Lesson Objectives

• Meaning and definition of Company

• Nature and characteristics of a company

• Company vis-à-vis other forms of business

• Development of Corporate Law in India

• Doctrine of Lifting of Corporate Veil

• Illegal association

1
• Introduction
• Development of Company Law in India i.e.
Stage One: The Companies Act, 1956,
Stage Two: Concept Paper on Company Law, 2004 & JJ Irani Report,
Stage Three: The Companies Bill 2012 and
Stage Four: The Companies Act, 2013

• Meaning and definition of Company

• Nature and characteristics of a Company

2
 Introduction
Meaning:
The word Company is derived from two Latin words “Com” meaning
“coming together” and “panis” meaning “bread”.

Company originally referred to group of people who took their meal

together.

3
 History and Development of the Concept of Company Law in India
The Companies Act, 1956 – Based on Bhaba Committee Recommendations

• At the end of 1950, the Government of independent India appointed a

Committee under the Chairmanship of H.C. Bhaba.
• The objective of this Committee was to revise the Indian Companies Act
keeping in mind the development of Indian trade and industry.
• Based on the recommendations of the Committee, a Bill namely, the
Companies Act, 1956 was introduced in Parliament.
• This Bill, was based on “English Companies Act, 1948”

4
 Contd….
Companies Act, 1956:
• The Act came into force on 1st April, 1956.

• This Companies Act was based on the recommendations of the Bhabha Committee.

• This Act was the longest piece of legislation ever passed by our Parliament.

• The Companies Act, 1956 consisted of 658 Sections and 15 Schedules.

5
 Contd….
• The Companies Act, 1956 was enacted with the object to amend and
consolidate the law relating to companies.

• This Act provided the legal framework for corporate entities in India and was a
mammoth legislation.

6
 NATURE AND CHARACTERISTICS OF A COMPANY
The most striking characteristics of a company are as following:
(i) Corporate personality:

Meaning: A company incorporated under the Act is vested with a

corporate personality i.e. it bears its own name, acts under name, has
a seal of its own and its assets are separate and distinct from those of
its members.

It is different ‘person’ from the members who compose it.

7
 Contd….
• The Company is capable of following:
(i) capable of owing property,
(ii) incurring debts,
(iii) borrowing money,
(iv) having a bank account,
(v) employing people,
(vi) entering into contracts and
(vii)suing or being sued in the same manner as an individual.

8
 Contd….
• Not liable for the acts of the company- A shareholder cannot be held
liable for the acts of the company even if he holds virtually the entire
share capital.

• Shareholders are not the agents of the company and so they cannot
bind it by their acts.

• Do not hold property as an agent or trustee- The company does not

hold its property as an agent or trustee.

9
 Contd….
• “Incorporation” is the act of forming a legal corporation as a juristic
person.

• A juristic person is in law also conferred with rights and obligations

and is dealt in accordance with law.

• The entity acts like a natural person but only through a designated
person, whose acts are processed within the ambit of law.

10
 Contd….
Case Law:
The case of Salomon v. Salomon and Co. Ltd., (1897) A.C. 22
• Facts of the case:
(i) In the case, Salomon had, for some years, carried on a prosperous business as a leather
merchant and boot manufacturer.
(ii) He formed a limited company consisting of himself, his wife, his daughter and his four sons
as the shareholders, all of whom subscribed to 1 share each so that the actual cash paid as
capital was £7.
(iii) Salomon sold his business (which was perfectly solvent at that time), to the Company
formed by him for the sum of £38,782.

11
 Contd….
• The company’s nominal capital was £40,000 in £1 shares.
• Part payment of the purchase money for the business sold to the company, debentures of
the amount of £10,000 secured by a floating charge on the company’s assets were issued to
Salomon, who also applied for and received an allotment of 20,000 £ 1 fully paid shares.
• The remaining amount of £8,782 was paid to Salomon in cash. Salomon was the managing
director and two of his sons were other directors.
• The company soon ran into difficulties.
• The debenture holders appointed a receiver and the company went into liquidation.
• They pleaded that Salomon, as a principal beneficiary, was ultimately responsible for the
debts incurred by his agent or trustee on his behalf.

12
 Contd….
• The Court observed following:
“The company is a different person altogether from the subscribers of
the memorandum; and though it may be that after incorporation the
business is precisely the same as before, the same persons are
managers, and the same hands receive the profits, the company is not,
in law, their agent or trustee”.

