Meaning and Definition of Company

In common parlance, a company refers to an assemblage of people who have

come together for some specific purpose; economic, or otherwise; and who have
incorporated themselves into a distinct legal entity in the form of a corporation for
that purpose.

Definition as per Companies Act, 2013

Sec 2(20) merely reads, a company means a company formed and registered
under this Act or under any previous company law.

Lord Justice Lindley definition

A Company is an association of many persons who contribute money or monies
worth to a common stock and employ in some trade or business and who share the
profit and loss arising therefrom. The common stock so contributed is denoted in
money and is the capital of the company. The persons who contributed to it or
whom it pertains are members. The proportion of capital to which each member is
entitled is his share. The shares are always transferable albeit the right to transfer
is often more or less restricted.

A company is an artificial person created by law, having a separate entity, with a

perpetual succession and common seal. Prof. Haney
.
An artificial person created by law, having a
separate entity, with a perpetual succession and
common seal.
1. Independent legal entity
2. Limited liability
3. Everlasting existence/Perpetual succession
4. Separate property of company
5. Flexibility of investment
6. Capacity to sue
7. Separation of ownership &
Management
8. Proportionate representation
9. Right to own property
 Kinds of Companies
1. Classification on the basis of Incorporation
a) Statutory companies : These are the companies which are created
by a special act of
the Legislature, e.g. Reserve Bank of India, the State Bank of India, LIC.
b) Registered Companies: These are the companies which are formed
and registered
under the Companies Act.

2. Classification on the basis of Liability

1. Companies with limited liability
b) Companies Limited by Shares: Where the liability of the
members of a company is
limited to the amount unpaid on the shares, such a companies is known
as a company
limited by shares.

b) Companies limited by guarantee: Where the liability of the

members of a company is
limited to a fixed amount which the members undertake to contribute
to the assets of
the company in the event of its being wound up, the company is called
a company
limited by guarantee.
 3. Classification on the basis of number of members
a) Private company: which has a minimum paid-up capital of
Rs.1,00,000 and which by Articles:
1. Restricts the right to transfer its shares, if any.
2. Limits the number of its members to 200
3. Prohibits any invitation or acceptance of deposits from persons other
than its members
4. Prohibits any invitation or acceptance of deposits from persons other
than its members, directors or their relatives.

b) Public company : a company to which the above restrictions does

not apply. The
minimum paid up capital is Rs.5,00,000. A private company, which is a
subsidiary of a
public company, shall be deemed to be a public company.

Minimum number of members

Public company 7
Private company 2

Maximum number of members

Public company unlimited
Private company 200
4. On the basis of Control
1. Holding company: A company which has control over other
company.
2. Subsidiary company: A company which is being controlled by
holding company.

Other types
1. Small company: A company (other than public company) whose
paid up capital does
not exceed Rs.50 lacs and turnover as per last profit and loss account
does not exceed
Rs.2 crore.
2. One Person Company
3. Government company: where Central/State/Partly Central and State
governments share in the company is not less than 51 percent.
4. Dormant company: A company that does not trade and has no
significant business transactions.
5. Foreign company: A company which is incorporated under the laws
of a different nation but conducts any of its business activities in
India.
For the incorporation or registration of a company two important
documents are required to be prepared and filed with the Registrar of
Companies namely:
1. Memorandum of Association
2. Article of Association

Contents of Memorandum
3. The name of the company, with the last word Limited in the case of
a public limited company, or the last words Private Limited in the
case of a private limited company.(Name Clause)
4. The State in which the registered office of the company is to be
situated (Registered office Clause)
5. The objects for which the company is proposed to be incorporated
and any matter considered necessary in furtherance thereof.
(Objects clause)
6. Limited liability (Liability Clause)
7. Share capital (Capital Clause)
8. The memorandum shall conclude with an Association clause which
states that the subscribers desire to form a company and agree to
share in it.
Articles of Association or just Articles are the rules, regulations and
bye-laws for the internal management of the affairs of a company. They
are framed with the object of carrying out the aims and objects as set out
in the Memorandum of Association.

Contents of Articles
1. Share capital and variation of rights
2. Lien
3. Calls on shares
4. Transfer of shares
5. Transmission of shares
6. Forfeiture of shares
7. Alteration of capital
8. Capitalization of profits
9. Buy-back of shares
10.General meetings
11.Proceedings at general meetings
12.Adjournment of meeting
13.Voting rights
14.Proxy
15.Board of Directors
16.Proceedings of the Board
Doctrine of Corporate veil (Disregarding the Corporate entity) implies that :
A company has a separate personality distinct from its members or shareholders.
This signifies that the company has a life and existence of its own
Can possess a property and deal with it the way it desires
Can sue and be sued in its personal capacity.
Moreover, no shareholder can either individually or jointly claim any ownership
rights in the assets of the company during its continuance of business or on its
winding up.

Doctrine of Ultra Vires Ultra means beyond and Vires means the powers.
The Latin term ultra vires, means to describe an act which is beyond the powers.
Any transaction (or act) which is not set out in the object clause of the companys
memorandum, and is not necessarily or reasonably incidental to the attainment of
the object(s), is ultra vires the company, and therefore, void, i.e of no legal effect
and does not bind the company.
Doctrine of Constructive notice: Every outsider deal with a company is deemed
to have notice of the contents of the Memorandum and the Articles of Association.
These documents, on registration with the Registrar assume the character of
public documents. This is known as Constructive notice of Memorandum and
Articles.

The Memorandum and the Articles are open and accessible to all. It is the duty of
every person dealing with the company to inspect these documents and see that it
is within the powers of the company to enter into the proposed contract.

Doctrine of Indoor management: The outsiders dealing with the company are
entitled to assume that as far as the internal proceedings of the company are
concerned, everything has been regularly done. They are presumed to have read
these documents and to see that the proposed dealing is not inconsistent therewith,
but they are not bound to do more; they need not inquire into the regularity of the
internal proceedings as required by the Memorandum and the Articles.