contributed is denoted in money and is the capital of the company. The persons 
who form it, or to whom it belongs, are members. The proportion of capital to which each member is 
entitled is his “share”.
From the foregoing discussion it is clear that a company has its own corporate and legal personality 
distinct and separate from that of its members. A brief description of the various attributes is given here 
to explain the nature and characteristics of the company as a corporate body.
NATURE AND CHARACTERISTICS OF A COMPANY
Since a corporate body (i.e. a company) is the creation of law, it is not a human being, it is an artificial 
person (i.e. created by law); it is clothed with many rights, obligations, powers and duties prescribed 
by law; it is called a ‘person’. Being the creation of law, it possesses only the properties conferred upon 
it by its Memorandum of Association. Within the limits of powers conferred by the charter, it can do all 
acts as a natural person may do.
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265
Legal Aptitude  
and Logical Reasoning
ELEMENTS OF  
COMPANY LAW
LESSON 4
266
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
MEANING OF COMPANY
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it 
originally referred to an association of persons who took their meals together. In the leisurely past, 
merchants took advantage of festive gatherings, to discuss business matters. Now a days, the business 
matters have become more complicated and cannot be discussed at length at festive gatherings. 
Therefore, the word company has assumed greater importance. It denotes a joint stock enterprise in 
which the capital is contributed by a large number of people. Thus, in popular parlance, a company 
denotes an association of like-minded persons formed for the purpose of carrying on some business or 
undertaking. A company is a corporate body and a legal person having status and personality distinct 
and separate from that of the members constituting it.
It is called a body corporate because the persons composing it are made into one body by incorporating 
it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the 
Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by the 
process other than natural birth. It is, for this reason, sometimes called artificial legal person. As a legal 
person, a corporate is capable of enjoying many of the rights and incurring many of the liabilities of a 
natural person.
In the legal sense, a company is an association of both natural and artificial persons incorporated 
under the existing law of a country. In terms of the Section 2(20) of the Companies Act, 2013, Company 
means a company incorporated under this Act or under any previous company law. In common law, a 
company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives 
of its members. However, an association formed not for profit acquires a corporate life and falls within 
the meaning of a company by reason of a licence under Section 8 of the Act.
But a company is not merely a legal institution. It is rather a legal device for the attainment of any social 
or economic end. It is, therefore, a combined political, social, economic and legal institution. Thus, the 
term company has been described in many ways. “It is a means of cooperation and organisation in 
the conduct of an enterprise”. It is “an intricate, centralised, economic and administrative structure 
run by professional managers who hire capital from the investor(s)”. Lord Justice James has defined a 
company as “an association of many persons who contribute money or money’s worth to a common 
stock and employ it in some trade or business and who share the profit and loss arising therefrom. The 
common stock so contributed is denoted in money and is the capital of the company. The persons 
who form it, or to whom it belongs, are members. The proportion of capital to which each member is 
entitled is his “share”.
From the foregoing discussion it is clear that a company has its own corporate and legal personality 
distinct and separate from that of its members. A brief description of the various attributes is given here 
to explain the nature and characteristics of the company as a corporate body.
NATURE AND CHARACTERISTICS OF A COMPANY
Since a corporate body (i.e. a company) is the creation of law, it is not a human being, it is an artificial 
person (i.e. created by law); it is clothed with many rights, obligations, powers and duties prescribed 
by law; it is called a ‘person’. Being the creation of law, it possesses only the properties conferred upon 
it by its Memorandum of Association. Within the limits of powers conferred by the charter, it can do all 
acts as a natural person may do.
267
Legal Aptitude  
and Logical Reasoning
The most striking characteristics of a company are:
 (i) Corporate Personality
  By incorporation under the Act, the company is vested with a corporate personality quite distinct 
from individuals who are its members. Being a separate legal entity it bears its own name and 
acts under a corporate name. It has a seal of its own. Its assets are separate and distinct from 
those of its members. It is also a different ‘person’ from the members who compose it. As such 
it is capable of owning property, incurring debts, borrowing money, having a bank account, 
employing people, entering into contracts and suing or being sued in the same manner as an 
individual. Its members are its owners but they can be its creditors simultaneously as it has a 
separate legal entity. A shareholder cannot be held liable for the acts of the company even if 
he holds virtually the entire share capital. The shareholders are not the agents of the company 
and so they cannot bind it by their acts. The company does not hold its property as an agent 
or trustee for its members and they cannot sue to enforce its rights, nor can they be sued in 
respect of its liabilities. Thus, ‘incorporation’ is the act of forming a legal corporation as a juristic 
Lesson 4 – Elements of Company Law
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265
Legal Aptitude  
and Logical Reasoning
ELEMENTS OF  
COMPANY LAW
LESSON 4
266
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
MEANING OF COMPANY
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it 
originally referred to an association of persons who took their meals together. In the leisurely past, 
merchants took advantage of festive gatherings, to discuss business matters. Now a days, the business 
matters have become more complicated and cannot be discussed at length at festive gatherings. 
