Meaning of

Corporate Accounting
Submitted by: Azan
Definition of company
According to Section 2(20) of the Companies Act, 2013, "company means a
company incorporated under this Act or under any other previous
company law." However, this definition does not reveal the characteristics
of a company. In simple words, a company is an association of persons who
contribute money to a common corpus, called share. capital, to carry on its
activities. It is also called a joint stock company.According to Lord Justice
Lindley, "By a company is meant an association of many per sons who
contribute money or money's worth to a common stock and employ it in
some trade or business, and who share the profit and loss arising therefrom.
The common stock so contributed is denoted in money and is the capital of
the company. The persons who contribute it or to whom it belongs, are
members. The proportion of capital to which each member is entitled is his
share. Shares are always transferable although the right to transfer them is
often more or less restricted." This definition gives a clear description.
Characteristics of Company
• Incorporated association
• Separate legal entity
• Perpetua succession
• Limited liability
• Common seal
• Tranferability of shares
Incorporated Association
A company, under the Companies Act, comes into existence when a group
of persons get themselves registered as a company. A company comes into
existence from the date mentioned in the Certificate of Incorporation Thus,
a registered company must be incorporated or registered under the
Company Act Registration creates an int stock company A company is a
body corporate.
Separated Legal Entity
A company has a legal entity distinct from a members i partnershup has
no existence apart from its members A company is a legal person or lingal
entity. Therefore, it is capable of owning and disposing of property in in
own name. It can man and be weil in its own uane. Salman v Salon &
CLimited is a leading case on this point.
Perpetual Succession
A company has perpetual succession. It is capable of serving beyond the
lives of its members Membership of the company may keep-changing from
time to time, but that does not affect company's continuity. The death or
insolvency id individual members does non, in any way, affect the
corporate existence of the company "Members may cure and go but the
company can go on for ever (Gower Modern Company Law).
Limited Liability
The company, licing aparate legal person, is the owner of theassets and is
liable to pay it liabilities Mumbers are not owners of the company's asms
no liable for its dabis to case of limites lability companies, the members
afility is limited to the extent of the nominal value of shares held by them
on the amount guaranteed by them.
Common Seal
A company is not a natural person. A company is an artificial person and
exist in the contemplation of law. It acts through its agents, called
directors. The company is bound by any those documents which beat itu
signature Common seal substitute for signature of the company.
Transferability of shares
• Section 44 of the Companies Act, 2003 provides "The share or
debentures on other interest of any member in a company shall be mu
able property, transferable in the manner provided by the articles of the
company Shares of a public company are freely transferable
Transferability of the hires provides liquidity to the investors. It also
provides stability to the company; However, certain restrictions are
imposed on transferability of shares in case of private companies.
Kinds of Companies according to mode of
incorporation.
• A company may be incorporated unites she special Act at legislature or
under the Companies Act. The companies which are incorporated under
the special Act of Central or State legislature are called statutory
companies such as Reserve Bank of India, Life Insurance Corporation,
Unit Trust of India et. The companies which are registered under the
Companies Act, 1956 or was registered under my eater Companies Acts
are known as Registered companies. It may be noted that companies
which were incorporated. under a special charter granted by the King or
Queen of England are known as chartered companies. These include
East India Company incorporated in 1600. Such compares a longer in
existence in India.
Kinds of registered companies based on
number members.
On the base of number of members a registered company may be
(1) private company.
(2) public company.
1. Private Company According to Section com of the Companies Act,
2013, pre company means a company which satisfies the following
conditions
(a) Minimum paid up capital The company must have a minimum paid up
capital as may capital has been dispensed with by the Companies
(Amendment) Act, 2015, as the rules do not prescribe any minimum paid
un capital. be prescribed. The requirement as to minimum paid up
(b) Restriction on transferability of shares: There must be some restrictions
on the right of its members to transfer their shares in the company.
(c) Restriction on number of members: The number of members of the
company, except in case of One Person Company, must be limited to 200
except the persons who are in the employment of the company and
persons who were in the employment of the company and were members
of the company while in that employment and continued to be member
after the employment ceased Joint holders of shares are treated as single
number for this purpose.
(d) Prohibition on any invitation to the public to subscribe for any
securities: The company must prohibit any invitation to the public to
subscribe for any shares in or debentures or any other securities of the
company. The company should also prohibit any invitation or acceptance
of deposits from persons other than its members, directors or the relatives
A private company limited by shares must have articles containing
aforesaid restrictions, limitations and prohibitions The minimum number
of members required to form a private company is two. A private company
must add the word, "Private or any abbreviation thereof in its name.
2. Public company
According to 5 271) of the Companies Act, 2013"Public Company" means
a company winchne private companyte has a cumim paid-up cuperal as
my la prescribal. The ruls prescribe any nimum paid up capital. The
requirement as til mammans paid up capital has been dispemod with hy
she Compantes Animdment)do notAct, 2015Her private company shall
be dected to be a puble company which is a niaba diary of a campany
which is not a privalumanyThe minimum number of members required
to form a public, limited company de reven There is no restriction on
maximis number of members.
Thank You