Introduction to Company Law: Meaning, Nature, Scope, Importance and Sources; Companies Act Basics Questions

Question 1

Define company (one line).

Accepted Answer

A **company** is a legal entity incorporated under law, having a separate identity from its members with perpetual succession and (usually) limited liability.

Question 2

What is meant by company law?

Accepted Answer

Company law is the set of rules governing **incorporation**, management, capital, disclosures and winding up of companies.

Question 3

State one feature of a company.

Accepted Answer

One feature is **limited liability** of members.

Question 4

What is meant by perpetual succession?

Accepted Answer

Perpetual succession means the company continues to exist **despite changes in membership** such as death or insolvency of members.

Question 5

Separate legal entity means company and members are distinct. (True/False)

Accepted Answer

True. A company has a **separate legal identity** from its members and can own property and sue/be sued.

Question 6

Give one circumstance where corporate veil may be lifted.

Accepted Answer

Corporate veil may be lifted in case of **fraud** (or tax evasion / sham company).

Question 7

Explain any three features of a company (brief).

Accepted Answer

Any three features:

- **Separate legal entity**: company is distinct from members.
- **Limited liability**: members’ liability is limited.
- **Perpetual succession**: company continues despite member changes.
- Separate property: company owns assets in its own name.

These features make the company a stable form for business.

Question 8

State the sources of company law (any three) using a small table.

Accepted Answer

Sources of company law:

| Source | What it provides |
|---|---|
| **Companies Act** | primary statutory rules |
| Case law | interpretation and doctrines |
| **MOA/AOA** | internal governance rules (subject to Act) |
| Standards/guidelines | compliance guidance |

Any three sources can be written with brief notes.

Question 9

Explain the importance of company law (any three points) with a small table.

Accepted Answer

Importance of company law:

| Area | Why it matters |
|---|---|
| **Investor protection** | disclosures and governance |
| Creditor protection | capital rules, winding up framework |
| Economic growth | enables capital formation |

Thus, company law balances business freedom with stakeholder protection.

Question 10

Explain separate legal entity doctrine and its implications (brief) with a table.

Accepted Answer

Separate legal entity means the company is distinct from members.

| Implication | Meaning |
|---|---|
| **Separate property** | company owns assets, not members |
| Limited liability | members not liable beyond limits |
| Legal capacity | company can sue/be sued |

Hence, the doctrine provides legal stability and encourages investment.

Question 11

Explain limited liability and its importance (brief) with an example/table.

Accepted Answer

**Limited liability** means members are liable only up to the unpaid value of shares (or guarantee amount).

| Aspect | Point |
|---|---|
| Meaning | liability is **limited** by law |
| Importance | encourages investment; reduces personal risk |

Example: If a shareholder has fully paid shares, they are not personally liable for company debts.

Question 12

Write an exam-style answer on features of a company (any five) with a table and conclusion.

Accepted Answer

### Features of a company (any five)

| Feature | Meaning |
|---|---|
| **Separate legal entity** | company is distinct from members |
| **Limited liability** | liability limited to shares/guarantee |
| Perpetual succession | continuous existence |
| Separate property | company owns assets |
| Management by directors | acts through board |

### Conclusion
These features make the company suitable for large-scale business by ensuring continuity, limited risk and better governance.

Question 13

Explain sources of company law (exam-style) with a table and conclusion.

Accepted Answer

Sources of company law:

| Source | Role |
|---|---|
| **Companies Act** | primary statutory rules |
| Case law | interpretation and doctrines |
| **MOA/AOA** | internal rules (subject to Act) |

Thus, statute is the main source, supported by case law and internal documents.

Question 14

Explain lifting of corporate veil: meaning and circumstances (exam-style) with a table and conclusion.

Accepted Answer

### Meaning
Lifting (piercing) the corporate veil means ignoring the company’s separate identity in special cases to identify the real persons behind it.

| Circumstance | Example |
|---|---|
| **Fraud** | using company to cheat creditors |
| Tax evasion | hiding income through shell companies |
| Sham/facade | company formed to avoid obligations |
| Public interest | regulatory enforcement |

### Conclusion
Veil lifting is an exception used to prevent misuse of the corporate form and to ensure **justice** and compliance.

Question 15

Write an exam-style note on nature and scope of company law (include a table and conclusion).

Accepted Answer

### Nature
Company law is **statutory**, regulatory and disclosure-based, focusing on governance and stakeholder protection.

### Scope
| Area | Covers |
|---|---|
| Incorporation | registration, MOA/AOA |
| Management | directors, meetings, resolutions |
| Compliance | filings, accounts, audit |
| Remedies | oppression/mismanagement, investigation |

### Conclusion
Thus, company law provides a comprehensive framework for forming and regulating companies and ensuring accountability in corporate affairs.

Introduction to Company Law: Meaning, Nature, Scope, Importance and Sources; Companies Act Basics

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