Therefore, the word company has assumed greater importance. It denotes a joint stock enterprise in 
which the capital is contributed by a large number of people. Thus, in popular parlance, a company 
denotes an association of like-minded persons formed for the purpose of carrying on some business or 
undertaking. A company is a corporate body and a legal person having status and personality distinct 
and separate from that of the members constituting it.
It is called a body corporate because the persons composing it are made into one body by incorporating 
it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the 
Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by the 
process other than natural birth. It is, for this reason, sometimes called artificial legal person. As a legal 
person, a corporate is capable of enjoying many of the rights and incurring many of the liabilities of a 
natural person.
In the legal sense, a company is an association of both natural and artificial persons incorporated 
under the existing law of a country. In terms of the Section 2(20) of the Companies Act, 2013, Company 
means a company incorporated under this Act or under any previous company law. In common law, a 
company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives 
of its members. However, an association formed not for profit acquires a corporate life and falls within 
the meaning of a company by reason of a licence under Section 8 of the Act.
But a company is not merely a legal institution. It is rather a legal device for the attainment of any social 
or economic end. It is, therefore, a combined political, social, economic and legal institution. Thus, the 
term company has been described in many ways. “It is a means of cooperation and organisation in 
the conduct of an enterprise”. It is “an intricate, centralised, economic and administrative structure 
run by professional managers who hire capital from the investor(s)”. Lord Justice James has defined a 
company as “an association of many persons who contribute money or money’s worth to a common 
stock and employ it in some trade or business and who share the profit and loss arising therefrom. The 
common stock so contributed is denoted in money and is the capital of the company. The persons 
who form it, or to whom it belongs, are members. The proportion of capital to which each member is 
entitled is his “share”.
From the foregoing discussion it is clear that a company has its own corporate and legal personality 
distinct and separate from that of its members. A brief description of the various attributes is given here 
to explain the nature and characteristics of the company as a corporate body.
NATURE AND CHARACTERISTICS OF A COMPANY
Since a corporate body (i.e. a company) is the creation of law, it is not a human being, it is an artificial 
person (i.e. created by law); it is clothed with many rights, obligations, powers and duties prescribed 
by law; it is called a ‘person’. Being the creation of law, it possesses only the properties conferred upon 
it by its Memorandum of Association. Within the limits of powers conferred by the charter, it can do all 
acts as a natural person may do.
267
Legal Aptitude  
and Logical Reasoning
The most striking characteristics of a company are:
 (i) Corporate Personality
  By incorporation under the Act, the company is vested with a corporate personality quite distinct 
from individuals who are its members. Being a separate legal entity it bears its own name and 
acts under a corporate name. It has a seal of its own. Its assets are separate and distinct from 
those of its members. It is also a different ‘person’ from the members who compose it. As such 
it is capable of owning property, incurring debts, borrowing money, having a bank account, 
employing people, entering into contracts and suing or being sued in the same manner as an 
individual. Its members are its owners but they can be its creditors simultaneously as it has a 
separate legal entity. A shareholder cannot be held liable for the acts of the company even if 
he holds virtually the entire share capital. The shareholders are not the agents of the company 
and so they cannot bind it by their acts. The company does not hold its property as an agent 
or trustee for its members and they cannot sue to enforce its rights, nor can they be sued in 
respect of its liabilities. Thus, ‘incorporation’ is the act of forming a legal corporation as a juristic 
Lesson 4 – Elements of Company Law
268
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
person. A juristic person is in law also conferred with rights and obligations and is dealt with in 
accordance with law. In other words, the entity acts like a natural person but only through a 
designated person, whose acts are processed within the ambit of law [Shiromani Gurdwara 
Prabandhak Committee v. Shri Sam Nath Dass AIR 2000 SCW 139].
