What is a company?

A. What is a company?
The term Company is used to describe an association of a number of persons, formed for
some common purpose and registered according to the law relating to companies.
Lord Justice Lindley defines: "By a company is meant an association of many persons who
contribute money or money's worth to a common stock and employ it for a common purpose.
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.“

B. Objects and purposes:

The main objects and purposes of statutes relating to companies are as follows:

1. Encourage investments in companies by providing certain facilities, e.g., limitation of liability,

transferability of shares etc.

2. Ensure due and proper administration of the funds and assets of companies in the interest of
the investing public.

3. Present malpractices by directors and managers.

4. Arrange for investigation into the affairs of companies and provide for effective audit in dealing
with cases of dishonesty and fraud in the corporate sector.
C. Essential features:

The principal characteristics of an incorporated company can be summarised as follows:

1. Registration;
2. Voluntary Association;
3. legal personality;
4. Contractual capacity;
5. Management;
6. Capital;
7. Permanent existence;
8. Registered Office;
9. Common Seal;
10. Limited Liability;
11. Transferability;
12. Statutory Obligations;
13. Not a citizen;
14. Residence;
15. Fundamental rights;
16. Social Objective;
17. Centrally Administrated;
18. "Lifting the veil" of the company
D. Is a Company a Property of the Shareholders?

The traditional view that the company is the property of the shareholders is now an exploded myth. A company according
to the new socio­economic thinking, is asocial institution having duties and responsibilities towards the community
in which it functions. Maximisation of social welfare should be the legitimate goal of a company and shareholders
should be regarded not as proprietors of the company, but merely as suppliers of capital entitled to no more than
reasonable return and the company should be responsible not only to shareholders but also to workers,
consumers and the other members of the community and should be guided by considerations of national economy
and progress.

E. Types of companies:
There are two types of companies-Public and Private.

a) Private Company:
A private company is one which, by its articles,
I. restrict the right of the members to transfer their shares, if any ;
II. limit the number of its members (not counting its employees) to 50 and
III. Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the Company .

Private companies may be limited by shares or limited by guarantee. There cannot be a private company with unlimited
liability.

b) Public Company:
All companies other than private companies are called public companies .Public companies may be classified into three
types :
1. companies limited by shares,
2. companies limited by guarantee, and
3. unlimited companies.
Statutory Public Company:
Non-Profit Associations:
the Central Government may by licence, permit the omission of the words Limited or
Private Limited in the case of companies which are formed for promoting
commerce, art, science, religion, or any other useful object, and which are non-
profit and non dividend paying organisations (e.g., Chambers of Commerce). The
licence given may be withdrawn, if the company ceases to fulfill the conditions
mentioned in Sec. 25.

F. Differences between a private & a public company:

Number of members; Restrictions on transfer of shares; Restriction on invitation to
public; Restriction on name; Prospectus; Issue of rights shares; Commencement of
business; Statutory meeting and statutory report; Managerial remuneration;
Number of directors; Rules regarding directors; Company's own shares; Procedure
of meeting; Memo of contract:

G. Jurisdiction of court:
Suits relating to the constitution of a company and its winding up 'are ordinarily dealt
with in the High Court of the area in which the registered office of the company is
situated. Suits of other types (e.g., money suits) by or against the company, where
would try is determined by the rules regarding jurisdiction of courts as laid down in
the Civil Procedure Code.