PART 03: CORPORATE REGULATIONS AND ADMINISTRATION

 

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CORPORATE REGULATIONS AND ADMINISTRATION

 

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COMPANY
 

A business entity which acts as an artificial legal person, formed by a legal person or a group of legal persons to engage in or carry on a business or industrial enterprise.
 

Section 2(20) of the 2013 Act defines the term “company” to mean “a company incorporated under the Companies Act 2013 or any previous company law.”

 

 

Features & Characteristics of a Company: 

 

1. Separate Legal Entity: 

A company has a distinct entity and is independent of its members or people controlling it. 

 

2. Limited Liability: 

A company may be limited by guarantee or limited by shares. In a company limited by shares, the liability of the shareholders is limited to the unpaid value of their shares. In a company limited by guarantee, the liability of the members is limited to the amount they had agreed upon to contribute to the assets of the company in the event of it being wound up. 

 

3. Perpetual Existence: 

Unlike other non-registered business entities, a company is a stable business organization. Its life doesn’t depend on the life of its shareholders, directors, or employees. Members may come and go but the company goes on forever.

 

4. Common Seal: 

A company being an artificial legal person, uses its common seal (with the name of the company engraved on it) as a substitute for its signature. Any document bearing the common seal of the company will be legally binding on the company. 

 

5. Artificial Legal Person: 

In the eyes of the law, A company is an artificial legal person which has the rights to acquire or dispose of any property, to enter into contracts in its own name, and to sue and be sued by others 

 

6. Transferability of shares: 

The shares of the company are freely transferable. They can be bought and sold in stock market. 

 

7. Capacity to Sue and to be Sued: 

The capacity is almost similar to human being

 

8. Incorporated association: 

A company comes into existence when it is registered under the Companies Act (or other equivalent act under the law). A company has to fulfil requirements in terms of documents (MOA, AOA), shareholders, directors, and share capital

 

 

Advantages and disadvantages of Incorporation :

 

  Incorporation of a company refers to the process of legally forming a company or a corporate entity. 

 

 

Advantages of Incorporation

• Corporate Personality/Separate Legal Entity

• Limited Liability

• Transferable shares

• Perpetual succession

• Separate property

• The capacity to sue and to be Sued

• Professional management

• Opportunity to involve large number of investors 

 

Disadvantages 

• Formalities and Expenses

• The company is not a citizen

• Lifting the corporate veil

• Corporate scams

 

 

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