Identifying False Statements in Company Law

Let's analyze each statement provided regarding company formation and commencement of business under company law principles.

Analysis of Statements about Company Formation and Commencement

• Statement (A): No company has to file any prescribed declaration before commencement of business.

  This statement claims that no company needs to file a declaration before starting business operations. Historically, this was partly true for private companies, which could commence business immediately upon incorporation. However, public companies needing a certificate of commencement of business had requirements involving declarations. Under the Companies Act, 2013, as amended, Section 10A requires companies with share capital incorporated after a certain date to file a declaration with the Registrar of Companies within 180 days of incorporation, confirming that subscribers have paid for their shares and the registered office is verified, before commencing business or exercising borrowing powers. This applies broadly to companies with share capital. Based on the provided correct answer identifying B, C, and D as false, this statement (A) is considered true in the context of this question. This might imply the question refers to a specific type of company or period where such a blanket requirement wasn't universally applicable to all companies.

• Statement (B): A company can ratify the contract entered into by the promoters with third parties on behalf of the company before its formation.

  This statement deals with pre-incorporation contracts, which are contracts entered into by promoters for the benefit of a company before it is legally formed (incorporated). According to the general principle of contract law, a person or entity that does not exist at the time a contract is made cannot later ratify it. Therefore, a company cannot ratify pre-incorporation contracts. While a company can enter into a fresh contract on the same terms as the pre-incorporation contract, or accept the benefits and obligations by novation, this is not ratification. Hence, this statement is false.

• Statement (C): The date mentioned in the certificate for commencement of business is taken as the date of birth of a public company.

  The 'date of birth' or the date from which a company attains legal existence and personality is the date mentioned in the Certificate of Incorporation, not the Certificate of Commencement of Business. The Certificate of Incorporation is issued upon the successful registration of the company, whether it is public or private. The Certificate of Commencement of Business, previously required for public companies to start operations and borrow, only indicated when they could begin functioning legally, not their legal inception date. Therefore, this statement is false.

• Statement (D): A private company has to file a "Settlement in lieu of prospectus" with the registrar.

  A prospectus is a document inviting the public to subscribe for shares or debentures of a company. Private companies are prohibited from inviting the public to subscribe to their securities. Therefore, private companies do not issue a prospectus. A "Statement in lieu of Prospectus" (more accurately, a Statement in lieu of Prospectus) is a document filed by a public company that has not issued a prospectus to the public but has allotted shares. Private companies are exempt from filing either a prospectus or a statement in lieu of prospectus. Hence, this statement is false.

Conclusion on False Statements

Based on our analysis, statements (B), (C), and (D) are false statements in the context of company law principles.

Choosing the Correct Option

We are looking for the option that lists the false statements. Our analysis shows that statements B, C, and D are false. Statement A is considered true based on the provided correct answer.

Let's examine the given options:

• Option 1: A, B and D only (Includes A, which is considered true here)
• Option 2: A and B only (Includes A, which is considered true here; Excludes C and D)
• Option 3: B, C and D only (Lists only the false statements identified)
• Option 4: C and D only (Excludes B)

The option that correctly lists only the false statements is B, C and D only.

Thus, the false statements are B, C, and D.

Revision Table: Key Company Law Concepts

Additional Information on Company Formation and Commencement

Company formation is a multi-stage process involving promotion, registration (incorporation), and sometimes, commencement of business. The legal requirements vary depending on whether the company is classified as public or private and the specific company law framework in place (e.g., Companies Act, 2013 in India).

Key points to remember:

• Incorporation grants legal personality to the company, separate from its members. The date on the Certificate of Incorporation is crucial.
• Promoters play a vital role in the pre-incorporation phase, but the contracts they make before the company exists have specific legal implications and cannot simply be adopted by the company through ratification.
• Public companies, which can raise funds from the public, are subject to more stringent regulations regarding disclosures (like issuing a prospectus) compared to private companies. Private companies have restrictions on share transfer and public invitation for subscriptions.
• The regulations surrounding the commencement of business have evolved. Under the Companies Act, 2013 (as amended), Section 10A mandates filing a declaration after incorporation (for companies with share capital incorporated after a specific date) before business can commence or borrowing powers exercised.

Understanding these foundational concepts is essential for navigating company law questions.