  The case of Salomon v. Salomon and Co. Ltd., (1897) A.C. 22 has clearly established the principle 
that once a company has been validly constituted under Companies Act, it becomes a legal 
person distinct from its members and for this purpose it is immaterial whether any member has 
a large or small proportion of the shares, and whether he holds those shares beneficially or as a 
mere trustee.
  In the case, Salomon had, for some years, carried on a prosperous business as a leather 
merchant and boot manufacturer. He formed a limited company consisting of himself, his wife, 
his daughter and his four sons as the shareholders, all of whom subscribed for 1 share each so 
that the actual cash paid as capital was £ 7. Salomon sold his business (which was perfectly 
solvent at that time), to the Company for the sum of £ 38,782. The company’s nominal capital 
was £ 40,000 in £ 1 shares. In part payment of the purchase money for the business sold to the 
company, debentures of the amount of £10,000 secured by a floating charge on the company’s 
assets were issued to Salomon, who also applied for and received an allotment of 20,000 £ 1 
fully paid shares. The remaining amount of £8,782 was paid to Salomon in cash. Salomon was 
the managing director and two of his sons were other directors.
  The company soon ran into difficulties and the debenture holders appointed a receiver and 
the company went into liquidation. The total assets of the company amounted to £6050, its 
liabilities were £10,000 secured by debentures, £8,000 owning to unsecured trade creditors, who 
claimed the whole of the company’s assets, viz., £6,050, on the ground that, as the company 
was a mere ‘alias’ or agent for Salomon, they were entitled to payment of their debts in priority 
to debentures. They further pleaded that Salomon, as principal beneficiary, was ultimately 
responsible for the debts incurred by his agent or trustee on his behalf.
  Their Lordships of the House of Lords observed:
  “When the memorandum is duly signed and registered, though there be only seven shares 
taken, the subscribers are a body corporate capable forthwith of exercising all the functions of 
an incorporated company. It is difficult to understand how a body corporate thus created by 
statute can lose its individuality by issuing the bulk of its capital to one person. The company is 
at law a different person altogether from the subscribers of the memorandum; and though it 
may be that after incorporation the business is precisely the same as before, the same persons 
are managers, and the same hands receive the profits, the company is not in law their agent or 
trustee. The statute enacts nothing as to the extent or degree of interest which may be held by 
each of the seven or as to the proportion of interest, or influence possessed by one or majority 
of the shareholders over others. There is nothing in the Act requiring that the subscribers to the 
memorandum should be independent or unconnected, or that they or any of them should take 
a substantial interest in the undertakings, or that they should have a mind or will of their own, or 
that there should be anything like a balance of power in the constitution of company.”
  The case of Lee v. Lee’s Air Farming Ltd. (1961) A.C. 12 (P.C.) illustrates the application of the principles 
established in Salomon’s case (supra). In this case, a company was formed for the purpose of aerial 
top-dressing. Lee, a qualified pilot, held all but one of the shares in the company.
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Legal Aptitude  
and Logical Reasoning
ELEMENTS OF  
COMPANY LAW
LESSON 4
266
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
MEANING OF COMPANY
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it 
originally referred to an association of persons who took their meals together. In the leisurely past, 
merchants took advantage of festive gatherings, to discuss business matters. Now a days, the business 
matters have become more complicated and cannot be discussed at length at festive gatherings. 
Therefore, the word company has assumed greater importance. It denotes a joint stock enterprise in 
which the capital is contributed by a large number of people. Thus, in popular parlance, a company 
denotes an association of like-minded persons formed for the purpose of carrying on some business or 
undertaking. A company is a corporate body and a legal person having status and personality distinct 
and separate from that of the members constituting it.
It is called a body corporate because the persons composing it are made into one body by incorporating 
it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the 
Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by the 
process other than natural birth. It is, for this reason, sometimes called artificial legal person. As a legal 
person, a corporate is capable of enjoying many of the rights and incurring many of the liabilities of a 
natural person.
In the legal sense, a company is an association of both natural and artificial persons incorporated 
under the existing law of a country. In terms of the Section 2(20) of the Companies Act, 2013, Company 
means a company incorporated under this Act or under any previous company law. In common law, a 
company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives 
of its members. However, an association formed not for profit acquires a corporate life and falls within 
the meaning of a company by reason of a licence under Section 8 of the Act.
