The word company is derived from the Latin word ‘com’ which means with or together and ‘panis’ which means bread. It originally referred to an association of persons who took their meals together.
As per S. 3 of the Act, a company means a company formed and registered under the Act as well as a company formed and registered under the previous company law.
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The key characteristics of a company are:
- Incorporated Association: A company must be incorporated or registered under the Act. In case of a public company. The minimum number of members is 7 and in a private company it is 2. If there is a banking business, an association of 10 persons and in case of any other business an association of 20 persons must be registered under the Companies Act or other law for the time being in force, else such association will become illegal.
- Artificial Person: A company is created under the law and is not itself a human being. It is therefore artificial in nature. Due to having certain rights and liabilities it qualifies as a person. hence and artificial person
- Separate Legal Entity: upon incorporation a company becomes a separate legal entity. It has its own name and seal. Its assets and liabilities are distinct from that of its members. It is capable of owning property, borrowing money, having a bank tài khoản, entering into contracts, suing and being sued.
- Limited Liability: the liability of a company is limited by its shares to the nominal value of the shares held by the members. Thus the members are not liable beyond such nominal value as a company is a separate legal person. Therefore, if the shares are fully paid up, the liability of its members is NIL.
- Separate property: The shareholders are not part of the owners of the company or its property.
- Transferability of Shares: since the business is separate from its members, it facilitates transfer of members’ interest. This can be done by procedure prescribed in the AOA.
- Perpetual succession: it being a separate legal entity does not depend on the survival, retirement or insolvency of its members. Members may come and go, but the company lives on forever.
- Common Seal: a company works through its directors, officers and other employees. The signature of a company in entering any agreement is bound by the seal of the company having a distinct identity. The seal may be put on all formal documents executed by the company like power of attorney, negotiable instruments, contracts etc.
- Company may sue and be sued in its own name: A company, being a body corporate can sue and be sued in its own name, however, it shall be represented by a natural person of the company like a director, secretary etc.
Post Contributed By:
Indian Institute of Legal Studies