LESSON : 1
MEANING, CHARACTERISTICS AND TYPES OF A COMPANY
STRUCTURE
1.0 Objective
1.1 Introduction
1.2 Meaning of Company
1.3 Characteristics of a Company
1.4 Distinction between Company and Partnership
1.5 Types of Company
1.6 Summary
1.7 Keywords
1.8 Self Assessment Questions
1.9 Suggested Readings
1.0 OBJECTIVE
After reading this lesson, you should be able to:
(a) Define a company and explain its features.
(b) Make a distribution between company and partnership firm.
(c) Explain the various types of companies.
1.1 INTRODUCTION
Industrial has revolution led to the emergence of large scale business
organizations. These organization require big investments and the risk involved is very high.
Limited resources and unlimited liability of partners are two important limitations of
,partnerships of partnerships in undertaking big business. Joint Stock Company form of
business organization has become extremely popular as it provides a solution to
, overcome the limitations of partnership business. The Multinational companies like
Coca-Cola and, General Motors have their investors and customers spread throughout the
world. The giant Indian Companies may include the names like Reliance, Talco Bajaj
Auto, Infosys Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen
and Tubro etc.
1.2 MEANING OF COMPANY
Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company
formed and registered under this Act or an existing company”. Section 3(1) (ii) Of the act
states that “an existing company means a company formed and registered under any of the
previous companies laws”. This definition does not reveal the distinctive characteristics
of a company . According to Chief Justice Marshall of USA, “A company is a person,
artificial, invisible, intangible, and existing only in the contemplation of the law. Being a
mere creature of law, it possesses only those properties which the character of its creation
of its creation confers upon it either expressly or as incidental to its very existence”.
Another comprehensive and clear definition of a company is given by Lord
Justice Lindley, “A company is meant an association of many persons who contribute
money or money’s worth to a common stock and employ it in some trade or business, and
who share the profit and loss (as the case may be) arising there from. The common stock
contributed is denoted in money and is the capital of the company. The persons who
contribute it, or to whom it belongs, are members. The proportion of capital to which
each member is entitled is his share. Shares are always transferable although the right to
transfer them is often more or less restricted”.
, According to Haney, “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”.
From the above definitions, it can be concluded that a company is registered
association which is an artificial legal person, having an independent legal, entity with a
perpetual succession, a common seal for its signatures, a common capital comprised of
transferable shares and carrying limited liability.
1.3 CHARACTERISTICS OFA COMPANY
The main characteristics of a company are :
1. Incorporated association. A company is created when it is registered under
the Companies Act. It comes into being from the date mentioned in the certificate
of incorporation. It may be noted in this connection that Section 11 provides that an
association of more than ten persons carrying on business in banking or an association or
more than twenty persons carrying on any other type of business must be registered under
the Companies Act and is deemed to be an illegal association, if it is not so registered.
For forming a public company at least seven persons and for a private company at
least two persons are persons are required. These persons will subscribe their names to the
Memorandum of association and also comply with other legal requirements of the Act in
respect of registration to form and incorporate a company, with or without limited liability
[Sec 12 (1)]
MEANING, CHARACTERISTICS AND TYPES OF A COMPANY
STRUCTURE
1.0 Objective
1.1 Introduction
1.2 Meaning of Company
1.3 Characteristics of a Company
1.4 Distinction between Company and Partnership
1.5 Types of Company
1.6 Summary
1.7 Keywords
1.8 Self Assessment Questions
1.9 Suggested Readings
1.0 OBJECTIVE
After reading this lesson, you should be able to:
(a) Define a company and explain its features.
(b) Make a distribution between company and partnership firm.
(c) Explain the various types of companies.
1.1 INTRODUCTION
Industrial has revolution led to the emergence of large scale business
organizations. These organization require big investments and the risk involved is very high.
Limited resources and unlimited liability of partners are two important limitations of
,partnerships of partnerships in undertaking big business. Joint Stock Company form of
business organization has become extremely popular as it provides a solution to
, overcome the limitations of partnership business. The Multinational companies like
Coca-Cola and, General Motors have their investors and customers spread throughout the
world. The giant Indian Companies may include the names like Reliance, Talco Bajaj
Auto, Infosys Technologies, Hindustan Lever Ltd., Ranbaxy Laboratories Ltd., and Larsen
and Tubro etc.
1.2 MEANING OF COMPANY
Section 3 (1) (i) of the Companies Act, 1956 defines a company as “a company
formed and registered under this Act or an existing company”. Section 3(1) (ii) Of the act
states that “an existing company means a company formed and registered under any of the
previous companies laws”. This definition does not reveal the distinctive characteristics
of a company . According to Chief Justice Marshall of USA, “A company is a person,
artificial, invisible, intangible, and existing only in the contemplation of the law. Being a
mere creature of law, it possesses only those properties which the character of its creation
of its creation confers upon it either expressly or as incidental to its very existence”.
Another comprehensive and clear definition of a company is given by Lord
Justice Lindley, “A company is meant an association of many persons who contribute
money or money’s worth to a common stock and employ it in some trade or business, and
who share the profit and loss (as the case may be) arising there from. The common stock
contributed is denoted in money and is the capital of the company. The persons who
contribute it, or to whom it belongs, are members. The proportion of capital to which
each member is entitled is his share. Shares are always transferable although the right to
transfer them is often more or less restricted”.
, According to Haney, “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”.
From the above definitions, it can be concluded that a company is registered
association which is an artificial legal person, having an independent legal, entity with a
perpetual succession, a common seal for its signatures, a common capital comprised of
transferable shares and carrying limited liability.
1.3 CHARACTERISTICS OFA COMPANY
The main characteristics of a company are :
1. Incorporated association. A company is created when it is registered under
the Companies Act. It comes into being from the date mentioned in the certificate
of incorporation. It may be noted in this connection that Section 11 provides that an
association of more than ten persons carrying on business in banking or an association or
more than twenty persons carrying on any other type of business must be registered under
the Companies Act and is deemed to be an illegal association, if it is not so registered.
For forming a public company at least seven persons and for a private company at
least two persons are persons are required. These persons will subscribe their names to the
Memorandum of association and also comply with other legal requirements of the Act in
respect of registration to form and incorporate a company, with or without limited liability
[Sec 12 (1)]
