MEANING AND FEATURES OF COMPANY

MEANING OF CO COMPANY

NO STRICT OR TECHNICAL OR LEGAL MEANING. A COMPANY IN THE NORMAL SENSE MEANS AN ASSOCIATION OF PERSONS UNITED FOR A COMMON OBJECT.

AN INCORPORATED COMPANY OR A CORPORATION IS A SINGLE PERSON DIFFERENT FROM THE INDIVIDUALS CONSTITUTING IT. CO IS A CORPORATE BODY AND LEGAL PERSON HAVING STATUS AND PERSONALITY DIFFERENT FROM ITS MEMBERS.

DEFINITION

SEC 2(20 ) OF THE COMPANIES ACT PROVIDES THAT” COMPANY MEANS A COMPANY INCORPORATED UNDER THIS ACT OR UNDER ANY PREVIOUS COMPANY LAW

LORD JUSTICE LINDLEY HAS GIVEN COMPREHENSIVE DEFINITION:-A COMPANY IS AN ASSOCIATION OF MANY PERSONS

WHO CONTRIBUTED MONEY OR MONEY’S WORTH

TO A COMMON STOCK AND EMPLOYED FOR A COMMON PURPOSE

THE COMMON STOCK SO CONTRIBUTED IS DENOTED IN MONEY AND IS CAPITAL OF THE COMPANY

THE PERSONS WHO CONTRIBUTE IT OR TO WHOM IT BELONGS ARE MEMBERS

THE PROPORTION OF CAPITAL TO WHICH EACH MEMBER IS ENTITLED TO HIS SHARE

SHARES ARE ALWAYS TRANSFERABLE ALTHOUGH THE RIGHT TO TRANSFER IS MORE OR LESS RESTRICTED

FEATURES OF A COMPANY

Ø  INCORPORATED ASSOCIATION: THE COMPANY COMES INTO EXISTENCE

Ø  SEPARATE LEGAL ENTITY:-INDEPENDENT CORPORATE EXISTENCE

Ø  THE LEADING CASE:- SALOMAN V SALOMAN AND CO LTD(1897)

Ø  SALOMAN HAD A BOOT BUSINESS. HE SOLD HIS BUSINESS TO A COMPANY NAMED SALOMAN & COMPANY LTD WHICH HE FORMED

Ø  WERE SEVEN MEMBERS-HIS WIFE,DAUGHTER AND FOUR PERSONS TOOK ONE SHARE EACH AND SALOMON 20000 SHARES OF ONE UK POUND

o    SALOMAN V SALOMAN AND CO LTD

Ø  HE PURCHASED CONSIDERATION WAS UK 39,000 AND WAS DISCHARGED IN THE FOLLOWING MANNER:-

Ø  9000 UK POUND IN CASH

Ø  FULLY PAID 20,000 SHARES OF ONE UK POUND

Ø  SECURED DEBENTURES ISSUED TO SALOMAON 10000 UK POUND

o    COMPANY WOUND UP DUE TO STRIKE

Ø  LEFT AMOUNT WAS 1055 UK POUND

Ø  LIABILITIES WERE 17,773 UK POUND INCLUDING 10,000 SECURED DEB OF SALOMAN AND UNSECURE LIABILITIES 7773 UK POUND

Ø  IMPLICATION OF SEPARATE PERSONALITY

Ø  MEMBERS HAVE NO INSURABLE INTEREST IN THE PROPERTY OF THE COMPANY

Ø  COMPANY CONTINUE TO EXIST EVEN WHEN THE MEMBERS DIE

Ø  NATIONALITY OF THE COMPANY DOES NOT DEPEND UPON THE NATIONALITY OF THE MEMBER

Ø  THE COMPANY CAN SUE AND BE SUED IN ITS OWN NAME

Ø  LIMITED LIABILITY:-YOU HAVE TO PAY AS MUCH YOU AGREED TO PAY

Ø  UNLIMITED LIABILITY OF THE MEMBERS FALL BELOW STATUTORY NUMBER IN CASE OF PRIVATE LIMITED IT IS BELOW 2  AND IN CASE OF PUBLIC LIMITED IT IS BELOW 7

Ø  PERSON SIGNS BILL OF EXCHANGE/CHEQUE WITHOUT DISCLOSING THE CONTRACT IS FOR /BEHALF OF THE COMPANY ALSO INCUR PERSONAL LIABILITY

Ø  SEPARATE PROPERTY: MACAURA V NORTHERN ASSURANCE CO LTD

Ø  M WAS HOLDER OF NEARLY ALL THE SHARES EXCEPT ONE OF TIMBER COMPANY. HE WAS ALSO A SUBSTANTIAL CREDITOR OF THE COMPANY. HE INSURED THE CO’S TIMBER IN HIS OWN NAME. TIMBER WAS DESTROYED AND M CLAIMED THE LOSS

Ø  X IV  CAPACITY TO SUE AND BE SUED

Ø  XV  PERPETUAL SUCCESSION

Ø  TRANSFER ABILITY OF SHARES

Ø  COMMON SEAL:- SIGNATURE W.E.F THE WORD COMMON SEAL HAVE BEEN OMITTED. NOW IT IS OPTIONAL AND NO MORE MANDATORY. IF THE COMPANY DOES NOT HAVE COMMON SEAL THE DOCUMENT SHOULD BE SIGNED BY TWO DIRECTOR OR BY ONE DIRECTOR AND COMPANY SECRETARY

Ø  WHICH DOCUMENTS REQUIRE COMMON SEAL:- POWER OF ATTORNEY,SHARE CERTIFICATE,SHARE WARRANT ETC

MERITS

        I.            ARTIFICIAL LEGAL PERSON

      II.            LIMITED LIABILITY

    III.            PERPETUAL SUCCESSION

    IV.            TRANSFER ABILITY OF SHARES

      V.            INFINITE MEMBERS AND UNLIMITED RESOURCES

    VI.            EASE IN CONTROL AND MGMT

  VII.            SEPARATE PROPERTY

DISADVANTAGES

        I.            TOO MUCH FORMALITY

      II.            CORPORATE DISCLOSURE

    III.            DIVORCE BETWEEN OWNERSHIP AND MGMT

    IV.            DETAILED WINDING UP PROCEDURE

      V.            MORE TAX