Q 1. Write note on characteristics of company
Introduction:
The word 'company' is a derivative of the Latin word 'companis.'
'Companis' is made up of two words: 'com' and 'panis'. 'Com' means
'together' and 'panis' means 'bread' originally, the word 'company'
implied, a group of persons who ate together. For the common purpose
and common object.
Meaning
A company is the voluntary association of persons formed for the
purpose of earning a profit with the investment of capital which is
transferable in shares of limited liability. It is incorporated and
registered as an artificial person under the Companies Act.
Definition
1) According to Sections 3(1)(i) and 3(1)(ii) of the Indian Companies
Act, 1956
"Company means a company formed and registered under this Act or
an existing company; 'existing company' means a company formed and
registered under any of the previous companies laws."
2) According to Section 2 (20) of the Company Act 2013 "Company
means a company incorporated under this Act or any previous
Company Law."
Characteristics of Company
1) Separate Legal Entity
The company acquires a separate legal entity after it is
incorporated which is distinct from its members.
As a result, a company can enter into a contract, buy property in
its name, borrow or lend money, open a bank account or file a suit in
a court of law against a third party. Likewise, others can also file a suit
against the company. In other words, a company can do all such acts
which a natural person would do in the course of his business.
Case Law Salmon Vs. Salmon Co. Ltd.
The principle of a company’s separate legal entity is exemplified in the
landmark case of Salomon vs. Salomon. In this case, Mr. Salomon had
1|Page
,a personal business in leather and shoe manufacturing. He later
created a company and sold his previous business to this company.
While he held the majority of the company’s shares, the court ruled
that the company was a separate entity from Mr. Salomon. This
distinction protected Mr. Salomon from being personally liable for the
company’s debts, reinforcing the concept of separate legal personality.
2) Perpetual Succession
Perpetual succession is another important characteristic of a
company. Its existence is not dependent on that of its shareholders or
directors. The shareholders or the directors might change, but the
company goes on.
Death, insolvency or lunacy of its members has no effect on the
existence of the company. Members may come and member may go,
but the company goes on.
3) Common Seal
A company is an artificial person so it cannot put its signature on
documents. That is why it is mandatory under law that every company
must have a common seal with its name engraved upon it. The common
seal is the symbol of the company's identity and is as good as a
signature. When it puts its seal on a document, the company becomes
bound by the contents of the document.
4) Limited Liability
The liability of the shareholders of the company is limited. In case
of financial loss to the company, the liability of the shareholders is
limited to the amount unpaid on their a shares, and their personal
property cannot be used to pay the company debts.
Example
If A buys 100 shares of a company at Rs. 10 each. His liability is
limited to Rs. 1,000, and he cannot be asked to pay more than that in
case the company suffers a loss.
5) Transferability of Shares
According to Section 44 of the Companies Act, 2013, the shares
or debentures or other interest of any member in a company shall be
2|Page
,movable property transferable in the manner provided by the articles
of the company.
So each shareholder can freely transfer his or her shares. But in
some specific situations, the company may impose restrictions on the
transfer of shares.
6) Separate property
Another crucial aspect of a company’s characteristics is its
possession of separate property. Since a company is considered a
distinct legal entity, it can own, enjoy and dispose of properties in its
own name. This separation of property is significant in protecting the
company’s assets and ensuring that they are distinct from the personal
assets of its shareholders.
RF Perumal vs. H. John Deavin
The case of RF Perumal vs. H. John Deavin underscores the principle
that no member can claim ownership of the company’s property during
its existence or liquidation. In this case, it was established that a
company cannot have an insurable interest in its property, reinforcing
the concept of separate property ownership.
7) Capacity to Sue and Be Sued
As a separate legal entity, a company has the capacity to sue and
be sued in its own name. This legal capacity extends to various
scenarios, including the company’s right to initiate legal actions against
others and its susceptibility to legal actions brought by third parties.
Additionally, a company can sue its own members when necessary.
Conclusion
Understanding the characteristics of a company is essential for
navigating the corporate world. The separate legal entity status, limited
liability, perpetual succession and transferability of shares are the
pillars that support the company structure. These features provide the
company with the flexibility to grow and adapt, while also ensuring a
framework of accountability and regulation. As the business
environment evolves, so does corporate law, reflecting the dynamic
nature of companies and their role in the economy.
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, Q2. Define company discuss different kinds of companies.(2023)
2. Describe corporation and give its kinds (2018)
Introduction:
The word 'company' is a derivative of the Latin word 'companis.'
'Companis' is made up of two words: 'com' and 'panis'. 'Com' means
'together' and 'panis' means 'bread' originally, the word 'company'
implied, a group of persons who ate together. For the common purpose
and common object.
Meaning
A company is the voluntary association of persons formed for the
purpose of earning a profit with the investment of capital which is
transferable in shares of limited liability. It is incorporated and
registered as an artificial person under the Companies Act.
Definition
1) According to Sections 3(1)(i) and 3(1)(ii) of the Indian Companies
Act, 1956
"Company means a company formed and registered under this Act or
an existing company; 'existing company' means a company formed and
registered under any of the previous companies laws."
2) According to Section 2 (20) of the Company Act 2013 "Company
means a company incorporated under this Act or any previous
Company Law."
Classification/ Kinds of companies
Following are the grounds for making the classification of companies.
A. On the basis of incorporation
There are two types of companies which are as follows.
1. Statutory Companies
Companies’ incorporation under a special act of parliament or
state legislature not under any of the companies act and provisions of
the same do not apply to such companies. Example are- RBI, SBI,
Employees State Insurance Corporation etc.
