01 May 2014
It is well settled that a company and its shareholders are different persons. It has been held that even in case of fully owned of Government Company, the company is different from government and it cannot be called a department of government. Even a fully owned state Government company will be liable to pay local tax imposed by concerned state government and it cannot deny liability for the reason that the state government owns full share capital. Likewise a fully owned company of central Government will also be liable to pay income-tax to the Central Government though entire share capital is held by the Central Government. Similarly a private limited company is distinct from its shareholders. Even a person may beneficial hold entire share capital of a company, in that case also property of company will not be property of 100% shareholder. A company and its shareholders are distinct persons. A company's property, liabilities, incomes, losses, etc., are not those of its shareholders. The contract between a company and its shareholders is governed by the memorandum and articles of association of the company, and the prospectus or other document constituting terms and conditions of issue of shares or other securities. Number of shareholders has increasing and they are widespread not only within India but also abroad. The gap between a Company's management and shareholders is also widening and in any case is capable of widening on changes in circumstances. Therefore, when a person or group of persons transfer say even hundred percent share capital of company, he transfers only shares and not the property. This is because the shares are only what the shareholder owns. The property is owned by company and not by shareholder. Selling of property can only be by company and it will be decision of company and not of shareholders. A shareholder can transfer his shares independent of other shareholders. The property owned by company cannot be transferred by shareholders though with transfer of shares control over company may go to the transferee of shares, but property will remain property of company.
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