CS Executive · Setting Up of Business, Industrial and Labour Laws · Business Collaborations
Three Indian construction firms form a short-term consortium to bid for a highway project. Each remains a separate legal entity, the consortium is not incorporated, and the work is split among them as per a consortium agreement. Which statement is correct about this arrangement?
A consortium is a project-specific contractual collaboration where members stay separate legal entities and perform their agreed shares of the work under the consortium agreement. Unless incorporated, it has no separate legal personality, and no share exchange or amalgamation is needed, so the other statements are wrong.
- AIt is a contractual collaboration for a specific project, with members bearing obligations as agreed and no new company formedCorrect
- BIt automatically creates a company with separate legal personality
- CIt converts the firms into a single amalgamated company on winning the bid
- DIt is invalid unless the firms exchange equity shares
Explanation
A consortium is a project-specific contractual collaboration governed by the consortium agreement. Being unincorporated, it has no separate legal personality, and no share exchange or amalgamation is required. The other options wrongly assume a company formation, a merger, or a mandatory equity exchange.
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