The Company

n,ecompany legislation in lndia dates back to 1850, when the first Companies
Act provided fo r the registration of Join_t Stock Co~pan ies. Since then it ~as
been revised and amended a number of times. After independence, Companies
Act came into force from Ist Apri l, 1956. It was both a consolidat ing and
an amending Act.
; view of changes in the national and inlei:,~ational econom ic environment
and expansion and growth of our economy, the Central_ Government after due
deliberations, decided to repeal the Companies Act, 1956 and enact a new
legislation. Thus,<th_e 57 year old Act was replaced by the Companies ct,
2013 on 29' h August, 2013_when it got the Pre~nt's assent. The
Companies Act, 2013 was published in the Official Gazette on JOrli ugt_1st,
2013 . This Act contains ·22 ChapJ_e~s, 470 Sections and 7 Schedules} The
Act prescribes 33 new definitions incf uding definitions of Associate Company,
Small Company, Employees Stock Option, Promoter, Related Party, Turn
Over, Key Managerial Personnel, Global Depository Receipt, etc. A substantial
part of the Act is in the form of Rules which have been prescribed

~ MEANING
The word Company is derived from the Latin words 'com' i.e. with or
together and 'panis' i. e. bread. It means an assoc iation of p~ ons or
merchants discussing matters or taking food together. Ordinarily-l!,b$ word
~ompany means a group or an association of persons united Jor a common
ob~ BuL under the company law, the word company means a company
or association, registered or incorporatt:d under the Companies Act or any law
of the land for any object. Section 2(20) of th e Companies Act, de fines
; company as; "any company fo rmed and registered under the Companies
_ct, or under any previous Com pany Law_Jrhe definition of a com pany
~ven by the Companies Act, does not ·clem1y point out the meaning of the
0rd
company. We need to look at the defin iti ons oiven by so me other
authors. e

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Broad Features of Indian Companies Act 2013 t' --:,,. I {
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Introduction .
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The Companie~ Act, 2013 was passed to consolidate and~ men~ tI;e law relating to companies.
The A~t comprises of 7 schedules, 29 chapters and 47Q sections. The Act extends to the whole
of India. The Act of Parliament received the assent of the President on the 29th August, 2013.
The Act has become applicable from financial year 2014-15. As per the Results- Frame~ork
Document (RFD), Ministry of Corporate Affairs~(2013-2014), ·the Act has following broad
features: . -- ·
, A<
Vision · ··,.' "-,
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To facilitate corporate growth with enlighten~d regulation.

Mission
To be responsive and ·sensitive to changes in the business environment and suitably formulate
and modify corporatela,vs and regulations from time-to-time.

Objectives
1. To provide siIP,plified laws governing Corporat~ Sector and to facilitate effective
compliances and enlightened regulatory regime.
2. On line delivery of all registry related services with speed, certainty and transparency,
access to public infor~ation and effectivelymonitoring -of statutory compliance by the
comparnes. •
Effec tive enf;rcement of 'Companies Act' and other Acts coming under the domain of
3.
1\11 CA fo r better Corporate Regulation and Governance. ·

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Company: Meilning and Featuros 3

4. Protection of Investor and Promotion of Investor Education and Awareness for growth
of Corporate Sector in the country.
5. To develop capacity building_and secure policy advisory support through IICA.
6. To Promote Competition. _ '
7. To disseminate Corporate Sector Data/Official Statistics as per National Data Sharing
and Accessibility Policy (NDSAP) .
· ·8; Improv·ing the functioning of Official Liquidators through application of e-
Governance.
9. Developing and_strengthening capabilities in SFIO.\
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Nature and Scope of Act

The Companies Act is the Act ~f the Central Legislature applies to companies thtough_qut ___
India on a uniform basis (except that·it fs applicable to the States of Jammu & Kashmir, Goa,
Daman & Diu and Sikkim subject to special provisions made and notifications issued by the
Central Government). .. · - \ - - ·
The provisions of this Act shall apply to-
(a) Companies incorporated under this Act or under any previous company law;
_(b) Insurance companies, except in so far as the said provisions are inconsistent v:ith the
provisions of the Insurance Act, 1938 or the Insurance Regulatory and Dev;..,opment
Authority Act, 1999;
(c) Banking companies, except in so far as_the said provisions are inconsistent \vith the
provisions of the Banking Regulat!,?n Act, 1949;
(d) Companies engaged in the generation or supply of electricity, except in so far as the
said provisions are inconsistent with the provisions of the Electricity Act, 2003;
...
(e) Any other company governed by any special Act for the time being in force, except in
so far as the said provisions are inconsistent with the provisions of such special Act;
and
(f) Such body corporate, incorporate~ by any Act for the time being in force, as the
Central Government may, by notification, specify in this behalf, subject to such
exceptions, modifications or adaptatio~, as may be specified in the notification.
Company: and Features
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Company and Body Co rp orate

