Definition of Company | Company Law - CLAT PG PDF Download

Definition of Company

• In a legal context, a company is a group of individuals, both natural and artificial, who come together and are recognized as a legal entity under the laws of a country. According to the Companies Act of 2013 in India, a company refers to an organization formed under this Act or any previous company legislation.
• Common law views a company as a separate "legal person" or "legal entity" that exists independently of its members and can continue to exist beyond their lifespans. Even a non-profit association can be considered a company if it obtains a license under Section 8(1) of the Companies Act.
• A company is more than just a legal structure; it serves as a tool for achieving social and economic objectives. It is a complex institution with political, social, economic, and legal dimensions. Essentially, a company is a means of organizing and cooperating in business activities.
• Lord Justice Lindley described a company as a group of individuals who contribute money or assets to a common fund and use it for business purposes, sharing the profits and losses. The capital contributed is the company's stock, and the individuals involved are its members, each entitled to a share of the capital. Shares can be transferred, although there may be restrictions on this.
• From this, it is clear that a company has its own legal identity, separate from its members. Below are some key attributes that explain the nature and characteristics of a company as a corporate entity.

Key Attributes of a Company

• Separate Legal Entity: A company is a distinct legal entity, separate from its members. This means it can own property, incur debts, and enter into contracts in its own name.
• Limited Liability: The liability of members is limited to the amount unpaid on their shares. This protects personal assets from the company's debts.
• Perpetual Succession: A company continues to exist regardless of changes in its membership. This ensures stability and continuity.
• Capacity to Sue and Be Sued: A company can initiate legal proceedings and can also be sued in its own name.
• Internal Governance: The company's internal affairs are governed by its Articles of Association, which outline rules for management and decision-making.
• Share Capital: Companies raise capital by issuing shares, which represent ownership in the company. Shares can be transferred, subject to any restrictions.
• Regulatory Compliance: Companies must comply with legal and regulatory requirements, including filing annual returns and financial statements.