MEANING AND DEFINITION OF COMPANY, IT'S CHARACTERISTICS AND TYPES OF COMPANY

This slide share is of subject company law . In this you will learn about meaning and definition of company , types / kinds of company (private , public , holding , subsidiary , limited liability and unlimited liability company etc.) , and its characteristics.

1. COMPANY LAW PREPARED BY : KHUSHI GOYAL

2. LEARNING OBJECTIVES MEANING AND DEFINITION OF COMPANY CHARACTERISTICS OF A COMPANY TYPES OF COMPANIES

3. MEANING AND DEFINITION OF COMPANY MEANING : The word ‘company’ is a derivative of the Latin word ‘ companis ’. ‘ Companis ’ is made up of two words : ‘com’ and ‘ panis ’. ‘ Com’means ‘together’ and ‘ panis ’ means ‘bread’. The word ‘ company’means a group of persons who ate together . Basically a company is the voluntary association of persons formed for the purpose of earning profit with investment of capital . It is incorporated and registered under the Companies Act , 2013. DEFINITION : “ A COMPANY IS AN INCORPORATED ASSOCIATION WHICH IS AN ARTIFICIAL PERSON CREATED BY LAW , HAVING A SEPARATE LEGAL ENTITY WITH A PERPETUAL SUCCESSION AND A COMMON SEAL.

4. CHARACTERISTICS OF COMPANY INCORPORATED ASSOCIATION ARTIFICIAL PERSON SEPARATE LEGAL ENTITY PERPETUAL SUCCESSION COMMON SEAL LIMITED LIABILITY NUMBER OF MEMBERS TRANSFERABILITY OF SHARES

5. Continued… INCORPORATED ASSOCIATION : A company is a registered association . Under the Companies Act , it is necessary for a company to be registered , i.e ., it needs to be incorporated. ARTIFICIAL PERSON : It is an another important characteristic that company is an artificial person because its birth is not natural birth . It is created by law . Being an artificial person , it cannot take an oath , be imprisoned or personally appear in a court of law . Like a natural person , a company can buy and sell properties , make agreements or enter into a contract. SEPARATE LEGAL ENTITY : The most important characteristic of a company is that it is a separate legal entity . A company is separate from its members , it can enter into any contract without any of its members, buy property in its name , borrow or lend money or file a suit in the court of law against any third party.

6. Continued… PERPETUAL SUCCESSION : Members may come members may go but the company goes on forever . Its existence is not dependent upon that of its shareholders or directors. The shareholders or the directors might change but the company goes on . COMMON SEAL : A common seal is the metallic seal of the company. It is the signature of the company to any document . Each company shall have only one common seal , on its incorporation . It is to be used in the manner prescribed in (AOA of Companies Act , 2013). As per companies (Amendment ) Act , 2015, now for a company to have a common seal is not mandatory. LIMITED LIABILITY : The liability of the shareholders of the company is limited. In case of financial loss , the liability of members will be limited to the amount unpaid of their shares and their personal property cannot be used to pay off the debts .

7. Continued… NUMBER OF MEMBERS : The minimum number of members in a public company is seven and maximum can be infinite. The minimum number of members in a private company is two and maximum can be two hundred , excluding present and past employees of the company . TRANSFERABILITY OF SHARES : In the public company the shares can be transferred freely and in private company also the shares can be transferred but with some restrictions ( shares are not freely transferrable) .

8. TYPES/ KINDS OF COMPANIES

9. CONTINUED… LIMITED LIABILITY COMPANY : The liability of a company is limited . It can be limited by the number and value of shares or limited by guarantee . UNLIMTED LIABILITY COMPANY : A company in which the liability of its members is not limited. The members of this company are personally liable for the debts of the company. GOVERNMENT COMPANY : A government company means any company in which 51% or more share is held by Central Government . HOLDING COMPANY : A holding company is a company which holds 50% or more than 50% of share in another company.

10. CONTINUED... SUBSIDIARY COMPANY : A company in which 50% or more than 50% of share is held by another company. For example : ABC LTD invested 52% in shares of XYZ LTD then ABC LTD is holding company and XYZ LTD is subsidiary company. PRIVATE COMPANY : Section 2(68) of the Companies Act , defines a private company is a company : With minimum members – 2 , maximum – 200 (excluding past and present employees) In which 2 directors are minimum required Which cannot issue their shares in public In which shares are not freely transferrable. PUBLIC COMPANY According to section 2(71) of the Companies(Amendment) act ,2015 defines a public company is a company : A company which is not a private company. Minimum members – 7 , maximum members - infinite In which 3 directors are minimum required In which shares can be transferred easily without any restrictions .

11. Continued… ONE PERSON COMPANY : One person company means a company which has only one person as a member. A natural person can be the member of this company. It may have only one director .It’s paid up capital should not exceed Rs 50Lakhs. Its average turnover of three years should not exceed Rs 2Crore.

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