• Company in general usage term means "A group of persons
associated together for the attainment of some common
end, social or economical”
it has no strictly
technical or legal meaning.
• According to sec 3(1)(i) of companies act 1956, company
means “a company formed & registered under this act or
some company’s act”.
• In common law, a company is a legal person or legal entity ,
separate form & capable of surviving beyond the lives of its
• It has its own rights & duties & enclosed with the potential
of perpetual succession.
• Lindley defines a company as “An association of
many persons who contribute money or
money’s worth , to a common stock, & employ it
in some common trade or business & who share
the profit or loss rising their form.
The incorporation of a company provides certain
advantages they are…
1. Independent corporate existence
2. Limited liability
3. Perpetual succession
4. Separate property
5. Transferable shares
6. Capacity to sue & to be sued
7. Professional management
Independent Corporate Existence
• The outstanding features of a company is its
independent corporate existence . A partnership
has no existence apart from its members . It is
nothing but a coalition of partners while as
company is a person according to law
• it is a distinct legal persona &
exists independent of its members . No one can
say he is the owner of it . On incorporation it
immediately starts functioning as a corporate
individual. it becomes impersonalized.
The privilege of limiting liability for business debts
is one of the principle advantages of doing
business under the corporate form of
Members even as a whole are neither
the owners of its assets nor liable for debts.
No member is bound to contribute
anything more than the nominal value of the
shares he holds. The liability is limited to the
extent of the shares taken by him or the
amount guranteed by him.
• An incorporated company never dies it is an
entity with perpetual succession. any
member just holds the share, these shares
can be transferred or inherited by others
who become new members but the company
will remain the same entity.
• it means the
members may come and go but the company
goes on forever .
• A company being A legal person, is capable
of owning, enjoying & disposing of property
in its own name the share holders are not the
several or joint owners of the company’s
property. No share holder has right to any
item of property owned by the company.
• According to the company’s act , the share or
debentures or other interest of any member in a
company shall be movable property,
transferable in the manner provided by the
articles of the company .
• members can sell his shares in the open market
& to get back his investment without having to
withdraw the money from the company.
CAPACITY TO SUE & TO BE SUED
• A company being a corporate can sue & be
sued in its own name criminal complaint can
be filed by a company but through a natural
person. A company has the right to protect
its fair name it can sue for defamatory
• The corporate sector is capable of attracting
the growing cadre of professional managers.
Young management graduates willingly join
companies because of the feeling that they
would thereby belong to a managerial class .
The independent functioning as managers is
assured because of the fact that there is no
human employer & the share holders
exercise only a formative control.
• Capital is the life blood of a concern. The company
is the only medium which is given the privilege of
raising capital by public subscriptions either by way
of shares or debentures.
• Further, public
financial institutions lend their resources more
willingly to companies than to other forms of
DISADVANTAGES OF A COMPANY
1. LIFTING OF A COMPANY VEIL
a) DETERMINATION OF CHARACTER
b) FOR BENEFIT OF REVENUE
c) FROD OR IMPROPER CONDUCT
d) GOVERNMENT COMPANY
2. FORMALITY & EXPENSES
3. COMPANY IS NOT CITIZEN
KINDES OF COMPANIES
1. UNLIMITED COMPANIES
2. GUARANTEE COMPANIES
3. PRIVATE COMPANIES
4. FOREGIN COMPANIES
5. GOVERNMENT COMPANIES
6. HOLDING COMPANY & SUBSIDIARY
COMPANIES• One of the main purpose of a company is to counter upon
the business community the privilege of trading with limited
liability but the promoters of the company can have the
choice to form the company with unlimited liability .
• Sec – 12 says 7 or more persons or where a company to be
found will be a private company any 2 or more persons may
form an incorporated company with or without limited
• “a company not having any limit on the liability of its
members is an unlimited company”.
• Such companies are rare
• An unlimited company should have articles of association
stating the no of members with which company is to
REGD….. & If company has share capital, the amount of share
capital with which it is to be REGD…
• DISADVANTAGE ; Is that the liability will be unlimited
like the partners in a partnership firm.
• The members have to contribute to the assets of the
company so as to enable it to meet the debts & the
expenses of winding up.
1. It need not have share capital
2. It can increase & reduce its capital without any
3. An unlimited company can get itself re-registered as a
limited liability company under sec-32 the conversion
will not effect its debts, liability, obligations or contracts
existing at the time of conversion.
• When it is proposed to register a company with
limited liability, the choice is to limit liability by
shares or by guarantee.
• The liability of the members of a guarantee
company is limited by a fixed sum which is
mentioned in the memorandom,beyond which they
cannot be called upon to contribute.
• It is not necessary for a guarantee company to have
any share capital.
• It does not have the liberty to purchase its own
A COMPANY IS ONE WHICH HAVE A MINIMUM
1. PAID UP CAPTIAL; OF 1 LAKH RUPEES OR SUCH
HIGHER AMOUNT AS MAY BE PRESCRIBED BY THE
2. RESTRICTIONS ON TRANSFERABILITY OF SHARES;
THERE MUST BE SOME RESTRICTIONS ON THE RIGHT
OF ITS MEMBERS TO TRANSFER OF SHARES IN THE
COMPANY SO AS TO ENABLE DIRECTORS TO
MAINTAIN THE MAXIMUM LIMIT OF 50 MEMBERS.
3. RESTRICITIONS OF MEMBERSHIP ;it should not be
more than 50
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