Features of a Company

1. Independent Corporate Existence:

Under Section 24 (2) of The Companies Act - 1994, when a Company is registered
is becomes a corporate legal entity distinct from its members.
So, a Company is an independent corporate existence; as soon as it is registered it
becomes an individual with all legal rights, duties & liabilities. It is the foremost
feature of a Company.
The independent corporate existence of a Company was established by the
following landmark case Saloman Vs Saloman & Co. Ltd. - 1897
One Solomon was a/boot and shoe manufacturer. His business was in sound
condition and there was a substantial surplus of assets over liabilities. He
incorporated a Company named Solomon & Co. Ltd for the purpose of taking over
and carrying on his business. The seven subscribers to the memorandum were
Solomon, his wife, his daughters and his four sons and they remained the only
members of the Company Solomon and two of his sons constituted the board of
directors. The business of Solomon was transferred to the Company for € 40,000.
In payment Solomon took 20,000 shares of £l each and debentures worth £10,000.
The debentures certified that the Company owed Solomon £10,000 and created a
charge on the company's assets. One share was given to each remaining member
of his family.
The Company went into liquidation within one year. On winding up the state of
affairs was broadly something like this, Assets £6000; liabilities–Solomon as
debenture holder £10,000 and secured creditors £7,000. This after paying the
debenture-holder, i.e. Solomon nothing was left for the unsecured creditors.
The unsecured creditors, therefore, contended that, though incorporated under the
Act, the Company never had an independent existence; it was in fact Solomon
under another name; he was the managing director, the other directors being his
sons and under his control.
But it was held that Solomon & Co. Ltd was a real company fulfilling all the legal
requirements. It must be treated as a company as an entity consisting of certain
corporators, but a distinct and separate corporation. There Lordships of House of
Lords observed:
 "When the memorandum is duly signed and registered, though there be only seven
shares taken, the subscribers are a body corporate capable forthwith of exercising
all the functions of an incorporated company...... The company is at law a different
person altogether from the subscribers of the memorandum; and though it may be
that after incorporation the business is precisely the same as before, the same
persons person altogether from the subscribers of the memorandum; and though it
may be that after incorporation the business is precisely the same as before, the
same persons are managers, and the same hands receive the profits, the company
is not in law their agent or trustee. There is nothing in the Act requiring that the
subscribers to the memorandum should be independent or unconnected, or that
they should have one mind or will of their own, or that there should be anything
like a balance of power in the constitutions of the company."
The principle has been recognized in India even before Solomon Case. The
decision of Calcutta High Court in Kandoli Tea Company Ltd, Re 1886 seems to
be first on the subject.
In this case, certain persons transferred a tea estate to a company and claimed
exemptions from ad velorem duty on the ground that they themselves were the
shareholders in the Company and therefore, it was nothing but a transfer from
them in one to themselves under another name.
Rejecting this Court observed; "the company was a separate person, a separate
body altogether from the shareholders and transfer as much a conveyance, a
transfer of the property, as if the shareholders had been totally different persons."
In Dhulia-Amalner Motor Transport Ltd VRR Dharamsi - 1952,
“ A partnership Firm carrying on the business of plying buses having worked for
some time, some of the partners formed a private limited company. Such of the
partners who formed the company sold to the company their own buses, which
were heretofore used by the firm. The other partners who constituted the minority
sued the section forming the company for accounts and their share of profits on the
ground that in reality the Company was not a different entity from the firm and
that the business carried on by it was the same as that of the farm.”
It was held that the plaintiff had no legal right to sue for accounts of the business
done by the Company which was altogether a third person. Buses, which the
company was plying, were the property not of its shareholders but of the company
itself. The company was a corporate body whose entity was entirely different from
the entities of the shareholders.
2. Limited Liability:
The Company being a separate person is the owner of its assets and bound by its
liability. The shareholders are not liable except to the extent of their shares in the
Company. According to the Companies Act 1994, the liability of the shareholders
may be limited by share under Section 6(a)(4) or limited by guarantee under
Section 7 (a) (4).
3. Perpetual Succession:
An incorporated Company never dies. It is an entity with perpetual succession.
Membership in a Company may keep changing from time to time, but that does not
affect the Company's continuity. Death or insolvency of a member does not affect
the Company's continuity.
For example, A, B & C are the only members of a Company holding all of its
shares. Their shares may be transferred to or inherited by X, Y and Z., who may
therefore become the new members and managers of the Company. But the
company will remain same entity.
4. Separate Property:
The company, being a legal person, is capable of owning, enjoying and disposing
of property in its own name. The company becomes the owner of its capital &
assets. The shareholders are not the several or joint owners of the Company's
property.
Case - Macaura Vs Northern Assurance Co. Ltd 1925
Macaura was the holder of nearly all the shares, except one, of a timber Company
and was also a substantial creditor. He insured the Company's timber in his own
name. The timber having been destroyed by fire, the insurance company was held
not liable to pay compensation.
The Court held that no shareholder hoe any right to any item of Company, for he
has no legal or equitable interest therein.
5. Transferable shares:
 Shares are movable properties and they can be transferred anytime. If shares were
not transferable, the shareholders would feel in secured or afraid. Moreover, the
shares being transferable in the open market, the company need not pay money to
the shareholder in exchange of his share; the clients are interchanging between
themselves. This provides liquidity to the investor and stability to the company.
Section 30(1) of the Companies Act 1994 refers about the transferability of the
shares.
6. Capacity to sue & be sued:
A Company, being a body corporate, can file a suit in a court of law and can be
sued in its own name. In case of criminal case, a criminal complaint can be filed by
the company
but it must be represented by a natural person. A Company has the right to protect
its fair name. It can sue for such defamatory statements remarks against it as are
likely to damage its business or property, etc.
7. Professional Management:
The corporate sector is capable of attracting the growing cadre of professional
managers. Young management graduates join the Companies and functions
independently which ensures better productivity and services. Smart and qualified
managers are helpful for the effective management and successful operation of the
large organized companies.
8. Finance:
The Company is the only medium of organizing business which is given the
privilege of raising capital by public subscriptions either by way of shares or
debentures. Moreover, public financial institutions lend their resources more
willingly to Companies than to other forms of business organizations.

Edited by -
Mostafa Ahmed Suntu
Department of law
Jagannath University