2. Definition
→“ A Company is an association of persons united for a common
object.”
-Lord Justice James
→“A company is an incorporated association, which is an
artificial person, created by law, having a separate
personality, with a common seal and perpetual succession.”
– Lord Justice Marshal
3. Cont.
Section 3(1) of the Company Act define a company as…
→“ A company formed and registered under this Act or
an existing company. ” (Here an existing company means a
company formed an registered under any of the former
companies Acts.)
4. Characteristics of a Company
1. Incorporated association
2. Voluntary association
3. Artificial legal person
4. Common Seal
5. Perpetual existence
6. Limited liability
7. Transferable Shares
8. Separate Property
9. Capacity to Sue
5. Incorporated association :
• Registration creates a company and it is
compulsory for all associations. A company has
to be incorporated or registered under the
prevalent Company Law.
6. Voluntary association
• A company is voluntary association of
individuals for profits having divided into
transferable shares of a fixed face value.
Either company act or any authorized person
of the company cannot force any person for
membership in a company.
7. Artificial legal person
• A company is an artificial person. Negatively
speaking, it is not a natural person. A company
is purely the creation of law. It has no body, no
soul, and no conscience and still it is in a
position to exist, to enter into a contract, to
appoint people as its employees. In short, it can
do everything just like natural persons.
8. Perpetual existence
• Compani’s life does not depend upon the death,
insolvency or retirement of any one or all shareholder(s)
or director(s). The life of a company depends on the
term of its memorandum of association. Law creates it
and law alone can dissolve it. Members may come and
go but the company can go on forever.
• “ During the war all the members of one private
company, while in general meeting, were killed by a
bomb. But the company survived; not even a
hydrogen bomb could have destroyed it. ” Thus, a
company has a perpetual existence.
9. Limited liability
• It is one of the important features of the company. In
the case of a company limited by shares, the liability
of members is limited to the extent of the nominal
value of shares held by them. If a shareholder paid
fully amount of the shares held by him, his liability is
nil. For example, if a shareholder buys 100 shares of
Rs. 10 each and pays Rs. 7 on each share, he has paid
Rs. 700 and can be made to pay another Rs. 300, but
he cannot be made to pay more than Rs. 1000 in all.
10. Transferable Shares
• Shares shall be movable property, transferable
as per articles of the company. A member can
sell his shares in the open market and get back
his money at his will. This provides liquidity
and stability to the company.
11. Separate Property
• As a legal person, a company can own, enjoy and
dispose of any property in its own name. The
property of the company can be used for the
company’s business and not for the personal benefit
of its shareholders.
12. Capacity to Sue
• The Company is a legal person and it can sue and be
sued in its corporate name. In the real sense it can do
most of the things, which may be done by or to a
human being.
13. Assignment
Que 1. Benefits of the Company & Social Usefulness of
the Company
Que 2. Limitations of the Company & Social Vices of the
Company
Que 3. Social Responsibility of Company: Write a
Short Note (Dec:2011)
