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What Is Company

This paper deal with the concept of  Company or What Is Company? according to companies Act 2013.

The word Company has no strictly technical or legal meaning . it may be described to imply an association of persons for some common object or objects . The word Company , in simple term , may be described to mean a voluntary association of person who have come together for carrying on some business and sharing the profits there from.

Indian law provides two main types of organizations for such association:

partnership and Company . Although  the word 'Company' is colloquially applied to both , the statute regards companies and Company law as distinct from partnerships and partnership law.

The Act does not define a Company in term of its features. Section 2(20) Of The Companies Act 2013 defines a Company to mean a Company incorporated under this Act or under any previous Company law. in order to understand  the meaning of Company, let us see the definitions given by some authorities:
A) Lord Justice Lindley -  A Company is an association of many person who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising the form. the common stock so contributed is denoted in money and is capital of the Company. The person who contribute to it or  to whom it partains are members. The shares are always transferable although the right to transfer is often more or less restricted.

B) Prof. Haney - A Company is an artificial person created by law, having separate entity, with a perpetual succession and common seal.

Characteristics Features of Company:

  1. Incorporated Association-

    A Company law must be incorporated or registered under the companies Act. minimum number of members required for this purpose is seven in the case of a 'public Company' and two in the case of a 'private Company'. However, section -3 of the companies Act, 2013 allows formation of  one person Company also.
     
  2. Legal Entity Distinct From Its Members

     This feature is also known as Corporative Personality. And  the legal entity of Company is separate from the entity of its members. this is the reason that the rights and liability of  Company are separate from those person by whom the Company has been created.  (Saloman Vs. Saloman & Co. Ltd. [1895-99] ALL ER 33 (HL) ).
     
  3. Artificial Person

     Its very important feature of Company that Company is the Artificial person. Company is known as such type of  or Artificial person because Company is create by law and destroyed by law.
     
  4. Limited Liability

    One of the principal advantages of trading through the medium of a limited Company is that the members of the Company are only liable to contribute towards payment of its debts to a limited extent. In the case of unlimited liability companies, members shall continue to be liable till each paisa has been paid off.
     
  5. Separate Property

    In India this principle of separate property was best lid down by the supreme court in Bacha F. Guzdarv. Cit, Bombay (Supra). The supreme court held that a share holder is not the part owner of the Company or its property, he is only given certain rights by law, for example, to vote or attend the meetings, or to receive dividends. (Macaura Vs. Northern Assurance Company Ltd. [1925] AC 619 )
     
  6. Transferability of Shares

    The Act in section 44 echoes this feature by declaring The shares, debentures or other interest of any member in a Company shall be movable property, transferable in the manner provided by the article of Company. A shareholder can transfer his shares to any person without the consent of other members.
     
  7. Perpetual Succession

    Company being an artificial person cannot be incapacitated by illness and it does not have an allotted span of life. Being distinct from the members, the death, insolvency or retirement of its members leaves the Company unaffected. Members may come and go but the Company can go for ever. It continues even if all its human members are dead. Even where during the war all the members of a private Company, while in general meeting were killed by a bomb, the Company survived. Not even Hydrogen Bomb could have destroyed it. (case- k/9meat suppliers Guildford) ltd. Re(1966)1 W.L.R. 1112).
     
  8. Comman Seal
    Common seal of Company is also important feature of Company as the feature like legal entity of any Company.


Sources of This Article:

  • Company law (a comprehensive text book on companies Act 2013 ) 8th edition by Dr. G. K. Kapoor,  Sanjay Dhamija.)

Written By: Sunita Meena, 7th sem. b.a.l.l.b.  Law College MLSU Udaipur

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