Assignment # 02:

A company is “essentially define in terms of legal status and the ownership of

asset”.-Explain and illustrate.

Introduction
The word company has no strictly technical or legal meaning. In the term of the company
act, a company a company formed under and registered under the company act. In
common law company is a “legal person” or “legal entity” separate from, and capable of
surviving beyond the lives, of it members. Like any juristic person, a company is legally
an entity apart from its member, capable of right and duties of its own; it becomes the
owner of its capital and asset, and endowed with the potential of perpetual succession.
But the company is not merely a legal institution. It is rather a legal device for the
attainment o any social or economic end to a large extend publicly and socially
responsible. It is there fore, a combine political, social, economic, and legal institution.
Thus the term has been variously described. It is a means of co-operation in the conduct
of an enterprise… corporate device is one form of associated enterprise. It is an intricate,
centralized, economic administrative structure run by professional managers who hired
capital from the investor.1

In a practical way, a company means a company of certain persons registered under the
company act.2 But in this case our purpose to define company in terms of legal status
(legal identity) and ownership of asset.

Important Issue for Defining Company

In ‘The Companies Act 1994’ defines company as "company" means a company formed
and registered under this Act or an existing company. And "Existing Company" means a
company formed and registered under any law relating to companies in force at any time

1
Singh Avtar , Company Law, Reprint [2008-09], p-01.
2
Lee Loevinger, The Law Of Free Enterprise, [1949], pp- 59.
before the commencement of this Act, and is in operation after commencement of this
Act.

Memorandum of Association stated that any seven or more persons or, where the
company to be formed will be a private company, any two or more persons associated for
any lawful purpose may, be subscribing their names to a memorandum of association and
otherwise with the requirements of this Act in respect or registration form an
incorporated company, with or without limited liability, that is to say, either--
A company limited by shares, or a company limited by guarantee, or an unlimited
company. All types of company requires a separate name for the company (Limited
company by share and guarantee requires with "limited" as the last word in its name) and
the object of the company for which it would be established.3

Defining Company
Company law is about the interactions between a company (as a legal person in its own
rights), the company’s members, its directors, and its creditor. What makes company
remarkable is that they are “legal person” with their owning right, not simply group of
individual working together in a common enterprise. In the study of company law,
therefore, it is not only necessary to address the types of rules that enable groups of
people to work together in an organization, but also to address the rules that enable a non-
human ‘person’ to perform a wide variety of acts for itself.

Defining company in terms of Legal Identity

In law legal status refers to the concept of individuals having a particular place in
society, relative to the law, as it determines the laws which affect them. Degrees of status,
as well as the rights and statutes which apply, vary in accordance with several standard
(as well as specialized designations).4

3
The Companies Act (Bangladesh), 1994, (Published by Notification No. SRO 177-law dated 1-10-95. of
Ministry of Commerce) < http://www.vakilno1.com/saarclaw/bangladesh/part1.htm>.
4
http://en.wikipedia.org/wiki/Legal_status.
Legal status (Legal entity) is person or organization that has the legal standing to enter
into a contract and may be sued for failure to perform as agreed in the contract. As well
as a company can also sue others. A child under legal age is not a legal entity. A
corporation is a legal entity since it is a person in the eyes of the law. An artificial-person
is defined as "A legal entity, not a human being, recognized as a person in law to whom
legal rights and duties may attach - e.g. a body corporate". Sometimes an artificial-person
may be referred to as a CORPORATION, which is not always the same as an
Incorporated Company. These subtle re-definitions are made in Statutes whenever the
Government wants to change the meaning of the word. The technique used by the
Government was to create an artificial-person (referred to herein as a CORPORATION
for emphasis) for every human-being in Canada. As creator of a CORPORATION, the
Government can demand anything it wants from the CORPORATION. As a legal entity,
a CORPORATION does not have feelings and cannot be hurt. It can be subject to slavery
and complete domination by its creator and the CORPORATION must obey its creator.5

The outstanding feature of the company is its independent corporate existence. A

partnership has no existence apart from its member it is nothing but a collection pf the
partners, a company, on the other hand, is in law a person. It is a distinct legal persona
existing independent of its members. By incorporation under the act, the company is
vested with a corporate personality which is distinct from the members who compose it.
One of the effects of incorporation says that upon the issue of the certificate of
incorporation, the subscription to the memorandum and other persons, who may from
time to time be the member of the company, shall be a Body Corporate capable forthwith
of exercising all the function of an incorporated company and having perpetual
succession and common seal. Thus the company becomes a body corporate which is
capable immediately of functioning as an incorporated individual. The enterprise acquires
its own entity. It becomes impersonalized. No one can say that he is the owner of the
company. The business now belongs to an institution. The entity of the enterprise
becomes institutionalized.6

5
http://www.natural-person.ca/artificial.html
6
Singh Avtar , Company Law, Reprint [2008-09], pp-03
The principle that, apart from exceptional cases, the company is a body corporate, distinct
from members, lies at the root of the most perplexing questions that besets company law.
It is fundamental or cardinal distinction-a distinction which must be firmly grasped. This
principle is thrown into clear relief by contrasting an incorporated company with a
partnership, for under English law (through not under Scottish law or that of the most
Continental system) a firm or partnership is not a separate entity from its members.

