Meaning, Definition and Characteristics of Company

Origin of the Term:

The term company is derived from the Latin word "companis" . "Com" means together and "Panis" means bread. originally it is an association of person who took their meals together.

Meaning of Company:

A company is the voluntary Association of individuals formed for the purpose of obtaining a common purpose.

Definition of company :

According to the Indian Companies Act 2013 "a company is formed and registered under this Act or an existing company."

Characteristics of a company:

1. Legal personality:

As per the law there are two persons, Natural person and artificial person. a company is created under a law. so, it is an artificial legal person and it is having legal personality.

2. Limited liability: 

In Companies owner and the company are different persons.

In any company the shareholder will not pay the amount more than the unpaid value of the shares held by them. Shareholder liability is upto the unpaid value of the share only. So, in company liability is limited.

3. Perpetual Succession: 

A company is not depending upon the life of their owners . According to Lord Gower, "Members may come members may go but the company can go on forever". So, the company is enjoying the long life that is perpetual succession.

4. Right to property:

Since, the company is a legal person the company may purchase any asset or sell any asset in its name.

5. Common Seal: 

Company is an artificial person. So, it cannot sign in the documents or certificates. Representatives will sign on behalf of the company by affixing the common seal. The common seal is considered as the official signature of the company.

6. Transferability of shares:

Huge sum of capital divided into small parts or units are called as shares. In case of public limited companies the shares are easily Transferable from one person to another person.

7. Capacity to Sue and be Sued:

The company is a legal person so it can see you against anyone in its name and anyone can see you against the company on its name.

8. Not a citizen:

Even though company is a legal person it is not a citizen under the constitution of India. It can act with the help of its representatives only. so the company cannot enjoy the fundamental rights for the person mention in the Article 14 of the Indian Constitution.