Define a company. State the essential features of a company.

Meaning of a company : A company or a joint stock company is an association of persons for a business purpose. It is incorporated under the Companies Act. Its capital is subscribed by the shareholders. It is a corporate enterprise that has a legal entity separate that of its members.

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 registered under any of the previous Company Laws.” The definition of a company given by the Companies Act, does not elaborate much the meaning of the word company.

  • A company is an artificial person created by law, having separate entity with a perpetual succession and a common seal.
  • A company is an association of persons united for a common object.

Characteristics (Features) of a Company: The following are the main characteristics of acompany :

  • Incorporation : A company is an artificial person created by law. A company comes into existence only after registration under the Companies Act.
  • Separate Legal Entity : A company is a separate legal entity from its shareholders. It can own property, enter into a contract, conduct business, sue or be sued.
  • Perpetual Existence : A company has a perpetual succession (continuous life without interruption) not affected by the death, lunancy or bankruptcy of its members or shareholders.
  • Limited Liability : Liability of the members of the company is limited (though not in all the cases to the value of the shares subscribed by each of them.
  • Transferability of Shares : The shares of a company are freely transferable, except in case of private companies.
  • Common Seal : Every company has its own common seal which is affixed to all the important documents of the company.
  • Management and Ownership : A company is not run by all the members but by their elected representatives called ‘Directors’.

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