DD: Company Law I

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Company: An association of like minded persons formed for the purpose of carrying on same business or undertaking. May be incorporated or unincorporated.
o Incorporated – separate person distinct from the individuals constituting it.
o Unincorporated – mere aggregation of individuals
- Body corporate – persons composing it are made into one body by incorporation, clothing it with legal personality and turning it into a corporation.
- Owes its existence to special act of parliament or companies law
- Association of both natural and artificial persons incorporated under the existing law of a country.
- Association not for profit acquires corporate life if givens a license.

Characteristics

1. Corporate personality- Once a company has been validly constituted under the Companies Act, it becomes a legal person distinct from its members, and it is immaterial whether any member has a large or small proportion of the shares, and whether he holds those shares beneficially or as a mere trustee.

- Separate legal entity
- Bears its own corporate name and acts under it.
- Seal of its own
- Assets separate and distinct from those of its members
- Can incur debts, borrow money, have a bank account, employ people, enter into contracts and sue or be sued
- Members can also be creditors
- Shareholder can’t be held liable for its acts

- Members not liable for debts of the company due to SLP
- Liability limited to the extent of the nominal value of the shares held by them.
That too only when company goes into liquidation.

2. Perpetual succession
- Variation in members doesn’t affect legal existence and identity of a company.
- Can be dissolved only under law as it is a creation of law.

3. Transferability of shares

- Capital of company divided into parts called shares – movable property which is freely transferable subject to certain conditions
- No shareholder is permanently or necessarily wedded to the company.
- Every member owning paid up shares is at liberty to dispose of them according to his choice but subject to the articles of the company.
- Any absolute restriction on the right to transfer shares is void.
o Joint stock – freely transferable
o Private co – limited restrictions

4. Separate property
- Company entitled to own and hold property in its own name
- No member can claim ownership of any item of the company’s assets

5. Common seal
- SLP with perpetual succession and common seal
- Since the company has no physical existence; must act through its agents.
- Common seal acts as the company’s signature – giving validity to actions of agents.
- Requirement of common seal has been dispensed with, as long as authorization by two directors or a director and company secretary, wherever such has been appointed.

6. Capacity to sue and be sued
- All legal proceedings against company in its own name


- Can bring action in its own name

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