Company Law

Krati Rajoria

Meaning
Under section 2(20) : Company is
defined as a company incorporated
under this Act or under any previous
Company law.

Under Companies Act

2(11) body corporate or corporation
includes a company incorporated outside
India, but does not include
(i) a co-operative society registered under
any law relating to co-operative societies;
and
(ii) any other body corporate (not being a
company as defined in this Act), which the
Central Government may, by notification,
specify in this behalf;

 A
legal
entity
(such
as
an
association,
company,
person,
government, government agency, or
institution) identified by a particular
name.
Also
called
corporation,
corporate body or corporate entity.

Theories
1.
2.
3.
4.
5.

Fiction theory
Realist theory
Bracket (symbolistic) theory
Concession theory
Purpose theory

Characteristics
1. Corporate personality
2. Limited liability
3. Perpetual succession
4. Separate property
5. Transferability of shares
6. Common seal
7. Capacity to sue and be sued
8. Contractual rights
9. Limitation of action
10.Separate management
11.Voluntary association for profit
12.Termination of existence

Disadvantages

Formalities and expenses

Corporate disclosures
Separation of control from ownership
Greater social responsibility
Greater tax burden in certain cases
Detailed winding up procedure

Difference between a company and

partnership
Formation: A company is created by
registration under the Companies
Act. A partnership is created by
agreement which may be express or
implied from the conduct of the
partners and is subject to the Indian
Contract
Act
and
the
Indian
Partnership Act. No special form is
required
,
though
partnerships
articles are usually written.

 Status AtLaw:A company is an artificial

legal person with perpetual succession.
Thus a company may have property ,
make contracts and sue and be sued. It is
an entity distinct from its members. A
partnership is not a legal entity though it
may sue and be sued in the firms name.
Thus the partners own the property of the
firm and are liable for the contracts of the
firm jointly as well as severally.

 Transfer Of Shares: Shares in a

company are freely transferable
unless the companys constitution
otherwise provides; restrictions may ,
of course , appear in the articles of a
private company. A partner can
transfer his shares in the firm , but
the assignee does not thereby
become a partner and is merely
entitled to the assigning partners

 Number Of Members: A private company must

have at least two members (now one) and
maximum 50 members (now 200). A partnership
cannot consist of more than 20 persons (10
persons in case of banking business).
Management: Members of a company are not
entitled to take part in the management of the
company unless they become directors. Partners
are entitled to share in the management of the
firm unless the articles provide otherwise.

 Agency: A member of a company is not

an agent of the company or that of other
members , and he cannot bind a company
by his acts. Each partner is an agent of
the firm and his partners, and may bind
the firm by his acts.
Liability Of Members: The liability of a
member of a company may be limited by
shares or by guarantee. The liability of a
partner is unlimited.

 Powers: The affairs of a company are closely

controlled by the Companies Act, 2013 and
the company can only operate within the
objects laid down in the memorandum of
association, though these can be altered to
some extent by special resolution. Partners
may carry on any business as they please so
long as it is not illegal and make whatever
arrangements they wish with regard to the
running of the firm from time to time.

 Termination: No one member of a company

can wind up the company, and the death,
bankruptcy or insanity of a member does not
mean that the company must be wound up.
A partnership may be dissolved by any
partner at any time unless the partnership is
entered into for a fixed period of time. A
partnership is also dissolved by the death or
bankruptcy of a partner.

Difference between a Company

and a Hindu Joint Family
Kinds of members: company consists of
heterogeneous members whereas a HJF
consists of homogeneous members.
Criteria
for
membership:
a
person
becomes a member in a joint family
business by virtue of birth but not in a
company.
Authority: in a HJF Karta is the sole
authority to contract, etc but the
coparceners cannot do so.