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F y bcom 2

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Characteristics of the Company. …

Characteristics of the Company.

Published in: Education, Business

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  • 1. Company
  • 2. Definition →“ A Company is an association of persons united for a common object.” -Lord Justice James →“A company is an incorporated association, which is an artificial person, created by law, having a separate personality, with a common seal and perpetual succession.” – Lord Justice Marshal
  • 3. Cont. Section 3(1) of the Company Act define a company as… →“ A company formed and registered under this Act or an existing company. ” (Here an existing company means a company formed an registered under any of the former companies Acts.)
  • 4. Characteristics of a Company 1. Incorporated association 2. Voluntary association 3. Artificial legal person 4. Common Seal 5. Perpetual existence 6. Limited liability 7. Transferable Shares 8. Separate Property 9. Capacity to Sue
  • 5. Incorporated association : • Registration creates a company and it is compulsory for all associations. A company has to be incorporated or registered under the prevalent Company Law.
  • 6. Voluntary association • A company is voluntary association of individuals for profits having divided into transferable shares of a fixed face value. Either company act or any authorized person of the company cannot force any person for membership in a company.
  • 7. Artificial legal person • A company is an artificial person. Negatively speaking, it is not a natural person. A company is purely the creation of law. It has no body, no soul, and no conscience and still it is in a position to exist, to enter into a contract, to appoint people as its employees. In short, it can do everything just like natural persons.
  • 8. Perpetual existence • Compani’s life does not depend upon the death, insolvency or retirement of any one or all shareholder(s) or director(s). The life of a company depends on the term of its memorandum of association. Law creates it and law alone can dissolve it. Members may come and go but the company can go on forever. • “ During the war all the members of one private company, while in general meeting, were killed by a bomb. But the company survived; not even a hydrogen bomb could have destroyed it. ” Thus, a company has a perpetual existence.
  • 9. Limited liability • It is one of the important features of the company. In the case of a company limited by shares, the liability of members is limited to the extent of the nominal value of shares held by them. If a shareholder paid fully amount of the shares held by him, his liability is nil. For example, if a shareholder buys 100 shares of Rs. 10 each and pays Rs. 7 on each share, he has paid Rs. 700 and can be made to pay another Rs. 300, but he cannot be made to pay more than Rs. 1000 in all.
  • 10. Transferable Shares • Shares shall be movable property, transferable as per articles of the company. A member can sell his shares in the open market and get back his money at his will. This provides liquidity and stability to the company.
  • 11. Separate Property • As a legal person, a company can own, enjoy and dispose of any property in its own name. The property of the company can be used for the company’s business and not for the personal benefit of its shareholders.
  • 12. Capacity to Sue • The Company is a legal person and it can sue and be sued in its corporate name. In the real sense it can do most of the things, which may be done by or to a human being.
  • 13. Assignment Que 1. Benefits of the Company & Social Usefulness of the Company Que 2. Limitations of the Company & Social Vices of the Company Que 3. Social Responsibility of Company: Write a Short Note (Dec:2011)