Corp Law Simplified

In the world of business and corporate governance, the term Company is fundamental. But what does it really mean in legal terms? This blog post unpacks the basic concept of a company under the Indian Companies Act, 2013. 

What is a Company?

In simple terms, Company is a legal entity formed and registered under the Companies Act. While the company may consist of individuals, such as directors, shareholders and employees, the company itself is treated as a separate person in the eyes of law. This separation gives company its own rights, duties and liabilities distinct from those of its members. 

Legal definition of a Company

Section 2(20) of Companies Act, 2013, defines a company as “a company incorporated under this Act or under any previous Company law.”

A company does not come into existence automatically. It is formally born by incorporation and registration under the law, which enables it to gain a legal personality. 

Key characteristics of a Company 

Understanding various features of a company helps in clarifying its unique position as a business structure. 

1. Separate Legal entity – A company is independent of individuals who run it. A company has its own rights and liabilities, which may be separate from its members or shareholders.  It can own assets, incur liabilities, sue and be sued in its own name.  
2. Limited Liability – Members of a company are liable only up to the amount they have invested or guaranteed in the company. Their personal assets are protected , even if the company fails, unless there is fraud or misconduct. 
3. Perpetual succession – The death, insolvency or departure of any member does not affect the company’s existence. It continues until a company is formally wound up. 
4. Artificial legal Person – A company is an artificial person created by law. While it lacks physical form, it can enter contracts, own property and be held legally accountable.  
5. Separate ownership and management – Shareholders own the company, but it day to day operations is managed by the directors.  This division supports accountability and governance. 

Conclusion 

 The concept of company is central to corporate law and modern business practices. As a separate legal entity, it offers continuity, limited liability and legal independence. These attributes make a Company, an ideal structure for business enterprise.