LAB/U2 Topic 1 Companies Act 2013: Meaning and Essential Feature of Company
The word company is derived from a Latin word `companies`
it means a group of persons who took their need together.
In India law relating to companies are contained in The companies Act 1956.
Meaning and definition
A company is a voluntary association of persons formed for some common purpose with capital divisible into parts known as shares.
Justice Lindlay defines company “as an association of many persons who contribute money or money’s worth to a common stock and employ it in some trade or business and who share the profits arising there from”
According to companies act a company means a company formed and registered under companies act.
Features of a Registered company
- Voluntary Association
A company is voluntary association of persons who have come together for a common object which generally is to earn profit.
The activities of this association are governed by the law and are limited by its memorandum of association
- Incorporated association
A company comes into existence on incorporation or registration under the companies act. Minimum number of persons required for the purpose of incorporation is seven in case of a public company and two in case of a private company.
- Separate legal entity
On incorporation company gets personality which is separate and distinct from those of its members. Company is an artificial person created by law.
- Separate property
The company can own , enjoy and dispose off its property in its own name.
- Legal restrictions
The formation, working and winding up of a company are strictly governed by laws, rules and regulations
- Perpetual succession
unlike a person a company never dies. Its existence is not affected in any way by the death or insolvency of any shareholder. Members may come and members may go , but the company continues its operations until it is wound up.
- Common seal
As a company is an artificial person it cannot sign its name on a contract. So it function with the help of seal. All contract entered into by the members will be under the common seal of the company.
- Share capital
A company mobilizes its capital by selling its shares. Those persons who buy these shares become its share holders and thereby become members in it
- Limited Liability
In case of limited companies liability of members will be limited to the amount unpaid on the shares.
- Transferability of shares
Members can freely transfer and sell their shares .The right to transfer share is a statutory right of members.
11. Ownership and management
The owners of a company are its share holders.
The affairs of the company are managed by their representatives known as Directors