' Body cor porate> or 'corpora te body' refe rs to a body which is in corpora ted under a statute and
h as a perpetual succC'ssion with common sea l, and is a legal entity separa te from the _
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m emb e rs co nstitut in g it. The tern,, 'body corporate' is wider than the 'company' and it
includes: · ·

Companies registered under the Companies Act, 2013 or any foriner Indian
Compan1.es Act
Foreign Co!llpanies
Corporati_ons formed under special Act of the Parliament or of State LegisJati1res or of
a foreign country
Public financial institutions as defined in Section 2(72) of Companies Act 2013 ·
Nationalised Banks
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LimitecLLiability Partnerships registered under the Limited Liability Partnership Act,
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2008. .
However, 'body corporate' does not in~lude: .
(a) A society registered under the Societie: Registration Act, 1860;
(b) A corporation sole; . . . .
(c) A co-opefative society registered under any law relating to co-operative soc1et.Ie~, and
. d t b in a company as defined · · t11e Compam·es Ac t._. .which the
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(d) Any other bo Y no e g "fi -f .11 the Official Gazette, specify in this behalf.
Central Government may, by nott ica wn , -~~- - - - - ..
 I nd ia v C.
Characteristics of Company company.
-:r 1. lncot'porat~d A~sociationf Company is an incorporated association ~f persons ";hich is 3 . Indep i
created by registration under t'he Companies Act, 2013 (or any former Indian Companies Act). ~ ons~t~e
For forming a public company at least seven persons and for a private company at least two governm
persons are required. These persons subscribe their names to the Memorandum of association

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it lik es. 1
and· also comply with other legal requirements of the Act in respect of registration to form and 1

incorporate a company~ . . The

2. Artificial Legal Persof:: Company is a legal person. The· registration of a company under the " are)
Companies Act grants a legal entity to the company enabling it to discharge functions akin to a is som
person such as the right to acquire and dispose of the property, to en_ter into contract with o-wner:
third parties in its own name, and to sue and be sued in its own name.•A cqmpany can enter of the
into partnership with one or more individuals or another company. It can buy shares or of the
debentures of another company. A company can fomr other companies by subscribing to their
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Memorandum of Associat~
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Perp&tu_al ·separate
Existence P~operty~

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Although, n compnny docs not exist . lll . . -.Ii..15 no body ' no so ul and
. th e p 11ys1en 1 f0 1111 S no
conscience, 1t. has mosl of th e attnbutcs
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of a pei , ts but in the eyes. of th e law.
_ 1t ex.is . . o, da
. as an nrt1·r·1cm . I Icga I pc1.s011. It l1as a nati onality, dom1c1. 1e an ~- - 0
company can be descnbcd
' residence bu t cannot ask .for th e enfo rce ment of t hosc run da~ ental rights. wff1ch. are hts
exclusively available to national citi zens. Not being a natural person, it cannot enJOY ~e : g fth 1

under the Constitution of India or Citizenship Act. It was held in State Trading Corpora~zon °
India v C.T.O that.neither the prov~sions of the Constitution nor the Citizenship·Act apply to a
c,ompany. · .. .
s. Independent Legal Entity A ompany has a legal entity distinct and separate_from it~
\_,..~ nstitul.JI1embirs.(sh.areh~~ s). It is an autonomOus b~dy,. s~If,controllin~ and se:-
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govemin It can hold and deal With any type of property of which 1t 1s the owner, m any w Y
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it likes. can enter into contracts, open a bank account in its own name, sue and be sued by ·C==
irmembers as well as outsiders; ·
The rights and· obligations of a company are distinct ·from its constituent men,be~
" areholders are not, in the eyes of the law, part owners of the undertaking. The un,.dertaking
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is something different from the totality of ·the shareholders.'' 6 membe_r cannot claim any
ownership rights in the assets of the company either individually or jointly during the existence (p
of the company or in its winding ~P· The property of thecompany is (q be ~sed for the benefit
of the company and not for the per~onal benef~t of the shareholde~ . CP
A-director of a company can be the office bearer ofthe trade union of the workers of the
same company. A shareholder, if otherwise qualified, can be the auditor of the same company. cp
At the same time, the members 0f the company can enter into contracts with the company in
0 the same manner as any other individual can.
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A co~pany can be held liable for criminal acts. It can be held liable for breach of law ana - (~
_ can be made .to pay fine. However, no impris9nme_nt of a company is possible. It--eafi be
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charged with conspiracy to defraud or may be convicted of making use of false documents (~
with intent to deceive. It can also be held liable for tort; committed by its employees in the
course of their employment. · · (~
On account of the independent corporate existence, the creditors of a company are
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creditors of the company alone and their remedy lies against the company and its property
only and not against any of its members. 'Law recognizes the existence of-the company qµite _
irrespectiv~of the motives, intentions, scheme or conduct of the individual shareholders. A
director or a managing director cannot be held personality liable for the payment of arrears of
taxes or salaries of employees due by the company. Similarly, shareholders cannot be held
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liable for the wrongs or misdeeds of the company.
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·. The principle of separate legal entity of the company was judicially recognized by the
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House of Lords in 1867 in the case of Oakes v.Turquand and Hording (1867). It was then held
that since an incorporated company has a legal personality distinct from that of its members, a
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6. Short v. Treasucy Commissioner (1948/ t} ,\ J " r · ~~':.JI-

