1. Subject: Company Law
Standard: LL.B second year
Topic: Essentials and Characteristics
MUNIR HUSSAIN KTK
Lecturer
UNIVERSITY LAW COLLEGE
QUETTA
www.facebook.com/pages/Corridor-to-Commercial-Law
Objectives
To learn
1. Essential of a company
2. Characteristics of a company
3. Merits and Demerits
Essentials
1 .There must be in Association
2. The Association Must Be Of a
Human Being
3. The Association Must Be
Formed For Common Purpose
(A single purpose shared by all)
4. The Common Purpose is
Usually Business for Profit
5. The Association Must Be
Registered
6. The Registration Must Be
According To Company
Ordinances1984
Characteristics
1. Legal Entity 2. Distinct Personality 3.Perpetual Succession
4 Common Seal 5. Artificial Person /legal/juristic 6.Holding Property 7.Transferability of
Shares 8.Limited Liability
2. Working Through Natural Person
Merits of a company
• Large capital:
Due to large number of shareholder company can increase,
manage a large capital by issuing a shares and debenture
• Limited liability :
The shareholders are responsible for the company debt up to the
face value of their respective shares.
• Shares transfer :
Share can be transfer any time to any one according to the nature
of company. So the amount of share is not blocked forever.
• Long life:
That means that the member may come and the member may go
but the company can go for ever. Retirement, death etc.
Company is a legal person
• Democratic control :
Shareholders are given the voting right they can elect the board of
director. So the business can be conducted in the best lucrative
way.
• Risk sharing:
The burden is not on the shoulder of single person because loss
can be distributed among the shareholders according to their
nominal shares.
• Secure business:
Due to Registration Company become a secure way of business
for the shares holders and their rights are protected by the law
• Fair ways of business:
As company is having moa so the shareholder is aware about the
purpose of their investment and company cannot go beyond its
MOA
Demerits of a company
 Legal formalities :
The formation of company is not an easy task.
Complex technicalities, formalities, expenses are
involve .time is required to handle the affairs.
 No secrecy :
The life of a company is just like an open book.
Company is bound to publish its performance,
prepare financial statement.
 Late decision :
Due to legal formalities the decision making
process is very slow, sometime the delay may
not be in the favor of company.
 Corrupt management :
The promoters and the directors may become
corrupt, they may exploits the asset of the
company for their personal profit.
 Detailed winding up procedure :
The ordinance provide a detailed winging up
procedure which is more expensive and time
consuming.
Summary
1. That after Incorporation it become Legal Entity
2. That the Merits are Superior then it’s Demerits
3. That the Company is a boom for Economic
development