The practical case as example that help to define company as a legal entity,-
The principle had been recognized in India ever before the Salomon case. The decision of
the Calcutta High Court in Kondoli tea company Ltd, Re, seems to be the first on the
subject.--
--Certain person transferred a tea estate to a company and claimed exemption from
ad ad valorem duty on the ground that they themselves were the shareholders in the
company and, therefore, it is nothing but the transfer from them in one to themselves
under another name.
Rejection this, the court observed: “The company was a separate person, a separate body
altogether from the shareholder and the transfer was as much a conveyance, a transfer of
the property, as if the shareholder had been totally different persons”.7

Defining Company In Terms of Ownership of Asset

Assets are anything of value that is owned by a company or a person, whether fully paid
for or not. These range from cash, inventory, and other "current assets" to real estate,
equipment, and other "fixed assets." Intangible items of value to a company, such as
exclusive use contracts, copyrights, and patents, are also regarded as assets.8

When a company registrar under the law, the company, being a legal person, is capable of
owning, enjoying and disposing of property of its own name. The company becomes the

7
www.flipkart.com/introduction-company-law-avtar-singh/8170128757-wv23f9tm1c
8
www.answers.com/topic/assets-industrial-engineering.
owner of its capital and asset. The shareholders are not the several or joint owner of the
company’s property. The company is the real person in which all its property is vested,
and by which it is controlled, managed and disposed of. A member does not even have an
insurable interest in the property of the company. A person was a holder of nearly all the
share, 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 him. No shareholder has any right to any item
of property owned by the company, for he has no legal or equitable interest therein.
Therefore, some of the cases stated that “The property of the company is not the property
of the shareholders; it is the property of the company”.

Thus, incorporation helps the property of the company to be clearly distinguished from
that of its members. The is vested in the company as a body corporate, however much,
the shareholder may come and go, remain vested in the company, and the company can
convey, assign, mortgage, or otherwise deal with it irrespective of these mutations. On
the nationalization of the Cole mines of a company, it was found that it had sold an item
of its immoveable property to the wife of one of its directors. The court rip open the veil
to probe into the genuineness of the transaction and discovered its shamness. The
property continued to be that of the company and became vested in the government. The
assets of the company were not allowed to be used for payment of a shareholder’s debt.
Unless a company’s incorporation can be viewed as a sham, its property would fall
outside the distribution of matrimonial assets on divorce. In a partnership, on the other
hand, the distinction between the joint property of the firm and the private property of the
partners is often not clear.9

Other Issues

9
Singh Avtar , Company Law, Reprint [2008-09], pp-09.
The discussion done in above, make it clear that “Company is a legal entity in the eye of
law and it is the owner of its own asset”. Besides that company has some restriction as
well as some responsibilities toward the shareholder, worker and society. As a legal
person, company could not deal and produce any harmful or illegal product, such as
drugs (yaba, heroin, cocaine…….), and arms or any illegal things. For this reasons the
memorandum must state the object for which the proposed company is to be established.
Company Act requires that in the case of the company in existence before this
amendment, the object clause has simply to state the object of the company. 10 For doing
something illegal company (Artificial person) could be sued as person and in some
opposite cases company can sue other person, which is one of the fundamental of a
person.

Conclusion
Thus the company is define as legal status (legal entity) and the term legal status or legal
entity is a legal identity through which the law allows a group of natural persons to act as
if they were a single composite individual for certain purposes, or in some jurisdictions,
for a single person to have a separate legal personality other than their own. This legal
fiction does not mean these entities are human beings, but rather means that the law
allows them to act as persons for certain limited purposes—most commonly lawsuits,
property ownership, and contracts.11 And the company gets the power of owner of asset
when it is registered under the law. Law defines the company as a person (juristic
person). Without some exception it enjoy all the facilities enjoy by a natural person,
which is under the law. Therefore it could be stated for a company that "Whereas it is
essential, if man is not to be compelled to have recourse, as a last resort, to rebellion
against tyranny and oppression, that human rights should be protected by the rule of
law."12

10
The Companies Act (Bangladesh), 1994, (Published by Notification No. SRO 177-law dated 1-10-95. of
Ministry of Commerce) < http://www.vakilno1.com/saarclaw/bangladesh/part1.htm>
11
http://en.wikipedia.org/wiki/Juristic_person.
12
http://www.natural-person.ca/artificial.html.
The companies act is not exhaustive of the whole of company because the company is
recognized as person (juristic person) and owner of its own asset. Therefore company law
only amends and consolidates certain portion of company law. Common law has still a
lot of role to play in this field. The duties of corporate directors and their social
responsibilities, which are at present one of the most developing aspect of common law,
are still largely governed by the principles of common law.13

But despite this, companies are recognized by the law to have rights and responsibilities
like actual people. Companies can exercise their legal status against other company,
individuals and the state, and they may be responsible for legal rights violations. They are
"born" into existence through its members obtaining a certificate of incorporation, they
can "die" when they lose money into insolvency. Corporations can even be convicted of
criminal offences, such as fraud and manslaughter.14

13
Singh Avtar , Company Law, Reprint [2008-09], pp-03
14
http://en.wikipedia.org/wiki/company_law.
Bibliography

1. Rahman Mahfuzur, Principle of Commercial Law

2. Singh Avtar , Company Law, Reprint [2008-09]
3. Lee Loevinger, The Law Of Free Enterprise, [1949].
4. The Companies Act (Bangladesh), 1994, (Published by Notification No. SRO
177-law dated 1-10-95. of Ministry of Commerce)
< http://www.vakilno1.com/saarclaw/bangladesh/part1.htm>.
5. http://en.wikipedia.org/wiki/Legal_status.
6. http://www.natural-person.ca/artificial.html
7. www.flipkart.com/introduction-company-law-avtar-singh/8170128757-
wv23f9tm1c
8. www.answers.com/topic/assets-industrial-engineering.
9. http://en.wikipedia.org/wiki/Juristic_person.
10. http://www.natural-person.ca/artificial.html.
11. http://en.wikipedia.org/wiki/company_law.