But a company is not merely a legal institution. It is rather a legal device for the attainment of any social 
or economic end. It is, therefore, a combined political, social, economic and legal institution. Thus, the 
term company has been described in many ways. “It is a means of cooperation and organisation in 
the conduct of an enterprise”. It is “an intricate, centralised, economic and administrative structure 
run by professional managers who hire capital from the investor(s)”. Lord Justice James has defined a 
company as “an association of many persons who contribute money or money’s worth to a common 
stock and employ it in some trade or business and who share the profit and loss arising therefrom. The 
common stock so contributed is denoted in money and is the capital of the company. The persons 
who form it, or to whom it belongs, are members. The proportion of capital to which each member is 
entitled is his “share”.
From the foregoing discussion it is clear that a company has its own corporate and legal personality 
distinct and separate from that of its members. A brief description of the various attributes is given here 
to explain the nature and characteristics of the company as a corporate body.
NATURE AND CHARACTERISTICS OF A COMPANY
Since a corporate body (i.e. a company) is the creation of law, it is not a human being, it is an artificial 
person (i.e. created by law); it is clothed with many rights, obligations, powers and duties prescribed 
by law; it is called a ‘person’. Being the creation of law, it possesses only the properties conferred upon 
it by its Memorandum of Association. Within the limits of powers conferred by the charter, it can do all 
acts as a natural person may do.
267
Legal Aptitude  
and Logical Reasoning
The most striking characteristics of a company are:
 (i) Corporate Personality
  By incorporation under the Act, the company is vested with a corporate personality quite distinct 
from individuals who are its members. Being a separate legal entity it bears its own name and 
acts under a corporate name. It has a seal of its own. Its assets are separate and distinct from 
those of its members. It is also a different ‘person’ from the members who compose it. As such 
it is capable of owning property, incurring debts, borrowing money, having a bank account, 
employing people, entering into contracts and suing or being sued in the same manner as an 
individual. Its members are its owners but they can be its creditors simultaneously as it has a 
separate legal entity. A shareholder cannot be held liable for the acts of the company even if 
he holds virtually the entire share capital. The shareholders are not the agents of the company 
and so they cannot bind it by their acts. The company does not hold its property as an agent 
or trustee for its members and they cannot sue to enforce its rights, nor can they be sued in 
respect of its liabilities. Thus, ‘incorporation’ is the act of forming a legal corporation as a juristic 
Lesson 4 – Elements of Company Law
268
CSEET Reference Reading Material - I
Legal Aptitude  
and Logical Reasoning
person. A juristic person is in law also conferred with rights and obligations and is dealt with in 
accordance with law. In other words, the entity acts like a natural person but only through a 
designated person, whose acts are processed within the ambit of law [Shiromani Gurdwara 
Prabandhak Committee v. Shri Sam Nath Dass AIR 2000 SCW 139].
  The case of Salomon v. Salomon and Co. Ltd., (1897) A.C. 22 has clearly established the principle 
that once a company has been validly constituted under Companies Act, it becomes a legal 
person distinct from its members and for this purpose it is immaterial whether any member has 
a large or small proportion of the shares, and whether he holds those shares beneficially or as a 
mere trustee.
  In the case, Salomon had, for some years, carried on a prosperous business as a leather 
merchant and boot manufacturer. He formed a limited company consisting of himself, his wife, 
his daughter and his four sons as the shareholders, all of whom subscribed for 1 share each so 
that the actual cash paid as capital was £ 7. Salomon sold his business (which was perfectly 
solvent at that time), to the Company for the sum of £ 38,782. The company’s nominal capital 
was £ 40,000 in £ 1 shares. In part payment of the purchase money for the business sold to the 
company, debentures of the amount of £10,000 secured by a floating charge on the company’s 
assets were issued to Salomon, who also applied for and received an allotment of 20,000 £ 1 
fully paid shares. The remaining amount of £8,782 was paid to Salomon in cash. Salomon was 
the managing director and two of his sons were other directors.
