Even subsequent registration cannot alter the validity of the contracts made before registration.

2. Unlimited Oversample Liability. Section 11(4) of the Companies Act provides that every member of an illegal association shall be personally li:1ble for all
liabilities incurred in such business, and can therefore, be sued by an .outsider. It is immaterial whether the outsider had or had not any knowledge of the
illegality of the association;
3. Penalty. According to Sec. 11(5) every member of such an association will be punishable with fine which may extend to Rs. 10,000.
The only relief available to a member of an illeg21 association is claim or refund of his original subscription, provided the amount is not used up in the
business ofthe illegal association (Greenberg Vs. Coopers ten). Such an ilIegal association is also liable to pay income tax on its profits (GopaIji & Co. Vs.
Commissioner of Income Tax). Further, an illegal association shall remain ilIegal even if its members are reduced to 20 unless it is registered (Madan Lal
Vs. Janki Prashad).
Problem 1. A husband and wife were the only two members of a private company, died in an accident. Does the company also come to an end?
Solution. No, the company does not come to an end even on the death of all its members. It will continue as usual because, it has a perpetual existence.
The legal heirs of the deceased members will become the members of the company by
transmission of shares. .
Problem 2. A, a b'ade.; carries on business under the name of A & Co. Ltd. without being incas a company with limited liability. Discuss the consequences


of the act of A.
Solution. Here A, an individual carries on business under the name of A & Co. Ltd. by using the word Ltd. at the end of its. name improperly is liable to a
fine upto Rs. 500 for each day for the period during which the word' Ltd.' has been improperly used (Sec. 631). Besides, the liability of A shall be unlimited
for all the debts incurred in the business.. The number of members in a public limited company became reduced to six on 10th September'
1988. The company incurs trade debts on 11th September' 1988, 2nd February 1989 and 17th March 1989. How far are the remaining members liable


for the debts?
Solution, Since the company carries on business for more than six months after the number of its members has been reduced below seven, all the
remaining six members will be severally liable for the whole of the debts of the company contracted after the reduction of number of its members below
the statutory