ARTIFICIAL PERSON<\/strong><\/p>\n\n\n\nIt is an artificial person in the eyes of the law which is created through the process provided in the Companies Act 2013 or any other previous Act. It is not considered as natural like human being.<\/p>\n\n\n\n
SEPARATE LEGAL ENTITY<\/strong><\/p>\n\n\n\nThe joint stock company has its separate legal entity from its members. It has its own existence in the eyes of the law. As a separate entity it can<\/p>\n\n\n\n
- Enter into contracts with other parties in its own name.<\/li>
- Sue others and be sued by others.<\/li>
- Sell or purchase property in its own name.<\/li><\/ul>\n\n\n\n
The company work independently of its members. It is not bound by the acts of its members.<\/p>\n\n\n\n
PERPETUAL SUCCESSION<\/strong><\/p>\n\n\n\nThe company is a separate legal entity. Thus it enjoys the perpetual succession which means it remains unaffected by the death, insolvency and lunacy of the stakeholders. The company comes into the existence only by the act of law and may end only by law. It is rightly said:<\/p>\n\n\n\n
\u201cMEMBERS MAY COME, MEMBERS MAY GO<\/em><\/strong><\/p>\n\n\n\nTHE COMPANY GOES ON FOREVER\u201d<\/em><\/strong><\/p>\n\n\n\nTRANSFERABILITY OF SHARES<\/strong><\/p>\n\n\n\nThe members of the companies enjoy the distinct feature of Transferability of shares. Any member is free to transfer their share of interest without any permission. However, by mentioning in the Articles of Association, the companies can put some restrictions or conditions but transfer of shares cannot be stopped at all.<\/p>\n\n\n\n
LIMITED LIABILITY<\/strong><\/p>\n\n\n\nIn case of companies, the liability of the members is limited upto the amount of unpaid value of shares. The companies may be:<\/p>\n\n\n\n
- Limited by guarantee<\/li>
- Limited by the shares<\/li><\/ul>\n\n\n\n
In case of companies limited by guarantee, the shareholders have to pay only that amount which is guaranteed by them in the Memorandum of Association.<\/p>\n\n\n\n
In case of companies limited by shares, the liability of shareholders is only upto the amount of unpaid value of shares.<\/p>\n\n\n\n
There is also a kind of Unlimited Companies, but these are not prevalent in India. <\/p>\n\n\n\n
COMMON SEAL<\/strong><\/p>\n\n\n\nA company is an artificial person. It cannot be considered as natural like human being. But the company has the right and the power to enter into the contracts. The companies can do so by having its common seal. The common seal is a stamp with the name of the company engraved on it. The seal of the company is affixed on the documents which require the approval. The two directors must witness the affixation of the seal.<\/p>\n\n\n\n
According to the Companies (Amendment) Act, 2015, the use of the common seal is made optional.<\/p>\n\n\n\n
SEPARATION OF OWNERSHIP AND MANAGEMENT<\/strong><\/p>\n\n\n\nThe ownership and management of the companies are in different hands. The shareholders are the owners of the companies. But they are scattered worldwide, that is why they appoint their representatives to manage the work of the companies. These elected representatives are known as the Board of Directors.<\/p>\n\n\n\n
GOVERNING ACT<\/strong><\/p>\n\n\n\nThe company form of business is governed under the Companies Act 2013 or under any previous Act.<\/p>\n\n\n\n
REGISTRATION<\/strong><\/p>\n\n\n\nThe registration is compulsory in all the cases under the Companies Act 2013. The companies must get the Certificate of Incorporation and Certificate of Commencement to start its business. <\/p>\n\n\n\n
PUBLICATION OF ACCOUNTS<\/strong><\/p>\n\n\n\nThe publication of accounts for the companies is compulsory. The company has to file its annual statements with the Registrar of Companies at the end of the financial year. The annual statements are to be inspected by the Registrar.<\/p>\n\n\n\n\n\n\n\n
\u201cA company is an artificial person, created by law with a perpetual succession and a common seal.\u201d<\/h2>\n\n\n\n
L H Haney has defined the company as an artificial person, created by the law with a perpetual succession and the common seal.<\/p>\n\n\n\n
This definition of company given by Prof. Haney is the most scientific and appropriate one.<\/p>\n\n\n\n
Company as an artificial person: <\/strong>Company is an artificial person created by the law. It is called an \u2018artificial person\u2019 because its birth is not a natural birth. It is invisible, intangible and immortal artificial person that has an identity only in the eyes of the law. It has no body, no soul and suffers no pain and enjoy no personally appearance in a court of the law. It cannot get married or become a professional like a doctor or a lawyer. <\/p>\n\n\n\nBut it cannot be treated as a fictional person’ or a ‘fictitious entity’ because it really does exist. Like a natural person, a company can buy and sell properties, make agreements or enter into contracts and employ people on its payroll. It can also be penalised if it does not abide by law. In other words, it can be said that a company, though lifeless, enjoys the privileges of a living person.<\/p>\n\n\n\n
