THE COMPANY ACT 1956

Submitted to:- J.J Maini HOD of Mgt

Submitted by:- Aditi garg 802

COMPANY
A Company is a voluntary association of

persons formed for the purpose of doing business, having a distinct name and limited liability. A Company is an artificial legal person, having a separate legal entity , with a perpetual succession, a common seal, a common capital comprised of transferable shares and carrying limited liability.

CHARACTERISTICS OF A COMPANY
1 SEPERATE LEGAL ENTITY 2.SEPARATE PROPERTY 3.PERPETUAL EXISTENCE 4.COMMON SEAL 5.LIMITED LIABILITY 6.CAPACITY TO SUE 7.TRANSFERABILITY OF SHARE

Separate legal entity

A company is an separate legal entity means it

is different from its members. It works as a individual body. It can make contracts, open a bank account, can sue and be sued by others. The law has recognised that even if a person holds virtually all the shares, the right and obligations of the company shall be different from its members.

Separate property
A company is a distinct legal entity. The companys property is its own. A member cannot claim to be owner of the company's property during the existence of the company

Perpetual existence [sec 34(2)]

Section 34(2) of the act states that an

incorporated company has perpetual life. The life of the company is not related to the life of the members . Law create the company and law alone can dissolve it. The existence of the company is not affected by death, insolvency, retirement or transfer of share of members.

Limited liability
It means that the liability of a member shall be

limited to the value of the share held by him, he cannot be called upon to bear the loss from his personal property. A member (share holder) cannot be made liable once the member has paid all their dues towards the shares held by him in the company.

Common seal
A company being an artificial person can not

work as a natural being. Therefore, it has to work through its directors, officers and other employees. Common seal used as a official signature of a company.

Transferability of share sec(82)

The share of a company are freely transferable.

The shareholder can transfer his share to any person without the consent of other members. A company cannot impose absolute restrictions on the rights of member to transfer their shares

Capacity to sue and be sued

When a company incorporated it acquire a

separate and independent legal personality. As a legal person it can be sue and be sued in its own name.

Distinctions between a Partnership firm and a Company.

(1)Registration A company comes into existence only after its registration under the Companies Act, 1956. In case of partnership, the registration is not compulsory. (2)Legal Status A company is a legal person and regarded by law as a single person. A partnership is a collection of individual. (3) Minimum number of persons The minimum number of persons required to form a company is two in case of private companies and seven in the case of public companies. The minimum number of persons required to form a partnership is two.

(4) Maximum number of persons A public company may have any number of members. In case of a private company the maximum number cannot be more than fifty. In trading partnership the maximum number of partners is twenty, in a banking business, the maximum number if ten. (5) Transferability A shareholder can transfer his share without the consent of other shareholders. In case of partnership, a partner cannot transfer his share without the consent of other partners. (6) Liability of members The liability of the members of a company is limited whereas liability of partners for debts of a firm is unlimited. (7) Length of existence The death or retirement of a partner dissolves the partnership. But company having legal existence can continue in spite of death and insolvency of the members. It has a perpetual existence.

(8) Authority of members Management of a company vests in the hands of a few directors elected from amongst and by the shareholders. A shareholder has no say in the management. Whereas in the case of partnership all partners are entitled to share in the management of a firm. A partner is an agent of the firm and can bind it by his acts. (9)Distribution-of-Profits Profits of a firm are distributed in agreed proportion or equally in absence of agreement among the partners but profits in case of a company can be distributed according to the provision of the articles by the directors. (10)Audit Audit in case of company is compulsory but in case of partnership firm it is not compulsory.