Features of a Company

There are different definitions of a company in different countries. If we look at the global definition of it, it is said to be a business entity acting as an artificial legal person. A group of persons or a single person forms the company for engaging in or carrying on a business. Thus, it’s like an artificial person that exists in the form of a corporate legal entity. As per the Companies Act 2013 of India, a company is a registered association that has an independent legal entity along with perpetual succession. It is essentially a body corporate that carries limited liability and comprises of a common capital that includes shares that are transferable. 

Different Features of a Company

A company has various features that make it a company. It includes being a body corporate, perpetual succession, limited liability, common seal, and others.

Body Corporate

As a company is established by the country’s law, one needs to register the company under the Companies Act, 2013. To incorporate a company, it must register its formal documents with the Registrar of Companies. The essential documents include Memorandum of Association, Articles of Association, etc. Thus, a company can get a legal entity through a registration certificate. It also becomes accountable in case of breach of law.

Independent Legal Entity

It is a legal entity that is separate from the shareholders of the company. It acts as an autonomous body capable of opening a bank account, entering contracts, suing anyone or even getting sued. Thus, the shareholders are not responsible for the wrongdoings of the company. It can also be held accountable for criminal acts. All in all, the company’s existence is recognised by the law regardless of the intentions or motives of the shareholders.

Separate Property

The company’s property is different from that of the members. Thus, there are no direct proprietary rights of the members over the property of the company. They have rights simply over the shares of the company. Even if a person owns all the company shares, it still won’t be their property. Moreover, they also cannot consider the company their agent.

Perpetual Succession

By perpetual succession, we mean that there is no allotted lifespan of the company. In simpler terms, the company continues to exist regardless of the life of its members. Thus, only the law has the power to terminate the existence of the company. As it is an artificial person, the company cannot die regardless of the death or retirement or resignation of its members.

Common Seal

Even though the company is an artificial person, it works through its directors, that are actual human beings. Thus, they serve as the company’s agent but not to its members. A common seal is responsible for approving every act that the company does. In other words, it is like the company’s official signature. If any document does not bear the company’s common seal, it won’t bind on the company.

Separation of Ownership and Management

A number of shareholders own the company. This body is too huge for managing the company’s affairs. Thus, the company’s objectives are set by the shareholders. Similarly, they also appoint the directors of the company for managing its affairs to achieve their goals. Consequently, executives are hired by directors for executing the company’s daily operations. Thus, we see that ownership and management are different things.

Limited Liability

When we talk about the company’s shareholder’s liability, we see that it is different from that of the company’s liability. In other words, the shareholders usually have limited liability. Thus, they do not have any obligation to the company after paying their shares full amount. If there is a loss, they will not be held accountable for compensating them. Thus, no creditor can claim the shareholder’s personal wealth.

Transferability of Shares

In a company, the shares are transferable. Thus, it allows the people to sell their shares to anyone who is interested. In the case of public companies, the shares can be transferred freely as per the law. However, in the case of private companies, some restrictions exist in transferring shares.

Conclusion

All in all, a company is a legal person established by law. As it is an artificial person, it cannot act as per its own impulses. The people who own the corporation are responsible for all the company’s decision-making. Thus, there are certain features of a company that makes it what it is. The major ones are that it is a body corporate, artificial legal person, has limited liability and perpetual succession, and more. In India, every company must be registered under the Companies Act, 2013. Otherwise, it cannot be called a company.