“The statute enacts nothing as to the extent or degree of interest,

which may, be held by each of the seven or as to the proportion of
interest, or influence possessed by one or majority of the shareholders
over others”
13
 Contd….
“There is nothing in the Act requiring that the subscribers to the
memorandum should be independent or unconnected, or that they or
any of them should take a substantial interest in the undertakings, or
that they should have a mind or will of their own, or that there should
be anything like a balance of power in the constitution of company.”

14
 Contd….
Conclusion: The above case law clearly states the principle that once
a company has been validly constituted under the Companies Act, it
becomes a legal person distinct from its members and for this
purpose it is immaterial whether any member holds a large or small
proportion of the shares, and whether he holds those shares as
beneficially or as a mere trustee.

15
 Contd….
(ii) Company as an artificial person:
(a) A Company is an artificial person created by law.
(b) It is not a human being it acts through human beings.
(c) The company is considered as a legal person as it can enter into
contracts, possess properties in its own name, sue and can be sued
by others etc.
(d) It is called as an artificial person since it is (i) invisible, (ii) intangible,
existing only in the contemplation of law.
(e) It is capable of enjoying rights and being subject to duties.

16
 Contd….
(iii) Company is not a citizen:
(a) The company, though a legal person, is not a citizen under the Citizenship
Act, 1955 or the Constitution of India.
Case Law: In State Trading Corporation of India Ltd. v. C.T.O., A.I.R. 1963 S.C.
1811, the Supreme Court held that the State Trading Corporation though a legal
person, was not a citizen and can act only through natural persons.
(b) It is to be noted that certain fundamental rights enshrined in the Constitution
for protection of “person”, e.g., right to equality (Article 14) etc. are also
available to company.
(c) Section 2(f) of Citizenship Act, 1955 expressly excludes a company or
association or body of individuals from citizenship.

17
 Contd….
Case Law: In R.C. Cooper v. Union of India, AIR 1970 SC 564
In this case, the Supreme Court held that where the legislative
measures directly touch the company of which the petitioner is a
shareholder, he can petition on behalf of the company, if by the
impugned action, his rights are also infringed.
In that case, the court entertained the petition under Article 32 of the
Constitution at the instance of a director as shareholder of a company
and granted relief.
Therefore, to be noted that an individual’s right is not lost by reason of
the fact that he is a shareholder of the company.

18
 Contd….
(iv) Company has Nationality and Residence:
(i) It is established through judicial decisions that a company cannot
be a citizen, the company has (i) nationality, (ii) domicile and (iii)
residence.

(ii) The company is capable of having a domicile and its domicile is the
place of its registration and that domicile clings to it throughout its
existence.

19
 Contd….
(v) Limited Liability:
(i) “The privilege of limited liability for business debts is one of the principal
advantages of doing business under the corporate form of organisation.”
(ii) The company, being a separate person, is the owner of its assets and bound
by its liabilities.
(iii) The liability of a member as shareholders is limited to the contribution to the
capital of the company.
(iv) Members, even as a whole, are neither the owners of the company’s
undertakings, nor liable for its debts.
The shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and
nothing more, even if the liabilities of the company far exceed its assets.

20
 Exceptions to the principle of limited liability
(i) Members are severally liable in certain cases:
(i) When the membership is reduced below the minimum
requirements i.e. for a public company, below seven and in case of
a private company, below two.

(ii) When the company does the business with such reduced
membership, the existing members shall be severally liable for the
payment of the whole debts of the company contracted during that
time, and may be severally sued therefor.

21
 Contd….
(ii) Unlimited Company: When the company is incorporated as an Unlimited Company under
Section 3(2)(c) of the Act.

(iii) False or incorrect information: Where a company has been incorporated by furnishing any
false or incorrect information or representation or by suppressing any material fact or
information in any of the documents or declaration filed.

(iv) Fraudulent Action: When the Company is incorporate by any fraudulent action, the
Tribunal may, on an application made to it, on being satisfied that the situation so warrants,
direct that liability of the members of such company shall be unlimited.

22
 Contd….
(v) Intention to defraud creditors: When the business of the company has been
carried on with an intent to defraud creditors of the company or any other persons or
for any fraudulent purpose.

