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.
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