MBA Distance Learning Education

Q: Define a Company ?
Ans: The Companies Act,1956 defines the word ‘Company’ as a company formed and registered under the Act or an existing company formed and registered under any of the previous company laws. This definition does not bring out the meaning and nature of the company into a clear perspective..

Q: What are the different types of Companies?
Ans: Companies can be distinguished on the following basis:-

1. On the basis of liability:- On the basis of liability, companies are of three types:
(i) Companies limited by shares :- In these companies, liability of members is limited to the extent of unpaid on the shares held by them.
(ii) Companies limited by guarantee :- In these companies, liability of members is limited to the amount undertaken by members to contribute to the assets of the company in the event of winding up.
(iii) Unlimited companies :- In these companies, the liability of members is unlimited.

2. On the basis of formation:- On the basis of formation, companies are of two types:
(i) Private Company :- A private company is a company which:
(a) Does not invite public to subscribe to its shares and debentures.
(b) Does not invite persons other than its members, directors or their relatives to subscribe to its shares and debentures.
(c) Have minimum two and maximum fifty members.
(d) Restricts the rights of its members to transfer shares.

(ii) Public company :- A public company is a company which :
(a) is not a private company
(b) have a minimum paid up capital of Rs.500000.
(c) is a private company which is subsidiary of a company which is not a private company.


Q: What are the features of a Company?
Ans: A company have following features :-

1. Incorporated association :- A company must be incorporated or registered under the Companies Act. An association of more than 10 persons, in case of banking business and 20 in case of any other business, if not registered as accompany under the Companies Act, or under any other law for the time being in force, becomes an illegal association.

2. Artificial person : - Since a company is not a human being, it is called artificial and since it is clothed with certain rights and obligations, it is called a person. So, a company is an artificial person.

3. Separate Legal Entity :- A company is a distinct legal entity separate from its owners or members i.e., the members cannot be held liable for the acts of the company.

4. Limited Liability :- The liability of members of a company is usually limited except in case of an Unlimited company. In case of a company limited by shares, the liability of members is limited to the amount unpaid on their shares. And in case of a company limited by guarantee, the liability of members is limited to amount of guarantee.

5. Separate Property :- The shareholders of a company are not the part owners of the undertaking, in the eyes of law. A share holder is only given certain rights by law, like, to vote, to attend meetings, to receive dividend, etc. The shareholder cannot claim himself as the part owner of company’s property during its existence or at the time of winding of.

6. Transferability of Shares :- The shares of a company are easily transferable in the manner provided in the Articles of Association, except in case of a Private company were there are certain restrictions imposed on transfer of shares.

7. Common Seal :- A company being a artificial person does not have a body of natural being. Therefore, it has to work through its directors, officers and other employees. But, it can be held bound by only those documents which bear its signature. Common seal is the official signature of a company.

8. Perpetual Existence :- A company being a artificial person cannot be affected by illness ant it does have an allotted span of life. The death, insolvency or retirement of its members has no impact on the company. Members may come and go but the company can go forever.