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Presented By:Jaywanti Takhtani
'Rameshwar Dass Jamuna Dass & Company'. accompany incorporated or registered under the Companies Act. Calcutta'. 'Kelvinator of India Ltd. etc. We shall be using the word company in our text strictly in legal sense.' The Alkali & Chemicals Corporation of India Ltd. be noted that although a company can be registered for any object. etc. however. But this company is not a company in the legal sense of the word.e. Ltd. Bombay'..g.. i. therefore.g. usually having the world ‘Limited’ as part of its name e. Delhi'. Almost every partnership firm having two or more partners may. and research. 'The Kohinoor Mill Co. .Company Literally the word company means a group of persons associated for any common object such as business.. It must. The word “& Company" here simply indicates that there are other persons in their association besides Rameshwar Dass and Jamuna Dass.... charity. style itself a 'company' e. sports. trading as well as nontrading.
Features of Company 1. This means that a company has a legal identity of its own which is quite separate from the legal identity of its owners. Conversely. and not its owners. This well-established principle was laid down in the following case. if a company injures a person that person can sue the company but cannot sue the owners. which has the right to sue. Company is a separate legal entity The most important consequence of incorporation is that a company is regarded as being a legal person in its own right. If a wrong is done to a company. it is the company. Salomon v Salomon & Co Ltd  (House of Lords) .
Salomon’s case is regarded as one of the most important in English law. He formed a limited company and sold his business to the company for £39. mainly because of the protection which it offers to the owners of limited companies.000 £1 shares. Salomon had carried on a business as a boot repairer and manufacturer.000. The assets of the company amounted to about £6. Although Salomon owned all but seven of the issued shares. and third by making up the balance in cash. Salomon therefore took all of the £6.Salomon v Salomon & Co Ltd  (House of Lords) For several years Mr. The unsecured creditors claimed that Salomon should repay their loans personally because he was the same person as the company. he was one person and the company was another. the company got into ﬁnancial difficulty and was wound up. The company paid the purchase price in three ways. Shortly after its incorporation. Unsecured creditors lent the company a further £8.000. as follows: ﬁrst. by issuing Salomon with 20.000. Salomon took all of the company’s assets as security for the loan which had been made to him. Salomon therefore had no more obligation to pay the company’s debts than he had to pay his next-door neighbor's debts.000. Held The company had been formed properly and without any fraud. Creditors who have been given security for their loan are entitled to be repaid before unsecured creditors.000. . second. by regarding him as having loaned the company £10.
2.000 in all. if a shareholder buys 100 shares of Rs 10 each and pays Rs 5 on each share. . but he cannot be made to pay more than Rs 1. Thus. No shareholder can be called upon to pay more than the nominal or face value of shares held by him. For example. by virtue of this characteristic the personal property of the shareholder cannot be seized for the debts of the company.Limited liability The liability of the members for the debts of the company is limited to the amount unpaid on their shares howsoever heavy losses the company might have suffered. he has paid up Rs 500 and can be made to pay another Rs 500. if he holds a fully paid-up share. in case of a company with limited liability.
assets of company are not the assets of members like partnership.3. Separate Property It is also feature of company that property of company is different from its members. In other words. . It can purchase or sell property without the permission of shareholders.
formed for carrying on a business with the object of earning profits. .Incorporated association : A company must necessarily be incorporated or registered under the prevalent Companies Act.4. having a membership of more than ten in banking and more than twenty in any other trading activity. Registration creates a joint stock company and it is compulsory for all associations or partnerships.
A company exists only in the contemplation of law.Artificial Legal Person: A company is an artificial person created by law to achieve the objectives for which it is formed. no soul and no conscience. It is invisible. It is artificial person in the sense that it is created by a process other than natural birth and does not possess the physical attributes of a natural person. It has no body. intangible.5. . immortal and exists only in the eyes of law. it is regarded as an artificial person.
But the company survived. insolvency or retirement of any or all shareholder(s) or director(s). . still the identity of the river remains the same. Its life does not depend upon the death."9 The company may be compared with a flowing river where the water keeps on changing continuously. Perpetual existence : A company is a stable form of business organization. Law creates it and law alone can dissolve it. were killed by a bomb. Thus. Members may come and go but the company can go on for ever. :-"During the war all the members of one private company. irrespective of changes in its membership. For eg.6. a company has a perpetual existence. not even a hydrogen bomb could have destroyed it. while in general meeting.
it can be found by only those documents which bear its signature. the law has provided for the use of a common seal. But having a legal personality.7. Any document bearing the gammon seal of the company will be legally-binding on the company. as a substitute for its signature. Common Seal As was pointed out earlier. . Therefore. a company being an artificial person has no body similar to natural person and as such it cannot sign documents for itself. It acts through natural persons who are called its directors. with the name of the company engraved on it.
Transferability of shares : The shares of a public company are freely transferable and members can dispose of their shares whenever they like without seeking any permission from the company or the other members.8. some restriction on the right to transfer is essential in its articles as per Sec. 3 (1) (iii) of the Act. . In a private company. however.
Being a share holder of a company does not give him the right to manage the affairs of a company. The management is vested with the directors. Company’s share holders are widely scattered. who are the legal representatives of the shareholders. It is physically impossible for all of them to take patty in the management of the company. .Separation of ownership and management Share holders are the owners of the company.9. Thus owners of the company have no direct control over the management of the company.
In order to bring any charges in its activity.Object clause of Business: A company can conduct only such business as stated in its first Memorandum of Association.Publication of Accounts: A joint stock company is required to file annual audited statements with the Registrar of Companies at the end of each financial year. 11.10. the object clause must be changed. . The annual statements are available for inspection in the office of the Registrar.
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