Saturday 21 May 2016

HOLDING OF PROPERTY BY COMPANY.




http://advocateselvakumar.com/profile.html


A Company is an artificial person created under the Companies Act 1956 with the right of perpetual succession and use of its unique and individual common seal.  It is a legal person different from its members/shareholders and possesses the right to enter into valid contracts for sale, purchase, to hold, to lease out or take on lease and to mortgage immovable properties in its own name.

There are two important types of companies viz; Private Limited Company and Public Limited Company. Any two persons can form a Private Limited Company though its membership/shareholders are limited to 50; whereas, a minimum number of seven persons are required to form a Public Limited Company.
Under the Companies Act, registration of both Private Limited Company and Public Limited Company is compulsory.  Thereafter a certificate of incorporation is issued on registration by the Registrar of Companies.  The Registrar of Joint Stock Companies issues a certificate for commencement of business to the Public Limited Companies, However, this certificate is not required to form Private Limited Companies.


The Memorandum and Articles of Association are important documents of a company.  The memorandum refers to the objectives and powers of the company and articles of association deals with the powers, duties, liabilities of the Board of Directors, share holders/members and rules and regulations governing the management of the company.


Companies are inanimate bodies who cannot execute documents themselves, and hence all the official documents belonging to or relating to the company requires its common seal to be affixed on all  documents in addition to the signature/s of its authorized officers to authenticate the company documents.  The common seal is used as a physical impression made upon the documents executed by the companies and is a special seal engraved on a steel block.


Officers of the companies may be authorized to represent the company through board resolution passed in Board Meetings of the Board of Directors of a Company or by an authorized committee of the Board.   Such persons, however, are required to affix the common seal of the company in addition to their signature/s to authenticate the company documents.  In case of certain companies the articles of association deal with the common seal.


The Transfer of Property Act mentions that a living person includes a company. and it is taken for granted that all outsiders are aware of the contents of the Memorandum and Articles of Association of a company.  The memorandum and Articles of Association deals with the objectives of the company and the powers and rules regarding governance of the company must be verified to ascertain that the transactions are as per the objectives and are not ultra virus of the powers conferred on a company.  The Articles of Association specifically deal with powers of the directors regarding sale, purchase and mortgage of immovable property.  The company may also execute Power of Attorney under its common seal empowering any person to execute deeds on its behalf.  The Directors, Managing Agents, Secretary, Treasurer, Manager or any authorized official may also authenticate the documents on behalf of the company and it need not be under the common seal.  


The Companies Act under Section 293 has restricted the powers of the Board of Directors to convey property belonging to the Companies whereby the consent of the General Body of the Company is mandatory to sell, lease or otherwise dispose of the whole or substantially the whole undertaking of the company.  Likewise the consent of the general body of the company is necessary to borrow in excess of the aggregate of the paid up capital and free reserves.  The only exception is to temporary loans taken by the company from its bankers in the ordinary course of its business.  So while transacting with the company it is necessary to ascertain that the property is not whole or substantially whole part of the undertaking of the company and if the transactions involve whole or substantially whole part of the undertaking, the consent of the general body is obtained.  


The Foreign companies who enter into any kind of transaction in India, are governed by Foreign Exchange Management Act, 1999.  According to the FEMA, a company registered outside India, which has established a branch Office or other place of business in India for carrying on any activity in accordance with Foreign Exchange Management Regulations 2000, excluding liaison office, can acquire an immovable property in India which is necessary for carrying on its activity after complying with the requirement of the applicable laws, rules, regulations and directions in force for the time being in force.  
 
For More..........:

No comments:

Post a Comment