Introduction of a company :
The word company ordinarily means as association of a number of persons for some
common purpose. In its legal form a company is an artificial person created by law.
Section 3(1) (i) of the Companies Act, 1956 defines a Company as, “A company formed,
and registered under this act or an existing company”. ‘An existing company’ means a
company formed and registred under any of the former Companies Act.
Haney’s defines, “A company is an incorporated association which is an
artificial person created by law, having a separate entity with a perpetual
succession and a common seal”.
February 07, 2008
ESSENTIAL CHARACTERISTICS OF A COMPANY
ESSENTIAL CHARACTERISTICS OF A COMPANY :
Registration and Legal Entity :
A company must be registered. It is an artificial person created by law. A company is a distinct legal entity and distinct from its members.
Limited Liability :
The liability of the members of a company having share capital is limited to the extent of the nominal value of the shares held by them. Shareholder can not be called upon to pay more than the unpaid value of his shares, whatever may be the level of indebtendness of the company. In the case of a guarantee company, the liability of members is limited to such amount as the members may undertake to contribute to the assets of the company.
Separate Property :
A company has every right to acquire as well as transfer property in its own name, as it is a legal person. No shareholder has any legal or equitable interest in the property of the company.
Perpetual Succession :
A company has a perpetual succession. Inspirte of a change in the memberrship of the company its continuity is not affected. It is said, ‘men may come and go, but the Company goes for ever.
Common Seal :
The company being an artificial person cannot sign its name on a contract. The common seal is used as a subsititute for its signature. The common seal bears the name and place of the company, and date of its incorporation engraved on it.
Transferability of Shares :
The shares of a company are freely transfereble except in the case of a private company.
Capacity to sue and be Sued :
As legal person it can sue and be sued in its own name.
Concept of Corporate Personality :
A company is a legal person, since in the eyes of law it is capable of having legal rights and boligations just like a natural person. Like any other person it can acquire and own property, transfer property, enter into contracts and sue and be sued in its own name. Being a legal person, a company has a separate legal entity, a personality distinct from its members or shareholders.
Registration and Legal Entity :
A company must be registered. It is an artificial person created by law. A company is a distinct legal entity and distinct from its members.
Limited Liability :
The liability of the members of a company having share capital is limited to the extent of the nominal value of the shares held by them. Shareholder can not be called upon to pay more than the unpaid value of his shares, whatever may be the level of indebtendness of the company. In the case of a guarantee company, the liability of members is limited to such amount as the members may undertake to contribute to the assets of the company.
Separate Property :
A company has every right to acquire as well as transfer property in its own name, as it is a legal person. No shareholder has any legal or equitable interest in the property of the company.
Perpetual Succession :
A company has a perpetual succession. Inspirte of a change in the memberrship of the company its continuity is not affected. It is said, ‘men may come and go, but the Company goes for ever.
Common Seal :
The company being an artificial person cannot sign its name on a contract. The common seal is used as a subsititute for its signature. The common seal bears the name and place of the company, and date of its incorporation engraved on it.
Transferability of Shares :
The shares of a company are freely transfereble except in the case of a private company.
Capacity to sue and be Sued :
As legal person it can sue and be sued in its own name.
Concept of Corporate Personality :
A company is a legal person, since in the eyes of law it is capable of having legal rights and boligations just like a natural person. Like any other person it can acquire and own property, transfer property, enter into contracts and sue and be sued in its own name. Being a legal person, a company has a separate legal entity, a personality distinct from its members or shareholders.
Kinds of Companies
Kinds of Companies :
On the Basis of Incorporation :
Chartered Companies :
Companies set up as a result of a royal charter greanted by a king or queen of a country are known as known as charted companies.
Example: East India Company, the Bank of England etc. These companies are nonexistent since independence .
Statutory Companies:
Companies set up by Special Acts of Parliament or State Legislatures are called Statutory Companies. Example: Reservice Bank of India, Life Insurance Corporation of India, Unit Trust of India etc .
Registered Companies :
Companies registered under the India Companies Act, 1956 or under any of the previous Companies Acts are called registered companies. Most of the companies in India belong to this cate
Licenced Companies :
Companies established for the promotion of Arts, Science, Religions, Charty or any other similar bojects can obtain licence under Sec. 25 from the Central Government and enjoy certain privileges.
Foreign Companies :
A company incorporated outside India under the law of the country of incorporation but having established its business in India is called a foreign company.
