Nature of a Company: History, Meaning and Definition

Accordingly, the word ‘company’ is employed to represent associations formed to carry on some business for profit or to promote art, science, education or to fulfill some charitable purpose. This body of individuals may be incorporated or unincorporated. The word Company has no strictly technical or legal meaning . It may be described to imply an association of persons for some common object or objects .

company meaning definition

‘Horne’ had been employed by the company under an agreement that he shall not solicit the customers of the company or compete with it for a certain period of time after leaving its employment. After ceasing to be employed by the plaintiff, Horne formed a Company which carried on a competing business and caused the whole of its shares to be allotted to his wife and an employee of the company, who were appointed to be its directors. The Companies Act, 2013 even upholds shareholders’ agreements providing for ‘Right of first offer’ and ‘Right of first refusal’ as valid even in case of a public company. What it means is that Articles of a company, whether public or private, may contain a clause that in case a member wishes to sell his shares, he will have to first offer the same to existing members.

Principle of Natural Justic…

It is called a body corporate because the persons composing it are made into one body by incorporating it according to the law and clothing it with legal personality. The word ‘corporation’ is derived from the Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by a process other than natural birth. It is, for this reason, sometimes called an artificial legal person. As a legal person, a corporation can enjoy many of the rights and incurring many of the liabilities of a natural person. A company is a fictitious individual with a separate legal identity from its owners.

Examples of statutory companies in India include the Reserve Bank of India, the Industrial Finance Corporation of India, the Life Insurance Corporation of India, etc. Efiling Income Tax Returns is made easy with ClearTax platform. Just company meaning definition upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources.

Common seal of Company is also important feature of Company as the feature like legal entity of any Company. Although the word ‘Company’ is colloquially applied to both , the statute regards companies and Company law as distinct from partnerships and partnership law. So wonderful to read the article very gently explain about the definition and also briefly explain but give a clear point of view about the company law. A transport company wanted to obtain licences for its vehicles, but it could not do so if it made the application in its own name. It, therefore, formed a subsidiary company and the application for licences was made in the name of the subsidiary.

Characteristic features of a company

The word Company , in simple term , may be described to mean a voluntary association of person who have come together for carrying on some business and sharing the profits there from. The capital of a company is divided into parts, called shares. The shares are said to be movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. Section 44 of the Companies Act, 2013 enunciates the principle by providing that the shares held by the members are movable property and can be transferred from one person to another in the manner provided by the articles. 4.2 Determination of the enemy character of a company – Company being an artificial person cannot be an enemy or friend.

  • In the legal sense, a company is an association of both natural and artificial persons and is incorporated under the existing law of a country.
  • Being the creation of law, the nature of the company is that it possesses only the powers conferred upon it by its Memorandum of Association which is the charter of the company.
  • It is also important to pick the right name, complete the registration process, and get the tax documents and essential permits.
  • Share is always Transferable although the right to transfer is 15 more or less restricted.
  • It was held that since both the decision-making bodies, the Board of directors and the general body of shareholders were controlled by Germans, the company was a German company and hence an enemy company.

The advantages of starting a business include diversification of profits, a positive connection between effort and reward, independence of production, and versatility. The drawbacks of starting a company include increased financial burden, increased legal liability, long working hours, employee and administrative personnel responsibilities, and legislation and tax issues. The advantages of incorporation are allowed to be enjoyed only by those who want to make an honest use of the ‘company’. In case of a dishonest and fraudulent use of the facility of incorporation, the law lifts the corporate veil and identifies the persons who are behind the scene and are responsible for the perpetration of fraud. To investigate the affairs where it is formed for fraudulent purposes, to defeat the true work and nature of company and circumvent the law or to defraud its creditors or to avoid valid obligations.

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Similarly, a member of a company cannot sue in respect of torts committed against the company, nor can he be sued for torts committed by the company. [British Thomson-Houston Company v. Sterling Accessories Ltd., 2 Ch. Therefore, the company as a legal person can take action to enforce its legal rights or be sued for breach of its legal duties.

company meaning definition

Ltd.’ at the end of a company’s name makes it possible to identify it as a private company. A company is a legal entity that is often referred to as an artificial being. It does not take birth as a normal being but is created by statute. A company, on the other hand, has all the privileges of a normal individual. It has the authority to enter into contracts and to own assets.

Features of a Company:

Similarly, the company may bring an action against anyone in its own name. However, a person duly authorized to execute documents pursuant to a power of attorney granted in his favour under the common seal of the company may execute such documents and it is not necessary for the common seal to be affixed to such documents. The concept of ‘Company’ or ‘Corporation’ in business is not new but was dealt with, in 4th century BC itself during ‘Arthashastra’ days. The nature of company got revamped over a period according to the needs of business dynamics.

However, section -3 of the companies Act, 2013 allows formation of one person Company also. A shareholder can transfer his shares to any person without the consent of other members. Articles of association, even of a public company can put certain restrictions on the transfer of shares but it cannot altogether stop it. A company must be incorporated or registered under the Companies Act. Minimum number of members required for this purpose is seven in the case of a ‘public company’ and two in the case of a ‘private company’. The number of members that a corporation can have is governed by several regulations.

Only if they refuse to buy within the stipulated period that they can be sold to the outsiders. Ltd. [ ] All ER 33 , Salomon was a prosperous leather merchant. He converted his business into a Limited Company— Salomon & Co. The company so formed consisted of Salomon, his wife and five of his children as members.

In case of companies limited by guarantee, the liability of each member shall be determined by the guarantee amount, i.e., he shall be liable to contribute up to the amount guaranteed by him. A) Lord Justice Lindley – A Company is an association of many person who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising the form. The common stock so contributed is denoted in money and is capital of the Company.

Seller of a piece of land sought to evade specific performance of a contract for the sale of the land by conveying the land to a company which he formed for the purpose. Initially the company was formed by third parties, and the vendor purchased the whole of its shares from them, had the shares registered in the name of himself and a nominee, and had himself and the nominee appointed directors. It was held that the company was formed by the assessee purely and simply as a means of avoiding tax and company was nothing more than assessee himself. It did no business, but was created simply as a legal entity to ostensibly receive the dividends and interest and to hand them over to the assessee as pretended loans. Mrs. Guzdar received certain amounts as dividend in respect of shares held by her in a tea company.

Lord Justice Lindley has defined a company as “an association of many persons 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 there from. A company, being a legal entity different from its members, can enter into contracts for the conduct of the business in its own name. A shareholder cannot enforce a contract made by his company; he is neither a party to the contract nor be entitled to the benefit derived from of it, as a company is not a trustee for its shareholders. An incorporated company never dies, except when it is wound up as per law.

Only a Section 8 company can be formed with no profit motive. Likewise, a shareholder cannot be sued on contracts made by his company. The distinction between a company and its members is not confined to the rules of privity but permeates the whole law of contract. Seal of company when to be used – The articles of association of the company provide for putting the seal of the company on documents. The shares are said to be a movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. When the joint-stock companies were established, the object was that their shares should be capable of being easily transferred, [In Re.

A member of such a corporation is liable for the company’s debts in relation to his stake in it. After passing a special resolution for conversion and applying to the Registrar of Companies for enrollment as a limited partnership, such a company may be turned into a limited liability company. A shareholder has the right to transfer his shares to others without the permission of the other shareholders.

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