A Company means a group of persons associated to achieve some common object. Such as the economic gain of its members. However,in law any association of persons for any common object can be registered as a company.
Definition of Company
According to the Indian Companies Act,1956___” a company is formed and registered under this Act or an existing company”. An “existing company” means a company formed and registered under any of the former Companies Act.
According to Justice Lindley__”A company is an association of many persons who contribute money or money’s worth to a common stock and, employs it in some trade or business and who share the profit and loss arising there from”. The common stock so contributed is denoted in money and is the capital of the company.
According to Justice Marshal___ It is an artificial being, invisible,intangible existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence”.
According to Prof. Hancy___” A company is an artificial person created by law, having separate entity, with a perpetual succession and common seal”.
Company Characteristics/ Nature
1. voluntary association: A company,as mentioned earlier,is a voluntary association of persons,i.e., it can neither compel a person to become its member nor to give up its membership. It is the personal choice of people and their lust for profit or some other objective of their own.
2. Separate legal entity: In the eyes of law, a company is regarded as an entity separated from its members, It has an independent corporate existence, the company’s money and property belongs to the company and not to the shareholders. It can hold property, make contracts and employ persons, it can sue or sued. Therefore it can enter into contracts with the members and in the same manner the members can enter into contracts with the company.
3. Perpetual existence: It is a perpetual succession i.e,. it neither dies nor does its life depends on that of its members. It is not in any manner affected by insolvency. Mental disorder or retirement of any of its members. It is created by a process of law and can be put to an end only by a process of law.
4. Common seal: Since a company has no physical existence, it must act through its agents and all such contracts entered into by its agents must be under the seal of the company. The common seal acts as an official signature of the company. The company’s seal is affixed on all documents executed for and on its behalf.
5. Limited liability: It may be limited by shares or limited by guarantee. In a company limited by shares, the liability of members is limited to the unpaid value of the shares. If the face value of a share is Rs. 20 and the member has already paid Rs.10. He can be called upon to pay not more than Rs.10 during the lifetime of the company. In case of a company limited by the guarantee, the liability of the member is limited to such amount as guarantee by the member in the event of its being wind up.
6. Transferability of shares: The share of a joint stock company are freely transferable except in the case of a private limited company. Every member owning a fully paid-up shares is usually at liberty to dispose it off according to his choice. Restriction imposed by the articles on the absolute right of the members to transfer shares shall be void. In the case of private companies, transfer of shares shall not be permitted except according to the conditions laid down in the articles of association.
7. Separate property: It can own separate property in its own name. Although its capital and assets are contributed by its shareholders, they are not the private and joint owners if its property. The company is the real person in which all its property is vested and by which it is controlled, managed and disposed of.
8. Capacity to Sue: It can use and be sued in its corporate name. It may also inflict or suffer wrongs. It can infact do have done most of the things, which may be done by or to a human being.
9. Artificial Person: It is created with the sanction of law and is not itself a human being, it is, therefore,called artificial; and since it is clothed with certain rights and obligations, it is called a person. It is accordingly an artificial person.
10. Incorporated Association: It must be incorporated or registered under the companies Act. Minimum number required for the purpose is 7, in case of a public company, and 2, in case of a private company [Section 12]. It may also be mentioned that as per section 11, and association of more than 10 persons, in case of banking business, and 20 in case of any other business, if not registered as a company under the companies Act, or under other law for the time being in force,becomes an illegal association.