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Company and its features
- 1. • According to Section 2(20) of Companies Act, 2013, “Company means a company incorporated under Companies Act, 2013 or under any previous law.” • A Company is an artificial person created by law having separate legal entity with perpetual succession and common seal.
- 2. Features of Company • Transferability of shares • Ownership is separated from Management • Perpetual Succession • Common Seal • Limited Liability of members • Artificial Judicial Person • Separate Property • Separate Legal Entity • Incorporated Association • Can sue and be sued
- 3. Transferability of Shares • The members of Public limited company can sell their shares without prior consent of other shareholders. • In case of Private limited company there are restrictions in transfer of shares to other than members.
- 4. Owners and managers are separate persons/ Separation of ownership from management • In this type of legal entity, owners and management are separate persons. • Management includes board of directors, Chairman, CEO which manages the company on behalf of the owners.
- 5. Perpetual Succession • Unlike Partnership, the existence of the company is not affected by insolvency, lunacy or retirement of its members or directors. This is because the company enjoys a separate legal existence from its members. • It is said that members may come, members may go, but the company goes forever. • It is created by law and is dissolved by law itself.
- 6. Common Seal • Being an artificial person, company can enter into contracts but cannot sign the documents itself. • Hence it uses a common seal on which its name is engraved. • Now a days, sign of two directors are used to bind company into legal agreement.
- 7. Limited Liability of members • The liability of the members is limited to their share of capital. • Liability of shareholders may arise to the extent of unpaid amount on share capital, in case the funds are insufficient to pay the outside liabilities. • But the liability of company is unlimited. Company need to sell of all its assets on winding up of company.
- 8. Artificial Judicial Person • A Company is an artificial judicial person in the eyes of law. • Though it has no body, no conscience, still it exists as a person, it can enter into legal contracts in its own name.
- 9. Separate Property • The assets of the Company and the Shareholders are separate. • It has the capability of owning property, borrow money etc. • Owners cannot have right to claim any asset of the company, but they have right to have their capital back at the time of winding up of the company, but only after paying off the outsiders liabilities(like Bank Loans, Unsecured Loans, Creditors) and Preference Shareholders.
- 10. Separate Legal Entity • Like management is different from members, Company has separate legal entity from its members. • Members cannot be held liable for the operations conducted by the company. • Company can, on its own, enter into contracts for the welfare of the owners(i.e. Shareholders).
- 11. Incorporated Association • A Company is required to be registered under Companies Act, 2013 or any previous Companies Act. An association of persons that is not registered is not called as a company.
- 12. Can Sue and be Sued • A Company can sue others, and be sued by others on its own name as it enters into contracts with other companies, firms, etc.