Created by law: <\/strong>A company is established by law, and can exist till such time as it is recognised by law. Under the Companies Act, it is necessary for a company that is formed to be registered, i.e., it needs to be incorporated. Any association or institution which is established with the objective of earning a profit, and which has more than 10 members in the case of banking and 20 members in case of any other business activity needs, by law, to be registered. A legally established company has a corporate personality, conducts transactions in its own name, has its own seal, and its assets are separate from those of its members. <\/p>\n\n\n\nTherefore, it can own property, incur debts, borrow money, have bank accounts, hire people, enter into different contracts, and sue or be sued in the same manner as individuals. Its members are its owners, but they can also be its creditors. Shareholders cannot be liable for the company\u2019s actions even if they hold nearly all of the share capital. Shareholders are not the company\u2019s agents and therefore cannot bind the company by their actions.<\/p>\n\n\n\n
The company does not hold its assets as an agent or fiduciary for its members, and they cannot exercise their rights or be sued for accountability. Therefore, \u2018incorporation\u2019 is the act of establishing a legal entity as a juristic person. Juristic persons are defined by law; they have obligations and other actions under the law. In other words, a company is like a natural person but can only carry out its actions within the law through a designated person.<\/p>\n\n\n\n
Perpetual Succession: <\/strong>A company can end by winding up, and other factors like the death of a person or retirement will not affect the company\u2019s existence. Perpetual Succession means that the membership of the company may change from time to time, but this does not affect its continuity. A company\u2019s membership may change because a shareholder has sold\/transferred his shares to another person, or his shares are transferred to his legal representative after his death, or because he has lost his ceases to be a member under some other provisions of the Companies Act. <\/p>\n\n\n\nThus, perpetual succession refers to the ability of a company to maintain its existence through the succession of new individuals who step into the shoes of those who cease to be members of the company. An example could be that, during the war, all members of a private company were bombed at a shareholder\u2019s meeting, but the company survived. All this will not affect the company\u2019s existence.<\/p>\n\n\n\n
Common Seal: <\/strong>A company is an artificial person and, as such, it cannot put its signature on documents. That is why it is mandatory under law that every company must have a common seal with its name engraved upon it. The common seal is the symbol of the company’s identity and is as good as a signature. Common seal means the metallic seal of a company which can be affixed only with the approval of the Board of directors of the company. It is the signature of the company to any document on which it is affixed and binds the company for all obligations undertaken in the document.<\/p>\n\n\n\nWhen company puts its seal on a document, the company becomes bound by the contents of the document. On the other hand, a document written on behalf of the company but not bearing the company’s common seal is not binding on the company. The person or persons who have signed such document will be personally held responsible for it.<\/p>\n\n\n\n
A company shall have only one common seal. The Act provides that from the date of incorporation mentioned in the certificate of incorporation, the company shall have a common seal. The Articles of Association provides the procedure relating to affixing of common seal.<\/p>\n\n\n\n
As per the companies (Amendment) Act, 2015, now for a company to have a common seal is not mandatory.<\/p>\n\n\n\n
Conclusion: <\/strong>The given statement is the essence of the company as a voluntary organisation. Company comes into existence by registration and enjoys the status of separate legal entity and conducts all its operations by using the common seal. The company enjoys the perpetual succession also. In the company, members may come, members may go but company goes on forever.<\/p>\n\n\n\n
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