(vi) Prospects issued to defraud the applicants of the securities: Prospectus has
been issued with the intention to defraud the applicants of the securities.

(vii) Failure to repay the deposits: Failure to repay the deposit or part thereof or any
interest thereon referred to in section 74 within the time specified with the intention to
defraud the depositors.

23
 Contd….
(viii) Fraud by the report of the inspector: Fraud any director, key managerial
personnel, other officer of the company or any other person or entity, has taken undue
advantage or benefit.

24
 Contd….
(vi) Perpetual Succession:
(a) An incorporated company never dies, except when it is wound up
as per law.
(b) A company, being a separate legal person is unaffected by death or
departure of any member.
(c) Perpetual succession, means that the membership of a company
may keep changing from time to time.
(d) Membership of the company is unaffected by the death of
members.

25
 Contd….
(vii) Separate Property:
(a) A company being a legal person and entirely distinct from its
members.
(b) A company is capable of owning, enjoying and disposing of
property in its own name.
(c)The company is the real person in which all its property is vested,
and by which it is controlled, managed and disposed off.

26
 Contd….
(vii) Transferability of Shares:
(a) The capital of a company is divided into parts, called shares.

(b) The shares are said to be movable property and hence freely transferable.

(c) When the joint stock companies was established, the object was that their shares should
be capable of being easily transferred.

(d) Section 44 of the Companies Act, 2013 provides that the shares held by the members are
movable property and hence can be transferred from one person to another.

27
 Contd….
(e) A member may sell his shares in the open market and realise the
money invested by him.

(f) This provides liquidity to a member and ensures stability to the

company.

(e ) The Stock Exchanges provide adequate facilities for the sale and
purchase of shares.

28
 Contd….
(ix) Capacity to Sue and Be Sued:
(a) Company being a body corporate, can sue and be sued in its own name.

(b) To sue, means to institute legal proceedings against (a person) or to bring a suit in a court
of law.

(c ) All legal proceedings against the company are to be instituted in its name.

(d) The company may bring an action against anyone in its own name.

29
 Contd….
(x) Contractual Rights:
(a) A company, being a legal entity different from its members, can enter into
contracts for the conduct of the business in its own name.
(b) A shareholder cannot enforce a contract made by his company.
(c) A shareholder is neither a party to the contract, nor be entitled to the benefit
derived from of it, as a company is not a trustee for its shareholders.
(d) A shareholder cannot be sued on contracts made by his company.
(e) The company as a legal person can take action to enforce its legal rights or be
sued for breach of its legal duties.

30
 Contd….
(xi) Limitation of Action:
• A company cannot go beyond the power stated in its Memorandum of
Association.
• The Memorandum of Association of the company regulates the powers and
fixes the objects of the company.
• The actions and objects of the company are limited within the scope of its
Memorandum of Association.
• To carry on actions of the Company without restrictions and limitations
sufficient powers should be granted in the Memorandum of Association.

31
 Contd….
(xii) Separate Management:
• Members derive profits without being burdened with the management of the
company.

• The working of the Company is in the hands of Directors, collectively known as

Board of Directors.

• The corporate functions are performed by managerial personnel employed by

them.

• The Company is administered and managed by its managerial personnel.

32
 Contd….
(xiii) Voluntary Association for Profit:
• A company is a voluntary association for profit.

• The Company is formed for accomplishing objective goals.

• Profit is gained is divided among its shareholders or saved for future expansion.

• Only a Section 8 company can be formed with no profit motive.

33
 Contd….
(xiv) Termination of Existence:
• A company, being an artificial juridical person, does not die a natural death.

• It is created by law, carries on its affairs according to law throughout its life and ultimately is
effaced by law.

• The existence of a company is terminated by means of winding up.

• The life of the Company is also brought to an end by adopting strategies like reorganisation,
reconstruction and amalgamation.

34
Distinction between Partnership Firm and Company (1 points)
Partnership Firm Company
(i) Meaning: A partnership firm is not Meaning: A company is a distinct legal
distinct from the several persons who person.
form the partnership.

(ii) Property: In a partnership, the Property: In a company, it belongs to the

property of the firm is the property of company and not to the individuals who
the individuals comprising it. are its members.