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Ly, Separate Property
A company is capable of owning, enjoying and disposing of property in its
own name. Although the capita\ and assets are contributed by the shareholders,
the company becomes the owner of its capital and assets. The shareholders
are not the private or joint owners of the company's property.
A member does not even have an insurable interest in the property of
the company. The leading case on this point is of Macaura v. Northern
Assurance Co. Limited (1925) :
~ cts of the case
\ · Macaura was the holder of nearly all (except one) shares of a timber
company. He was also a major creditor of the company. M Insured the
company's timber in his own name. The timber was lost in a fire. M claimed
insurance compensation. Held, the insurance company was not liable to him
as no shareholder has any right to any item of property owned by the
company, for he has no legal or equitable interest in them....~ ~-· ... ~----~-= ·-·- __
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 Company Law
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4 rpetual Succession
Unlike a natural person a company never dies. The life a com pa ny i~ not
measured by the life of any of its members. It is an ,utific ial person created
by law, law atone can bring 811 end to its li fe . Its existence is not affected
by the death or insolvency of its members. Members may come and members
may go, but the company continues its operation unless it is wound up. Just
like the waters of the river Thames change constantly, but it is still called
river Thames, similarly inspite of total change in membership, the company
will be the same entity with same privileges and immunities, estates and
possessions. The leading case in this regard is (Re.) Meat Suppliers (Guildford)
Limited (1966): ·
Facts of the case : All the members of a private company while in a general
meeting, were killed by a hydrogen bomb. The company survived.

/ -rAficial Legal Person ·

Company is person created by a process other than natural birth. It is thus
called artificial. Since it is created by law, it is an artificial legal person,
~lothed with all the rights of an individual. A company is invisible, intangible,
- immortal, but not fictitious. It can do everything which any natural person
can do, except be sent to jail, take an oath, marry or practice a learned
profession.
 5. Perpetual Existence( A companyhasa piipetual successio1;)t has no allotted span of life.
(:be mode of incorporation and ~iss~lution Qf compa,ny and . the right ~f t~e members to
transfer-shares guarantee the corttmmty of the existence of the company_ qmte independent of
the life of the members. The existence of a company can be terminated only_by law.tlBeing an
artificial person, it cann~t die irrespective of the fact thai its members,r even the W mders or
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subscribers to the Memorandum, may die or g~ out i~ Moreover, in spite of the changes in
the membership of the company, it can perform its c~ act~ and enter into future agreements.
Thus, members may come and go out the company can go on forever.

6. Common . Seal:(A company is an artificial person and it has no physical-existence, so it

cannot sign any document personally. Therefore, it is necessary for every company to have its
own common seal which works as its signature. All the acts of the company are authorized by
its "common seal" which is the official signature of the company. A document not bearing the
common seal of the company will not be bincling on.the company. /
 - - · 1,~ ·- ··" ·" · .

'J· Limited Lfo~illtyh ·11 c linbility () ( sbnrr h ol <l crs of n corr1pn 11y is diffe rent from Lh e Ii ab ilily ?f
the company. Shnrc/1uldrrs gcn cra lly ll hnvc li mit ed ll ubi lily- limited to Lh c ex tent of unpai d
value of shares held up. Shnrcholdcrs hove 110 oblign ti on to th e company once they have pa id
full amoun t on. the shares held by th em. Jn coses of losses, shareholders are not call~d tipon to
m~~e good th e losscs.:VCreditors canno t claim from the personal wealth of th e s~~rcholders.
In the case of a guara ntee company, the members are liable to contribute a sp ec1f1 cd agreed
sum to the assets of the company in the event of the company I
being wourid· up. · .

'_gTransferability of_§,ha~es{Qne can sell one's ~har~ p~ ownership rig_hts to. an ~nterested
buyer as the shares of a company are transferable. While m case of public companies shares
are freely transferable, there are some restrictions in the transferability of shares of private
companies. In .fact transferability of shares and limited liability ar~ tj:ie enabling factors for the
tremendous rise of companies all over the world. ) _-,- ·