Module-I The Indian Companies Act, 2013
Chapter-1 company and its formation
Definition of company: Under the Indian Companies Act, 2013: “A
company means a company incorporated under this Act or under any
previous company law”.
Essentials, features, characteristics of company, advantages and
disadvantages of incorporation of company
1. Registration: A company must be registered under the Companies Act. It
is the registration of the association of persons that creates a company.
Registration is compulsory under the act of 2013.
2. Independent Corporate Personality: A company on registration has a
separate identity of its own which is different and separate from its
members or shareholders who formed them. Company is a distinct legal
person.
3. Limited Liability: The liability of the members of the company is limited
up to the face value of shares purchased by them or to the guarantee
amount agreed or it is unlimited. They are not liable for the other liabilities
of the company.
4. Common seal: A company is an artificial legal person. The company has
a separate legal existence. It acts through its directors. The common seal
of the company is considered as its official signature. Directors enter into
contract with the outsiders on behalf of the company under its common
seal.
5. Capacity to sue and be sued: A company being a body corporate can
sue and be sued in its own name.
6. Perpetual Succession: A company being a body corporate has a
perpetual succession (continuity in life). The death or insolvency of
individual members does not affect the corporate existence of a company.
The membership of a company may keep changing from time to time, but
that does not have any effect on the company’s continuity.
, 7. Transferable shares: The shares of a public company are easily
transferable as compared to private company. This enables the member
to sell his shares in the open market.
8. Separate property: A company being a legal person is capable of
purchasing, enjoying and selling of the property in its own name. No
shareholder or member has any right on any of the assets or property
owned by the company.
9. Capacity to contract in its own name: Company being a separate legal
person is capable of entering into contracts in its own name. But there are
two limitations to the same:
Natural limitation: Company being artificial person can only
contract through its directors. Directors enter into contract on behalf
of the company under the common seal of the company.
Legal limitation: Company cannot enter into any contract which
goes beyond its two main documents viz., Memorandum of
Association and Articles of Association of the company. Any contract
beyond objects of the company is ultra vires (beyond the powers)
and therefore it is void-ab- initio (not enforceable by law).
Advantages of “Body Corporate”
A body corporate has certain distinct advantages:
1. Perpetual Succession: The advantage of such ‘corporate body’ is it
has perpetual succession and independent identity of its members. It
can hold business on its own name. Even if the name and members of
the company changes the ‘body corporate’ continues.
2. Limited liability: The members of the company have limited personal
liability. This is one of the major advantage of ‘partnership’. A
member is not been burden with liability and debts incurred by others.
Chapter-1 company and its formation
Definition of company: Under the Indian Companies Act, 2013: “A
company means a company incorporated under this Act or under any
previous company law”.
Essentials, features, characteristics of company, advantages and
disadvantages of incorporation of company
1. Registration: A company must be registered under the Companies Act. It
is the registration of the association of persons that creates a company.
Registration is compulsory under the act of 2013.
2. Independent Corporate Personality: A company on registration has a
separate identity of its own which is different and separate from its
members or shareholders who formed them. Company is a distinct legal
person.
3. Limited Liability: The liability of the members of the company is limited
up to the face value of shares purchased by them or to the guarantee
amount agreed or it is unlimited. They are not liable for the other liabilities
of the company.
4. Common seal: A company is an artificial legal person. The company has
a separate legal existence. It acts through its directors. The common seal
of the company is considered as its official signature. Directors enter into
contract with the outsiders on behalf of the company under its common
seal.
5. Capacity to sue and be sued: A company being a body corporate can
sue and be sued in its own name.
6. Perpetual Succession: A company being a body corporate has a
perpetual succession (continuity in life). The death or insolvency of
individual members does not affect the corporate existence of a company.
The membership of a company may keep changing from time to time, but
that does not have any effect on the company’s continuity.
, 7. Transferable shares: The shares of a public company are easily
transferable as compared to private company. This enables the member
to sell his shares in the open market.
8. Separate property: A company being a legal person is capable of
purchasing, enjoying and selling of the property in its own name. No
shareholder or member has any right on any of the assets or property
owned by the company.
9. Capacity to contract in its own name: Company being a separate legal
person is capable of entering into contracts in its own name. But there are
two limitations to the same:
Natural limitation: Company being artificial person can only
contract through its directors. Directors enter into contract on behalf
of the company under the common seal of the company.
Legal limitation: Company cannot enter into any contract which
goes beyond its two main documents viz., Memorandum of
Association and Articles of Association of the company. Any contract
beyond objects of the company is ultra vires (beyond the powers)
and therefore it is void-ab- initio (not enforceable by law).
Advantages of “Body Corporate”
A body corporate has certain distinct advantages:
1. Perpetual Succession: The advantage of such ‘corporate body’ is it
has perpetual succession and independent identity of its members. It
can hold business on its own name. Even if the name and members of
the company changes the ‘body corporate’ continues.
2. Limited liability: The members of the company have limited personal
liability. This is one of the major advantage of ‘partnership’. A
member is not been burden with liability and debts incurred by others.
