In other words, if a corporation, in the course of doing business, is involved in any legal action, then the corporation, for legal purposes, is its own person. The corporation is liable for its taxes - not the owner.

This is how corporations may sue and be sued, and their assets are tracked separately. If a corporation is sued, then the owners will not have their personal belongings at risk unless those belongings were purchased with illegal returns from the corporation.

In a sole proprietorship or partnership, the owners personally liable. For all intents and purposes, all acts taken by these two company types are taken by the owners themselves. The company becomes a legal person in its own right, distinct from the Shareholders and management: Separate personality means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things.

This separation of a company from its members was established in the House of Lords in the famous case. Salomon had a boot manufacturing business which he decided to incorporate into a private limited company. Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.

The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first. The result was that Mr Salomon was entitled to be repaid the debt as the first secured creditor. Where Company fails to make the application, a creditor or contributor may make the application. The court must be satisfied that statutory majority are acting in bona fide manner and that any intelligent and honest man belonged to the class would approve the scheme.

If the creditor wrongfully refuses to agree on the scheme, the Court cannot sanction the scheme or probe into the mala fide refusal of creditors to refuse the approval of the scheme. Where directors are sought to be proceeded against criminally for their act as director by the creditor pending the consideration of a scheme of arrangement, the criminal proceeding can be stayed for the limited purpose so that the directors are not pressurized by the creditors and the scheme can be considered effectively.

The MoA of the company contains power to amalgamate. If not, alter the object clause of memorandum by following the procedure laid down under section The Draft scheme of amalgamation based on fair exchange ratio prepared and approved by the Board of Directors.

It is always preferred to have the valuation of shares by an outside expert to determine the fair exchange value of shares. The summons shall be in Form no. The affidavit is signed and sworn in prescribed manner by the deponent under Code of Civil Procedure, Send a copy of application made to the court to the concerned Regional Director, Department of Company Affairs section A.

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