(iii) Creditors: Creditors of a partnership Creditors: The creditors of a company can

firm are creditors of individual partners proceed only against the company and
and a decree against the firm can be not against its members.
executed against the partners jointly and
severally.

35
 Contd….
Partnership Firm Company
(iv) Agency: Partners are the agents of Agency: Members of a company are not
the firm. its agents.

(v) Contract: A partner cannot contract Contract: A member can contract with his
with his firm. company.

(vi) Transferability of Shares: Transferability of Shares:

A partner cannot transfer his share and A company’s share can ordinarily be
make the transferee a member of the transferred.
firm without the consent of the other
partners.

(vii) Liability: A partner’s liability is Liability: The liability of shareholder may

always unlimited. be limited either by shares or a
guarantee.

36
 Contd….
Partnership Firm Company
(viii) Perpetual Succession: The death or Perpetual Succession: A company has
insolvency of a partner dissolves the firm, perpetual succession, i.e. the death or
unless otherwise provided. insolvency of a shareholder or all of them
does not affect the life of the company.

(ix) Audit: The accounts of a firm are Audit: A company is required to have its
audited at the discretion of the partners. accounts audited annually by a chartered
accountant.

(x)Dissolution: A partnership firm, on the Dissolution: A company, being a creation

other hand, is the result of an agreement of law, can only be dissolved as laid down
and can be dissolved at any time by by law.
agreement among the partners.

37
Distinction between a Hindu Undivided Family Business and a Company
Hindu Undivided Family Business Company
Meaning: A Hindu Undivided Family Meaning: A company consists of
Business consists of homogenous heterogeneous members.
members of the joint family itself.

Contracting Debt: In a Hindu Undivided Contracting Debt: There is no such

Family business the Karta (manager) has system in a company.
the sole authority to contract debts.

Membership: A person becomes a Membership: There is no provision to

member of a Hindu Undivided that effect in the company.
Family business by virtue of birth.

Registration Requirement: No Registration Requirement: Registration

registration is compulsory for carrying on of a company is compulsory.
business for gain by a Hindu Undivided
Family even if the number of members
exceeds twenty

38
Distinction between Limited Liability Partnership (LLP) and a Company

(i) Meaning: Limited Liability Partnership (LLP) is an alternative

corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership.

(ii) Existence: LLP can continue its existence irrespective of changes in

partners.

39
 Contd….
(iii) Entering in Contracts: It is capable of entering into contracts and holding
property in its own name.

(iv) Separate Legal Entity: LLP is a separate legal entity, is liable to the full extent
of its assets but liability of the partners is limited to their agreed contribution in
the LLP.

(v) Internal Governance Structure: The difference between an LLP and a

company lies in that the internal governance structure of a company is more
regulated by statute (i.e. Companies Act) whereas an LLP is governed by
contractual agreement between partners.

40
 Contd….
(vi) Management-Ownership Divide: The management-ownership
divide inherent in a company is not there in a limited liability
partnership.

(vii) Flexibility: LLP have more flexibility as compared to a company.

LLP have lesser compliance requirements as compared to a company.

41
 Brief of major amendments to Companies Act, 1956
(i) The Companies (Amendment) Act, 1960:
• On recommendations of Shastri Committee, the Companies Amendment Act,
1960 was introduced.
• Several new provisions relating to various aspects of company management
which were overlooked in the 1956 Act.

(ii) The Companies (Amendment) Act, 1963:

• This provided for the appointment of a Companies Tribunal and constitution of
the Board of Company Law Administration.
• Empowering the Central Government to remove managerial personnel involved
in cases of fraud, etc.

42
 Contd….
(iii) The Companies (Amendment) Act, 1965:
• On the recommendations of the Vivian Bose Commission, the 1965
amendments introduced some major changes as following:
(a) Clear definition of the main and subsidiary objects of a company in its
Memorandum of Association;
(b) Strengthening the provisions relating to investigation into the affairs of the
company, etc.
The Companies Act was further amended twice in 1966.

43
 Contd….
(iv) The Companies (Amendment) Act, 1969:
• Following two important changes were introduced with 1969 amendments:

(i) Firstly, the institutions of managing agents and secretaries and treasurers
were abolished with effect from April 3, 1970.

(ii) Secondly, contributions by companies to any political party or for any

political purpose were prohibited.

44
 Contd….
(v) The Companies (Amendment) Act, 1974:
(i) The 1974 amendment introduced some important and major changes in the
Companies Act, 1956.