On the Basis of Incorporation :
Chartered Companies :
Companies set up as a result of a royal charter greanted by a king or queen of a country are known as known as charted companies.
Example: East India Company, the Bank of England etc. These companies are nonexistent since independence .
Statutory Companies:
Companies set up by Special Acts of Parliament or State Legislatures are called Statutory Companies. Example: Reservice Bank of India, Life Insurance Corporation of India, Unit Trust of India etc .
Registered Companies :
Companies registered under the India Companies Act, 1956 or under any of the previous Companies Acts are called registered companies. Most of the companies in India belong to this cate
Licenced Companies :
Companies established for the promotion of Arts, Science, Religions, Charty or any other similar bojects can obtain licence under Sec. 25 from the Central Government and enjoy certain privileges.
Foreign Companies :
A company incorporated outside India under the law of the country of incorporation but having established its business in India is called a foreign company.
Private Companies
Private Companies :
· A Private company can be registered with a minimum of two members.
· It is entitled to commence business immediately after incorporation.
· It is not required to issue a prospectus.
· It is not required to hold a statutory meeting.
· It can proceed to allot shares before minimum subscription is received.
· Restrictions on further issue of capital do not apply to private companies.
· The mininim number of directors of a private company is two.
· It is not necessary for the directors to file a written consent to act as directors, to the Registrar.
· It is not necessary for directors to take up qualification shares.
· It is not required to maintain a separate Index of Members.
· Two members present can form a quorum in any meeting of a private company.
· The directors are not liable to retirement by rotation.
· The restrictions regarding remuneration of directors are not applicable.
· Restrictions regarding appointment of Managing Director for more than five years at a time are not applicable.
· A Private company can be registered with a minimum of two members.
· It is entitled to commence business immediately after incorporation.
· It is not required to issue a prospectus.
· It is not required to hold a statutory meeting.
· It can proceed to allot shares before minimum subscription is received.
· Restrictions on further issue of capital do not apply to private companies.
· The mininim number of directors of a private company is two.
· It is not necessary for the directors to file a written consent to act as directors, to the Registrar.
· It is not necessary for directors to take up qualification shares.
· It is not required to maintain a separate Index of Members.
· Two members present can form a quorum in any meeting of a private company.
· The directors are not liable to retirement by rotation.
· The restrictions regarding remuneration of directors are not applicable.
· Restrictions regarding appointment of Managing Director for more than five years at a time are not applicable.
Incorporation of a Company and the Incorporation of a Public Company limited by Shares
Incorporation of a Company :
A Company is said to have been incorporated or registered when it gets the Certificate of Incorporation form the Registrar of Companies. Certain steps have to be taken and necessary legal formalities completed for that purpose. The steps and formalities required for incorporation of company vary according to the type of the company concerned.
Steps for the Incorporation of a Public Company limited by Shares :
Application for approval of name :
The first steps is that of obtaining approval of the Registrar of Companies for the proposed name with which the company is to be registered. A company may abopt any name which is not probibited under the Emblems and Names (Prevention of Improper Use) Act, 1950 and which is not identical with or does not cosely resemble the name of a company already registered.
Preparation of Memorandum of Association:
The next step is the preparation of the Memorandum of Association of the company. It is the constitution of the company which defines the bojects and scope of the company’s activities and its relation with outside world.
Preparation of Articles of Association : It is the document containing the rules and regulations relating to the internal management of the company.
Printing, Signature and stapming of Memorandum and Articles. The next step is to arrange for the printing, signature and stamping of the Memorandum and Articles.
A Company is said to have been incorporated or registered when it gets the Certificate of Incorporation form the Registrar of Companies. Certain steps have to be taken and necessary legal formalities completed for that purpose. The steps and formalities required for incorporation of company vary according to the type of the company concerned.
Steps for the Incorporation of a Public Company limited by Shares :
Application for approval of name :
The first steps is that of obtaining approval of the Registrar of Companies for the proposed name with which the company is to be registered. A company may abopt any name which is not probibited under the Emblems and Names (Prevention of Improper Use) Act, 1950 and which is not identical with or does not cosely resemble the name of a company already registered.
Preparation of Memorandum of Association:
The next step is the preparation of the Memorandum of Association of the company. It is the constitution of the company which defines the bojects and scope of the company’s activities and its relation with outside world.
Preparation of Articles of Association : It is the document containing the rules and regulations relating to the internal management of the company.
Printing, Signature and stapming of Memorandum and Articles. The next step is to arrange for the printing, signature and stamping of the Memorandum and Articles.
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