4|Page
Introduction:
The word 'company' is a derivative of the Latin word 'companis.'
'Companis' is made up of two words: 'com' and 'panis'. 'Com' means
'together' and 'panis' means 'bread' originally, the word 'company'
implied, a group of persons who ate together. For the common purpose
and common object.
Meaning
A company is the voluntary association of persons formed for the
purpose of earning a profit with the investment of capital which is
transferable in shares of limited liability. It is incorporated and
registered as an artificial person under the Companies Act.
Definition
1) According to Sections 3(1)(i) and 3(1)(ii) of the Indian Companies
Act, 1956
"Company means a company formed and registered under this Act or
an existing company; 'existing company' means a company formed and
registered under any of the previous companies laws."
2) According to Section 2 (20) of the Company Act 2013 "Company
means a company incorporated under this Act or any previous
Company Law."
Characteristics of Company
1) Separate Legal Entity
The company acquires a separate legal entity after it is
incorporated which is distinct from its members.
As a result, a company can enter into a contract, buy property in
its name, borrow or lend money, open a bank account or file a suit in
a court of law against a third party. Likewise, others can also file a suit
against the company. In other words, a company can do all such acts
which a natural person would do in the course of his business.
Case Law Salmon Vs. Salmon Co. Ltd.
The principle of a company’s separate legal entity is exemplified in the
landmark case of Salomon vs. Salomon. In this case, Mr. Salomon had
1|Page
,a personal business in leather and shoe manufacturing. He later
created a company and sold his previous business to this company.
While he held the majority of the company’s shares, the court ruled
that the company was a separate entity from Mr. Salomon. This
distinction protected Mr. Salomon from being personally liable for the
company’s debts, reinforcing the concept of separate legal personality.
2) Perpetual Succession
Perpetual succession is another important characteristic of a
company. Its existence is not dependent on that of its shareholders or
directors. The shareholders or the directors might change, but the
company goes on.
Death, insolvency or lunacy of its members has no effect on the
existence of the company. Members may come and member may go,
but the company goes on.
3) Common Seal
A company is an artificial person so it cannot put its signature on
documents. That is why it is mandatory under law that every company
must have a common seal with its name engraved upon it. The common
seal is the symbol of the company's identity and is as good as a
signature. When it puts its seal on a document, the company becomes
bound by the contents of the document.
4) Limited Liability
The liability of the shareholders of the company is limited. In case
of financial loss to the company, the liability of the shareholders is
limited to the amount unpaid on their a shares, and their personal
property cannot be used to pay the company debts.
Example
If A buys 100 shares of a company at Rs. 10 each. His liability is
limited to Rs. 1,000, and he cannot be asked to pay more than that in
case the company suffers a loss.
5) Transferability of Shares
According to Section 44 of the Companies Act, 2013, the shares
or debentures or other interest of any member in a company shall be
2|Page
,movable property transferable in the manner provided by the articles
of the company.
So each shareholder can freely transfer his or her shares. But in
some specific situations, the company may impose restrictions on the
transfer of shares.
6) Separate property
Another crucial aspect of a company’s characteristics is its
possession of separate property. Since a company is considered a
distinct legal entity, it can own, enjoy and dispose of properties in its
own name. This separation of property is significant in protecting the
company’s assets and ensuring that they are distinct from the personal
assets of its shareholders.
RF Perumal vs. H. John Deavin
The case of RF Perumal vs. H. John Deavin underscores the principle
that no member can claim ownership of the company’s property during
its existence or liquidation. In this case, it was established that a
company cannot have an insurable interest in its property, reinforcing
the concept of separate property ownership.
7) Capacity to Sue and Be Sued
As a separate legal entity, a company has the capacity to sue and
be sued in its own name. This legal capacity extends to various
scenarios, including the company’s right to initiate legal actions against
others and its susceptibility to legal actions brought by third parties.
Additionally, a company can sue its own members when necessary.
Conclusion
Understanding the characteristics of a company is essential for
navigating the corporate world. The separate legal entity status, limited
liability, perpetual succession and transferability of shares are the
pillars that support the company structure. These features provide the
company with the flexibility to grow and adapt, while also ensuring a
framework of accountability and regulation. As the business
environment evolves, so does corporate law, reflecting the dynamic
nature of companies and their role in the economy.
3|Page
, Q2. Define company discuss different kinds of companies.(2023)
2. Describe corporation and give its kinds (2018)
Introduction:
The word 'company' is a derivative of the Latin word 'companis.'
'Companis' is made up of two words: 'com' and 'panis'. 'Com' means
'together' and 'panis' means 'bread' originally, the word 'company'
implied, a group of persons who ate together. For the common purpose
and common object.
Meaning
A company is the voluntary association of persons formed for the
purpose of earning a profit with the investment of capital which is
transferable in shares of limited liability. It is incorporated and
registered as an artificial person under the Companies Act.
Definition
1) According to Sections 3(1)(i) and 3(1)(ii) of the Indian Companies
Act, 1956
"Company means a company formed and registered under this Act or
an existing company; 'existing company' means a company formed and
registered under any of the previous companies laws."
2) According to Section 2 (20) of the Company Act 2013 "Company
means a company incorporated under this Act or any previous
Company Law."
Classification/ Kinds of companies
Following are the grounds for making the classification of companies.
A. On the basis of incorporation
There are two types of companies which are as follows.
1. Statutory Companies
Companies’ incorporation under a special act of parliament or
state legislature not under any of the companies act and provisions of
the same do not apply to such companies. Example are- RBI, SBI,
Employees State Insurance Corporation etc.
4|Page