(ii) The object of the Amendment Act was to inject an element of public interest
in the working of the corporate sector.

45
 Contd….
(vi) The Companies (Amendment) Act of 1977:
(i) This brought about certain changes in Sections 58A, 220, 293, 620 and 634A
of 1956 Act.

(vii) The Companies (Amendment) Act, 1985:

(i) The amending Act substituted Section 293A of Companies Act, 1956 with a new section
permitting Non-Government companies to make political contributions, directly or
indirectly.
(ii) With a view that legitimate dues of workers rank pari passu with secured creditors in the
event of closure of the company and rank above even the dues to Government, Sections
529 and 530 of the Companies Act, 1956, were amended and a new Section 529A was
introduced.

46
 Contd….
(viii) The Companies (Amendment) Act, 1988: The important changes
introduced by the Amendment Act of 1988 are as following.
(a) Aligning the definition of “Secretary” with the definition of ‘Company
Secretary’ in the Company Secretaries Act, 1980.

(b) The concept of company secretary in practice was introduced for the first
time in the Companies Act.

(c) Company Law Board to exercise judicial and quasi-judicial functions, earlier
exercised either by the Court or the Central Government.

47
 Contd….
(ix) The Depositories Act, 1996:
(i) Dematerialization of securities was introduced by the Depositories Act, 1996.
(ii) Amendments made to register of members and several other consequential
things were incorporated.

(x) The Companies (Amendment) Act, 1999:

(i) Companies allowed to issue Sweat Equity shares and to buy-back their own
securities.
(ii) Facility for nomination provided for the benefit of share/debenture/deposit
holders.

48
 Contd….
(iii) An Investor Education and Protection Fund to be established.

(iv) National Advisory Committee on Accounting Standards for companies to be

established.

(v) Prior approval of Central Government not required for inter-corporate

investment/lending proposals subject to certain conditions.

49
 Contd….
(xi) The Companies (Amendment) Act, 2000:
a. Private Companies and Public Companies to have a minimum paid-up capital
of Rupees one lakh and five lakh respectively.
b. Provisions relating to deemed public companies became inoperative.
c. SEBI given powers regarding issue and transfer of securities and non-payment
of dividend by listed public companies.
d. Every listed company making initial public offer of any security for a sum of
Rupees ten crores or more will have to issue the same only in a dematerialised
form.

50
 Contd….
(x) The Companies (Amendment) Act, 2002 and Companies (Second
Amendment) Act, 2002:
(i) New Part IXA consisting of Section 581A to 581ZT relating to Producer
Companies inserted.

(ii) The existing Company Law Board was proposed to be dissolved and in its
place a National Company Law Tribunal (Tribunal) was to be constituted.

(iii) The Board for Industrial and Financial Reconstruction was to be abolished
and SICA was proposed to be repealed.

51
 Contd….
(xi) The Companies (Amendment) Act, 2006:
(i) This inserted new Sections 610B, 610C, 610D and 610E and also certain
sections pertaining to Director Identification Number (DIN).

(ii) With the advent of new technologies this amendment introduced electronic
filing, DIN, maintenance of electronic records in consistency with Information
Technology Act, 2000.

52
 CONCEPT PAPER ON COMPANY LAW, 2004 & J.J. IRANI REPORT

• Dr. J J Irani Expert Committee on Company Law submitted its report making
Company Law:
(i) flexible,
(ii) dynamic, and
(iii) user-friendly.

• The Committee took a pragmatic approach.

• Kept ground realities and addressed concerns of all the stakeholders.
• Adoption of internationally accepted best practices.

53
 Contd….

• The Expert Committee recommended that private and small companies need
to be given:
(i) more flexibilities,
(ii) freedom of operations, and
(iii) compliance at a low cost.

Companies with higher public interest should be subject to a stricter regime of

Corporate Governance.

54
 Contd….
Companies Bill, 2012:

• Considering recommendations of Irani Committee and also detailed discussions

and liberations with various stakeholders the Companies Bill, 2009 was
introduced in the Lok Sabha on 3rd August, 2009.

• The Bill laid greater emphasis on following:

(i) self regulation and
(ii) minimization of regulatory approvals in managing the affairs of the Company.

