CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto
Under the Companies Act, 2013, Rohit incorporated a company by furnishing false information and suppressing material facts in the incorporation documents. Subsequently, the Tribunal finds the company was formed by fraud. Which statement is correct?
If a company is incorporated by furnishing false information or suppressing material facts, the Tribunal, on application, can pass orders such as regulating management, making members' liability unlimited, removing the company name from the register or winding it up. The certificate of incorporation is no protection against fraud.
- AThe Tribunal may, on an application, pass an order for regulation of management, or for the removal of the company's name from the register, or direct the liability of members to be unlimited, as it deems fit, on being satisfied that the company was formed by furnishing false information or fraudulentlyCorrect
- BThe certificate of incorporation is conclusive evidence and no action can ever be taken whatever the fraud
- CThe Registrar alone can cancel the incorporation without any reference to the Tribunal or opportunity of hearing
- DThe company automatically becomes a partnership firm upon the finding of fraud
Explanation
Where a company has been got incorporated by furnishing false or incorrect information or by suppression of material facts, the Tribunal, on application, may pass orders such as regulating the management, directing that liability of members be unlimited, removing the company's name, or winding up, after hearing. The conclusive nature of the certificate does not shield fraud. The Registrar cannot cancel unilaterally without the Tribunal's order, and the company does not become a partnership.
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