Let us know the meaning of the company. A company is defined in section 2(20) of the Companies Act,2013. A company is any company incorporated under this Act or any previous company law.
Origin of word company– Word company is made up of two words- ‘com’ and ‘panis’. ‘Com’ means bread and ‘panis’ means together. People who breaks their bread together. The merchants who sit together and had their meals together discuss business. This was the root for the origin of the word company
| Com means | Bread |
| Panies means | Together |
Nature of a company
- Corporate personality
- Company as an artificial person
- A Company is not a citizen
- Company has nationality and residence
- Limited Liability
- Perpetual Succession
- Separate property
- Capacity to sue or be sued
- Transferability of Shares
- Contractual Rights
- Limitation of Action
- Separate Management
- Voluntary Association of Profit
- Termination of Existence
- Corporate personality
The company has its own name, act under name, has a distinct seal of its own and has its own assets which is distinct from its members. It is in a way distinct from the person who has composed it and hence said to bear a distinct corporate personality.
2. Company as an Artificial Person
It is not a human being but acts like a human being. It can enter into contract, possess property in its own name, sue and be sued.
3.Company is not a citizen
A Company though an artificial legal person is not recognized as a citizen under the Citizen Act,1955. However certain fundamental rights which are available in the constitution for the protection of a person is available to a company. For example , Right to equality (Article 14)
4.Company has nationality and residence
A company has a nationality , domicile and residence which is the place of registration.
5. Limited Liability
The company is a distinct legal person and is the owner of its assets and liability. The liability of the members of a company extends to the contribution to the capital of the company. In other words the liability of the members is limited.
6.Perpetual Succession
An company never dies except when it is wound up as per law.The members of the company my die or leave the company but the company continues to exist.
7.Separate property
The company being a legal person is capable of owning a property and deposing it as and when required.
8. Transferability of Shares
The capital of a company is divided into shares. The shares are movable property and hence freely transferable subject to certain condition. Section 44 of the Company Act, 2013 clearly states that the shares are movable and can be transferred from one person to other.
9. Capacity to sue or be sued
A company is a legal person. Hence it can sue or be sued in a court of law.
10. Contractual Rights
A company can enter into legal contract for the conduct of its business with another legal person
11.Limitation of Action
A company cannot go beyond the powers defined in the Memorandum of Association. The MoA fixes the objective of a company and regulates its power.
12. Separate Management
The members derive their profit without being burdened by the management of the company. The manage the company by electing their representative i.e. the Director of the company.
13.Termination of Existence
A company does not die a natural death. It is created by law and gets terminated by the process of winding up in accordance to the law
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