Legal Environment of Business

Negotiable Instrument, in law, a written contract or other instrument whose benefit can be passed on from the original holder to new holders. The original holder (the transferor) must countersign the instrument (as in the case of a cheque) or merely deliver it (as in the case of a bank note) to the new holder; the new holder is then entitled to the benefit of the instrument (in the case of a cheque, to the money from the bank; in the case of the bank note, to the sum promised on the note). According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means “Promissory note, bill of exchange, or cheque, payable either to order or to bearer”. Major features of negotiable instruments are; Easy Transferability- A negotiable instrument is freely transferable. Usually, when we transfer any property to somebody, we are required to make a transfer Continue reading

‘Quantum meruit’ literally means ‘as much as earned’ or ‘as much as is merited’. When a person has  done some work under a contract, and the other party repudiates the contract, or some event happens  which makes the further performance of the contract impossible, then the party who has performed the  work can claim remuneration for the work he has already done. Likewise, where one person has  expressly or impliedly requested another to render him a service without specifying any remuneration, but  the circumstances of the request imply that the service is to be paid for, there is implied a promise to pay  quantum meruit, i.e. so much as the party rendering the service deserves. The right to claim quantum  meruit does not arise out of contract as the right to damages does; it is a claim on the quasi-contractual  obligation which the law implies in the circumstances. The claim Continue reading

Section 2(26) of the Companies Act, 1956 defines a managing director as, “a director who, by virtue of  an agreement with the company, or of a resolution passed by the company in general meeting, or by its  Board of Directors, or by virtue of its Memorandum or Articles of Association, is entrusted with  substantial powers of management which would not otherwise be exercisable by him, and includes a  director occupying the position of a managing director, by whatever name called.” From the above definition it is clear that a managing director is also a director, but he enjoys  substantial powers to act as the chief executive under the control and supervision of the Board. Thus, he  is both a director and manager. As a director he takes a seat in the Board meeting and participates in the  policy-making function. As a manager or chief executive, he is responsible for the Continue reading

Proxy battles take place when the agenda items at the meeting are likely to be opposed by dissident equity shareholders. Management of the company collect proxies to face these opponents in the meetings of the Board of Directors as well as shareholders. Meaning of Proxy Proxy is defined as a vote in deciding corporate issues in meetings and determining elections. Section 176 of the Companies Act, 1956 deals with the meaning, use and disposition of proxy, Section 176 is reproduced below: “176. Proxies — (1) Any members of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another and vote instead of himself; but a proxy so appointed shall not any right to speak at the meeting: Provided that, unless the articles otherwise provide: (a)       this subsection shall not apply in the case of a company not having Continue reading

The rules and regulations which are framed for the internal management of a company are set out  in a document known as the Articles of Association. The articles are framed to enable the company to  carry out the aims and objects of the company set out in the Memorandum of Association. Contents of Articles of Association The regulations and bylaws laid down in the Articles relate to the following: Share capital and its subdivision into different classes of shares, rights of shareholders and their  variation; The procedure for making allotment, calls on shares and transfer, transmission, forfeiture and  surrender of shares, including lien on shares;   Alteration and reduction of capital; Borrowing powers; Appointment of Manager, Managing Director, Secretary; Declaration of dividend; Procedure for convening, holding and conducting different kinds of meetings, voting rights and  methods; Maintenance of books of account and their audit; Share Certificates and Share Warrants, conversion Continue reading