  The company soon ran into difficulties and the debenture holders appointed a receiver and 
the company went into liquidation. The total assets of the company amounted to £6050, its 
liabilities were £10,000 secured by debentures, £8,000 owning to unsecured trade creditors, who 
claimed the whole of the company’s assets, viz., £6,050, on the ground that, as the company 
was a mere ‘alias’ or agent for Salomon, they were entitled to payment of their debts in priority 
to debentures. They further pleaded that Salomon, as principal beneficiary, was ultimately 
responsible for the debts incurred by his agent or trustee on his behalf.
  Their Lordships of the House of Lords observed:
  “When the memorandum is duly signed and registered, though there be only seven shares 
taken, the subscribers are a body corporate capable forthwith of exercising all the functions of 
an incorporated company. It is difficult to understand how a body corporate thus created by 
statute can lose its individuality by issuing the bulk of its capital to one person. The company is 
at law a different person altogether from the subscribers of the memorandum; and though it 
may be that after incorporation the business is precisely the same as before, the same persons 
are managers, and the same hands receive the profits, the company is not in law their agent or 
trustee. The statute enacts nothing as to the extent or degree of interest which may be held by 
each of the seven or as to the proportion of interest, or influence possessed by one or majority 
of the shareholders over others. There is nothing in the Act requiring that the subscribers to the 
memorandum should be independent or unconnected, or that they or any of them should take 
a substantial interest in the undertakings, or that they should have a mind or will of their own, or 
that there should be anything like a balance of power in the constitution of company.”
  The case of Lee v. Lee’s Air Farming Ltd. (1961) A.C. 12 (P.C.) illustrates the application of the principles 
established in Salomon’s case (supra). In this case, a company was formed for the purpose of aerial 
top-dressing. Lee, a qualified pilot, held all but one of the shares in the company.
269
Legal Aptitude  
and Logical Reasoning
  He voted himself the managing director and got himself appointed by the articles as chief pilot 
at a salary. He was killed in an air crash while working for the company. His widow claimed 
compensation for the death of her husband in the course of his employment. The company 
opposed the claim on the ground that Lee was not a worker as the same person could not be 
the employer and the employee. The Privy Council held that Lee and his company were distinct 
legal persons which had entered into contractual relationships under which he became, the 
chief pilot, a servant of the company. In his capacity of managing director he could, on behalf 
of the company, give himself orders in his other capacity of pilot, and the relationship between 
himself, as pilot and the company, was that of servant and master. Lee was a separate person 
from the company he formed and his widow was held entitled to get the compensation. In 
effect the magic of corporate personality enabled him (Lee) to be the master and servant at 
the same time and enjoy the advantages of both.
  The decision of the Calcutta High Court in Re. Kondoli Tea Co. Ltd., (1886) ILR 13 Cal. 43, 
recognised the principle of separate legal entity even much earlier than the decision in Salomon 
v. Salomon & Co. Ltd. case. Certain persons transferred a Tea Estate to a company and claimed 
exemptions from ad valorem duty on the ground that since they themselves were also the 
shareholders in the company and, therefore, it was nothing but a transfer from them in one 
name to themselves under another name. While rejecting this Calcutta High Court observed: 
“The company was a separate person, a separate body altogether from the shareholders and 
the transfer was as much a conveyance, a transfer of the property, as if the shareholders had 
been totally different persons.
 (ii) Limited Liability
  “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 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 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. For example, if A holds shares of the total nominal value of Rs. 1,000 and has already 
paid Rs. 500/- (or 50% of the value) as part payment at the time of allotment, he cannot be 
called upon to pay more than Rs. 500/-, the amount remaining unpaid on his shares. If he holds 
fully-paid shares, he has no further liability to pay even if the company is declared insolvent. In 
the case of a company limited by guarantee, the liability of members is limited to a specified 
amount mentioned in the memorandum.
  Buckley, J. in Re. London and Globe Finance Corporation, (1903) 1 Ch.D. 728 at 731, has 
observed: ‘The statutes relating to limited liability have probably done more than any legislation 
of the last fifty years to further the commercial prosperity of the country. They have, to the 
advantage of the investor as well as of the public, allowed and encouraged aggregation of 
small sums into large capitals which have been employed in undertakings of “great public utility 
largely increasing the wealth of the country”.
  There are, however, some statutory exceptions to the principle of limited liability. As the 
Companies Act, 2013 the members become personally liable if the membership falls below 
prescribed minimum and the business is carried on for more than six months thereafter.
Lesson 4 – Elements of Company Law