Company Registration in Tirupur
Person dealing with company in good faith
A shareholder receiving bonus shares from company has been held to be 'a person dealing with a company' within the ambit of section 35A (1), [English Act, 1985] and accordingly such a shareholder can in principle take advantage of the section which provides that, in favor of a person dealing with a company in good faith, the power of the Board of directors to bind the company, or authorize others to do so, shall be deemed to be free of any limitation under the company's constitution. The court said that the words 'a person dealing with a company' are not expressly fettered in any way. As a matter of ordinary language, a shareholder receiving bonus shares from the company is within the ambit of those wide words, and, in the absence of a powerful reason to the contrary, it is inappropriate to treat naturally wide words in a statute as subject to an implied limitation.
A director-cum-chairman of a company was not allowed to take advantage of this provision. He called a meeting which he alone attended and also presided over it. He executed and approved an assignment of certain of the company's claims to himself. He entertained a mistaken belief that he had the power to act alone under the articles. The court held that the transaction was not proper. He was not a person dealing with the company from the outside. He was responsible to assure that the constitution of the company was properly applied. He could not rely on his own mistake in order to give validity to something which had no validity of any kind under the company's constitution. There was a dissenting judgment also.
A company's property was sold
A unanimous Board resolution authorized an officer of the company to execute the sale deed. It was held to be immaterial that the officer who executed the agreement to sell was declared insolvent. The bona fide purchaser from the officer was entitled to assume that the internal affairs of the company were being conducted properly. The third party who was holding the agreement to sell from the managing director was protected in a pending suit for specific performance. He was not a necessary party to the proceedings.
Internal rules and bye-laws
The rules or bye-laws made by the Board of Directors or committee of the Board or by the company in general meeting have not the same force as the articles. They are only directory and non-compliance with them will not make anything done invalid, and irregularities in administering them can always be regularized.
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