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corporate law

Patricia (C.S.- Professional) (sdd) (197 Points)

09 May 2010

Hi Dear,

I 've below mentioned two queries :

What are the remedies available to a company against the promoter who makes a secret profit in connection with promotion of the company and does not disclose the same. [ ??? ]

Distinguish b/w ‘Certificate of Incorporation’ and ‘Certificate of Commencement of Business’

What is the Logic in waiting for another 30 days to wait for certificate of commence of business for a Public limited co. by shares and why the same is not applicable to Private Compnaies.

Pl reply.

thanks.

Nancy Sharma

Mumbai

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3 Replies

Prejith (Pursuing CA) (92 Points)
Replied 10 May 2010

The Company can seek the following remedies:

1. Company can rescind the contract and can recover any sum paid.

2. The company can retain the property and can make payment at cost price and deprive him from receiving the profit.

3. If the above remedies are not suitable then the company can sue the promoter.

Certificate of Incorporation: Every company has to obtain a certificate of incorporation from the ROC. The company comes into existance in the eyes of law only after obtaining this certificate.

Certificate of commencement of business: It is mandotory for every publlic company in order to start the operations. Where as a private company can choose to apply for this certificate.

Logic: I'm not sure of the logic but it might be that the money of public is involved in the functioning of a public company so The ROC might check thoroughly the operations of the company before it commences the same.

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CS Mayur Buha (Company Secretary) (238 Points)
Replied 10 May 2010

What are the remedies available to a company against the promoter who makes a secret profit in connection with promotion of the company and does not disclose the same. [ ??? ]

Ans: When the company comes to know about secret profits made by promoter the company may sue the promoter and collect the amount plus interest at the rate specified by RBI and any damage caused to company because of promoter the company can collect such damage also. and if required the concept 'lifting of corporate will' may be use by company.

Distinguish b/w ‘Certificate of Incorporation’ and ‘Certificate of Commencement of Business’

the copy of both you may find in MoA of public co.