COMPANY: It refers to a company which has been formed and registered under companies Act 2013 or an existing company which has been formed under any previous Companies Act.
FEATURES OF A COMPANY
REGISTRATION: To get the status of the company, the entity has to get itself compulsorily registered under the Companies Act 2013.
ARTIFICIAL LEGAL PERSON: A company gets the status of artificial legal person in the eyes of law and therefore can only be dissolved by the action of law. It is an intangible and invisible entity which only exists in the eyes of law. A company enjoys many rights that of a natural person. It can also enter into contracts, acquire and dispose of properties under its own name as well as it can also be defined as per the provisions of law for any violations thereof.
INDEPENDENT CORPORATE PERSONALITY: A company, after incorporation, is a separate person who is a distinct legal personality. By incorporation under the Companies Act, 1956 the company is vested with a corporate personality which is independent of and different from the members who compose it.
LIMITED LIABILITY: The one advantage that these corporations get from incorporation is the limitation of its liability. As per the company law, because a company is different from its members and directors and has its own very existence because it can own Assets and owe the liabilities in its own name, the members of the company cannot be bound by any amount more than the nominal value of the shares which they are held by them. Their Liability (members) will not exceed that of the face value of shares even if the company itself owes crores of money to its creditors.
PERPETUAL SUCCESSION: An incorporated company never dies like a natural person. It is a legal entity having perpetual succession. The insolvency or death of members does not affect the continued existence of the company. In spite of a total change in the members of the company, the company will remain the same entity. Members might come and members might go but the company continues to go on forever.
SEPARATE PROPERTY: When a company gets incorporated, the company gets its legal separate person from its owners whereby it can own capital and assets in its name. This way, the company becomes capable of holding property in its own name.
TRANSFER OF SHARES: It has been stated in the Companies Act, 2013 that the interest of any member in a company shall be movable or Transferable as per the AOA (articles of association). A shareholder may transfer his shares in the open market (in case the company is listed in stock exchange) and can get his money that was invested without changing the company’s capital.
COMMON SEAL: Because a company is not a natural person, it cannot sign its own documents. To resolve this, the law has provided for a common seal in the name of the company as a substitute company signature. A company will be bound by the documents which will have the common seal of the company. However, it should be noted that not just any director can affix the common seal.
CORPORATE VEIL: Even though a company is separate from its shareholders, but in substance, it is an association of persons who enjoy the benefits of the properties of the corporate. Thus, a company creates a veil between members & the company.
DISTINCTION BETWEEN A COMPANY AND PARTNERSHIP
A company is different from a partnership in the following ways:
REGISTRATION
While it is compulsory to get a company incorporated under the Companies Act, it is not mandatory for a partnership to get registered under Indian Partnership Act 1932.
NUMBER OF MEMBERS/PARTNERS
There has been a limit which has been prescribed for minimum as well as maximum number of members or partners as the case may be, which are required for a company and partnerships to get itself Incorporated:
Minimum number of members/partners:
- For private company: 2
- For public company: 7
- For partnership firm: 2
Maximum number of members/partners:
- For private company: 50
- For public company: No limit
- For partnership firm:
– in case of banking business: 10
– in case of any other business: 10
LEGAL STATUS
As already mentioned earlier, a company has a separate legal existence from its members and is viewed as a separate legal person this is not the case in case of a firm i.e partnership firm is not separate from its partners.
OWNERSHIP OF PROPERTY
A company can own property in its own name and not in the name of members which are separate persons. In case of a partnership firm, partners together own the property of the firm not the form itself because it does not have any separate legal existence to own such property.
MANAGEMENT
Board of directors who are elected by the shareholders manages the company while in case of a partnership firm, partners manage the firm (excluding dormant and sleeping partners).
PERPETUAL EXISTENCE
A company continues to exist irrespective of the existence of its members. They may go and keep on changing but the company remains unless it gets dissolved by the order of law. Because partnership is not separate from its partners, partnership or not enjoy the benefit of perpetual existence.
CONTRACTS
The members of the company can enter into contracts with the company but a partner cannot do the same with the partnership firm in which he or she is a member.
LIABILITY
The liability of the members of a company is limited, accepting the case of a company which has unlimited liability. And in case of partnerships, the liability of all the partners is unlimited.
TRANSFER
In case of a company, the transferee of shares becomes the members of the company after getting the shares in his name and there is no consent required from all the members to allow him/her to become the member in the company.
Unlike companies, if a person wants to become a partner in a partnership form, he or she has to obtain the prior-consent of all the partners.
DEATH
In case all or any of the members of the company dies, it doesn’t affect the existence of the company. The company continues to exist. In case a partner dies, it leads to dissolution of a partnership unless otherwise provided in the deed of partnership.
AGENCY
The company members cannot act as agents of the company, or a company cannot act as agent of its members. They are separate entities and have separate existence. While every partner of a firm is an agent of one another.