Company Laws

 

What is a Company?

The word ‘Company’ has no strictly technical or legal meaning. It implies an association of persons for some common object. The law relating to companies in India is contained in the Companies Act, 1956, as amended up to date. This Act runs into 658 sections and 15 schedules. The text of the law alone occupies more than 700 pages. Endeavour is, therefore, to present some aspects of company law which are relevant for managers.

 

Definitions of a Company

Section 3(1) (i) of the Companies Act, 1956 (the Act) merely states that “a ‘company’ means a company formed and registered under this Act or an existing company as defined in Section 3(1) (ii).” Section 3(1) (ii) lays down “an existing company means a company formed and registered under any of the previous companies law”. This definition neither gives the meaning of a company clearly, nor defines a company in terms of its features. To understand the meaning of a company, let us see the definition as given by different authorities.

 

a) “A company is an association of many persons who contribute money or monies worth to a common stock and employed in some trade or business and who share the profit and loss arising there-from. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute to it or to whom it pertains are members. The proportion of capital to which each member is entitled is his share. The shares are always transferable although the right to transfer is often more or less restricted.” — Lord Justice Lindley

 

b) According to Chief Justice Marshall, “A corporation is an artificial being, invisible, intangible existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.”

 

c) As per Prof. Haney, “A company is an artificial person created by law, having separate entity, with a perpetual succession and common seal.”

 

 

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