In this article we will discuss what is meant by Illegal Association in Company Law as well as what are the consequences it has to suffer.
What is an illegal association? What are its consequences?
Definition of Illegal Association
Under the Companies Act, an association of more than 10 persons carrying on banking business and an association of more than 20 persons carrying on any other business must be registered, it is deemed to be an illegal association.
Read also:
Define a private company. State its privileges and exemptions.
Explain and illustrate doctrine of indoor management. What are the exceptions to this rule?
Who can be a director? State the modes of appointment of directors.
Who can be appointed as an auditor of a company? What are the disqualifications of an auditor?
Consequences of Illegal Association
An illegal association suffers from the following consequences or disabilities:
- It has no legal existence.
- Such an association cannot enter into any contract.
- It can neither sue any of its members or any outsider nor can it be sued by any of its members or any outsider.
- Every member is personally liable for all debts of the company.
- Every member is punishable with fine which may extend to ₹ 10,000.
- It cannot be wound up even under the provisions relating to the winding up of unregistered companies.
- The illegality of an illegal association cannot be cured by subsequent reduction in the number of its members.
- The profits or losses are liable to assessment by Income Tax authority.
Liked our post?
We are available with lots and lots of commerce related contents.
[…] What is an illegal association? What are its consequences? […]
[…] What is an illegal association? What are its consequences? […]
[…] What is an illegal association? What are its consequences? […]
[…] What is an illegal association? What are its consequences? […]