Meaning and Characteristics of Company

Meaning :               (i) Company is an artificial person created by law.

                              (ii) Section 3(1) (i) of the company act, 1956 defines a company as: "A Company formed and registered under this act." 

Characteristics :

1. Separate Legal Entity: The Company has their own name so company is legal person according to company law. The company has independence corporate existence whereas The partnership firm has no Independence existence apart from its members.

2. Limited Liability: One of the most privilege of doing business under companies act 1956 is that the liability of the members are only extent of nominal value of shares which are held by members. It means shareholders are liable only for those shares which they held. They don’t require to pay more than held share.

3. Perpetual succession:

We know MD comes and takes retired, members and shareholder are going to changes, time by time. but this will not affect the operation the company. Even the death or insolvency of MD and Shareholders, does not affect the company.

4. Common Seal: It is very necessary to make the companies common seal after the formation of the company. The common seal is official signature of the company. All contracts made with company must be under the seal of the company. In case of absence of common seal of the company in any documents it will become unauthorized letter.

5. Transferability of shares: Shareholders are free to transfer their shares except in case of private limited company. Moreover shareholder may nominate the person for shares in case of accidental death or any other circumstance. In present time Companies prescribed forms stated First nominee and 2nd nominee.

6. Separate Property: In companies act 1956, company is a person who can contract with other party in manner of purchase or dispose of property. if company want to purchase any assets he should purchase the property in its own name

7. Capacity to sue : A company is a person so he can sue and be sued in its own name. in case of any fraud or crime committed by shareholder or third party, a company can sue that means company can take legal proceeding against the third party by its own name.

8.Share capital :In large scale company, it is necessary the fund is furnished by directors. the fund is called primary capital. It is necessary to check whether fund raiser company is in accordance with companies act or not.