A company is an artificial person whose business is run by a few natural persons in the interest or the profit of some natural persons. The word company has originated from two Latin words ‘corn’ and ‘Paris’, which mean ‘bread’ and ‘together’ respectively. Initially, the word company was used for the group of those persons who assemble to eat bread together.
According to Prof. Haney, “A joint-stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership”. According to the definition given by the Companies Act, 2013 Section 2(20), Company means any company formed and registered under the Act or under any previous company law.
Characteristics of a Company:
1. Artificial Person –
According to the provisions of the company act, Company is an artificial person created by law. Marshall has stated that the company is an artificial, invisible, intangible entity and existing only in the eyes of law. However, it is not regarded as an imaginary or false person but as a real person. Reasons behind these are that a company can buy or sell property in its own name, can enter into a contract, can sue and be sued in its own name by other – natural persons.
2. Separate Legal Entity –
A company enjoys separate legal existence from its members and board of directors. The company is separate and independent from its shareholders or owners.
3. Perpetual Succession –
The company continues forever. In other words, it enjoys the benefit of perpetual succession. A company never terminates, as it is given birth by the law. The death, lunacy or insolvency of members does not, in any way, affect the corporate existence of the company.
4. Limited Liability –
The shareholders of a company have limited liability. Generally, the liability of the members of a company limited by shares is limited to the extent of the unpaid value of the shares they have acquired. The liability of members of a company limited by guarantee is limited to the guaranteed amount. They have to pay this amount at the time of winding up of the company.
5. Transferability of shares –
The share of a company can be transferred by its members. The shareholders of a public limited company can fully transfer their shares.
6. Corporate Economy –
Transferability of share helps in attracting more and more capital in lesser time. Being an independent identity, it is the owner of its assets and is bound by its financial liabilities.
7. Indirect Management –
The shareholders don’t have a direct say in the management of the company.
8. The permanence of Capital and stability of the company –
The incorporated company has a low unit value of shares and debentures issued by the company, which enables an ordinary investor to invest his capital in shares with the risk being shared by a large number of persons. For such persons, the company form of organization is very beneficial and convenient.
9. Protection to investors against loss –
In section II of IPC that persons include any association of persons and company whether it is incorporated under General Clauses Act 1897 section 2(42) or not. Hence, criminal limited liability can’t be imposed on a company that gives adequate protection to investors against any losses.
