The word Company is made of two latin words Com which means with or together and Panis which means bread. In modern time company means a joint stock company in which large number of people have invested towards the capital of the company.
CHARACTERISTICS OF COMPANY
Separate Legal Entity
Company is has a separate legal entity other than its share holders. Company is a legal person and not a natural person so a company can be a resident of a country but cannot be citizen of any country. As a company is a legal person so it can enter into contract with its own share holders as well. This was first explained in the leading case of Salomon Vs. Salomon Co. Ltd.
Perpetual succession means the continuous existence. The existence of the company is not affected due to insolvency, death or unsoundness of mind of its members. Company has a perpetual succession. Shareholders may come and Shareholders may go but the company goes on. Even in case all the Shareholders of a company die, the legal existence of the company will not come to an end.
LIMITATION OF ACTION
A company cannot go beyond the power stated in the Memorandum of Association. The Memorandum of Association of the company regulates the powers and fixes the objects of the company and provides the edifice upon which the entire structure of the company rests. The actions and objects of the company are limited within the scope of its Memorandum of Association.
Can Sue and Can be sued
Company is a legal person and it can enforce its legal right, in the same way it can be sued for the breach of the contract. All legal proceedings against the company are to be instituted in company’s name.
Company is a voluntary association formed by its members to earn profit and the profit earned is divided among its shareholders in form of Dividend. This profit can also be restored for the future expansion of the company. There is an exception to this rule; a company can be formed with no profit motive under section 4(1) of the Companies Act.
Company is an artificial person so it can own property in its own name. Property in the name of the company is its property which is held, controlled and managed by the company. Shareholders of the company cannot claim to be the owner of the property.
Freely Transferable Shares in case of Public Company
Members of a public company are freely transferable. A shareholder can transfer his shares to any person without the consent of other members.
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