Company: Definition & Its Characteristics

A company is a legal entity formed by a group of individuals to engage in and operate a business-commercial or industrial-enterprise. A company may be organised in various ways  for tax and financial liability purposes depending upon the corporate law of its jurisdiction.

It is an association of both natural and artificial persons incorporated under the existing laws of the country. It has a separate legal entity from the persons constituting it.

Following are the characteristics of a company:-

• It bears its own name, acts under name, has a seal of its own and its assets are separate and distinct from those of its members. A corporate personality in fact, stated by the law that a company is recognized as a legal entity distinct from its members. A company with such personality is an independent legal existence separate from its shareholders, directors, officers and creators. The entity acts like a natural person but only through a designated person, whose acts are processed within the ambit of law [Shiromani Gurudwara Prabandhak Committee v. Shri Sam Nath Dass AIR 2000 SCW 139].
• It is considered as a legal person which an enter into a contracts, possess properties in its own name, sue and can be sued by others etc. This means that a company is treated as a separate person from its participants. It is owned by at least one shareholder and managed by at least one director.
• A company is not a citizen under the Citizenship Act, 1955 or the Constitution of India. As per the definition of 'person' as given in section 2(1)(f) of the Citizenship Act,1955, a 'person' does not include any company or association or body of individuals, whether incorporated or not. As per part 2 of the Constitution (Article 5 to 11), it can be clearly noticed that the Constitution talks about the grant of Citizenship only to the persons (that is natural persons). There is no grant of citizenship to any company or body of association (i.e juristic association).
• It is established through judicial decisions that a company can not be a citizen, yet it has nationality, domicile and residence. The nationality of a company depends on the country where it is incorporated and registered under the laws. All companies incorporated under India have Indian nationality. Resident status of a company is decided under the Income Tax Act for assessment of income and determination of tax purposes.
• The company being a separate person, is the owner of its assets and bound by its liabilities. The liability of a member as a shareholder, extends to the contribution to the company upto the nominal value of the share hold by him and not paid by him. It is a legal status where a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in the company or partnership. If a company with a limited liability is sued, then the claimants are suing the company, not its owners or investors.
• A company, being a separate legal entity is unaffected by death or departure of any member and it remains the same entity, despite total change in the membership.
• A company being a legal person and entirely distinct from its members, is capable of owning, enjoying and disposing of property in its own name. The company is the real person person in which all its property is vested, and by which it is controlled, managed and disposed off. Although its capital and assets are contributed by its shareholders, they are not the private or joint owners of the property.
• The shares are said to be movable property and is subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company.
• A company being a body corporate, can sue and be sued in its own name.
• A company, being a legal entity different from its members, can enter into contracts for the conduct of the business in its own name.
• A company can not go beyond the power, stated in  its MoA. It regulates the powers and fixes the objects of the company and provides the edifice upon which the entire structure of the company rests.
• The company is administered and managed by its managerial personnel.
• A company is voluntary association of profit.
• A company, being an artificial person, does not die a natural death.