Features of a Company

A joint stock company is distinguished from other forms of business organisation by a set of well-defined legal characteristics. These features together explain why large-scale enterprises studied in AP Intermediate commerce classes almost always take the company form.

Separate legal entity. A company is a legal person distinct from its shareholders, directors and employees. It can own property, enter into contracts, and sue or be sued in its own name. Shareholders do not own the company's assets directly; they own shares in the company. This principle, often called the 'corporate veil', means the company's debts are the company's own, not automatically the members'.

Incorporation (creation by law). A company can be formed only by registration under the Companies Act, 2013. Unlike a partnership, which can arise merely from an agreement, a company does not exist in the eyes of law until the Registrar of Companies issues a Certificate of Incorporation.

Perpetual succession. The life of a company does not depend on the life of its members. Members may die, sell their shares, resign or be replaced, but the company continues unless it is wound up by law. As is often said, 'members may come and members may go, but the company goes on forever'.

Common seal / authorised signatory. Traditionally, a company acted through a common seal affixed to important documents, since it has no physical body to sign in person. The Companies (Amendment) Act, 2015 made the common seal optional; a company may now authorise a director or officer to sign documents on its behalf instead.

Limited liability. In a company limited by shares — the most common type — a shareholder's liability for the company's debts is limited to the unpaid amount, if any, on the shares held. Personal assets of members are ordinarily protected.

Transferability of shares. Shares of a public company are freely transferable, subject to the company's articles, giving shareholders liquidity. A private company restricts the right of its members to transfer shares.

Separation of ownership and management. Shareholders (owners) elect a Board of Directors to manage the company on their behalf; day-to-day control usually rests with professional managers rather than every individual owner. …