55
 Contd….
• The Bill promised following commitments:
(i) greater shareholder democracy,
(ii) vesting the shareholders with greater powers,
(iii) containing stricter corporate governance norms and
(iv) requiring greater disclosures.

56
 Contd….
COMPANIES ACT, 2013:
(i) The Companies Bill, 2012 finally became the Companies Act, 2013.

(ii) It received the assent of the President on August 29, 2013 and was notified in
the Gazette of India on 30.08.2013.

(iii) The Companies Act 2013 introduced following new concepts:

(a) supporting enhanced disclosure,
(b) accountability,
(c) better board governance, and
(d) better facilitation of business and so on.

57
 Contd….
The Companies Act, 2013 included following new concepts:
(a) associate company, one person company, small company, dormant company,
(b) independent director, women director, resident director,
(c) special court,
(d) secretarial standards, secretarial audit,
(e) class action,
(f) registered valuers,
(g) rotation of auditors,
(h) vigil mechanism,
(i) corporate social responsibility, E-voting etc.

58
 Contd….
MEANING AND DEFINITION OF A COMPANY
• The word ‘company’ is derived from the Latin word (Com=with or together;
panis =bread), and it originally referred to an association of persons who took
their meals together.
• In past merchants took advantage of their festive gatherings, to discuss
business matters.
• Persons formed company for the purpose of carrying on some business or
undertaking.
• A company is a (i) corporate body and (ii) a legal person having status and
personality distinct and separate from the members constituting it.

59
 Contd….
DOCTRINE OF LIFTING OF OR PIERCING THE CORPORATE VEIL:
(i) Separate Personality: The separate personality of a company is a statutory privilege and it
must be used for legitimate business purposes only.

(ii) Fraudulent and Dishonest: Where a fraudulent and dishonest use is made of the legal
entity, the individuals concerned will not be allowed to take shelter behind the corporate
personality.

Conclusion: The Court will break through the corporate shell and apply the principle/doctrine
of what is called as “lifting of or piercing the corporate veil”.
The Court will look behind the corporate entity and take action as though no entity separate
from the members existed and make the members or the controlling persons liable for debts
and obligations of the company.

60
 Contd….
Lifting of Corporate Veil under Judicial Interpretation:
(i) Fraud or improper: Where the corporate veil has been used for commission of
fraud or improper conduct.

(ii) Agency: Where a corporate facade is really only an agency instrumentality.

(iii) Public Policy: When the conduct conflicts with public policy, courts lifted the
corporate veil for protecting the public policy.

(iv) Evade Taxes: Where the sole purpose for which the company was formed was to
evade taxes.

61
 Contd….
(v) Avoidance of welfare legislation: Avoidance of welfare legislations
is common as avoidance of taxation.

(vi) Abuse of corporate personality: When the corporate personality is

abused for an unjust and inequitable purpose, the court would not
hesitate to lift the corporate veil.

(vii) Acts against justice: The court will lift the corporate veil when
acts of a corporation are allegedly opposed to justice, convenience and
interests of revenue or workmen or are against public interest.

62
 Contd….
• Use of Corporate Veil for Hiding Criminal Activities: Where the
defendant used the corporate structure as a device or facade to
conceal his criminal activities (evasion of customs and excise duties
payable by the company), the Court could lift the corporate veil and
treat the assets of the company as the realisable property of the
shareholder.

63
 ILLEGAL ASSOCIATION
Understanding: In order to prevent the mischief arising from large trading
undertakings being carried on by large fluctuating bodies so that persons dealing with
them did not know with whom they were contracting, the law has put a ceiling on the
number of persons constituting an association or partnership. An unincorporated
company, association or partnership consisting of large number of persons has been
declared illegal.
The law does not recognize it, an illegal association:
(i) Cannot enter into contract: An illegal association cannot enter into any contract.

(ii) Cannot sue members: An illegal association cannot sue any member, or outsider,
not even if the company is subsequently registered.

64
 Contd….
(iii) Cannot be sued by members: An illegal association cannot be sued by a
member, or an outsider for recovery of any debts.

(iv) Cannot be wound up by court: An illegal association cannot be wound up by

an order of the Court.

(v) Cannot be taxed: An illegal association is liable to be taxed.

(vi) Individually liable: The members of an illegal association are individually

liable in respect of all acts or contracts made on behalf of the association.

65