Features of a Joint Stock Company

2. Features of a Joint Stock Company

Every feature below flows from one root idea already introduced in Section 1: the law treats the company itself, not its members, as the person carrying on the business.

1. Artificial legal person. A company is created by law (through registration), not born like a natural person, yet it enjoys most of the legal rights of a person — it can own property, enter contracts, and appear before a court in its own name. It acts in the real world only through natural persons (its directors and officers), but the rights and obligations created are the company's own, not theirs personally.
2. Separate legal entity. A company's identity is entirely distinct from the identities of its members. The company's debts are its own debts, not its shareholders' personal debts; the company's assets belong to the company, not jointly to its members. This is the principle Salomon v. Salomon & Co. Ltd. (1897) established once and for all — a company does not lose its separate identity merely because one person owns almost all of its shares.
3. Perpetual succession. The company's existence does not depend on the life of any particular member, director, or officer. Members may die, resign, sell their shares, or be declared insolvent — the company continues unaffected, exactly as before, until it is formally wound up by due legal process. This is often summed up as: "members may come and members may go, but the company goes on forever."
4. Limited liability. In a company limited by shares — the most common type — a member's liability for the company's debts is limited to the amount, if any, still unpaid on the shares registered in their name. Once a member has paid the company the full face value of their shares, their personal property can never be touched to satisfy the company's debts, however large those debts may be.
5. Common seal (now optional). Historically, a company authenticated its important documents by affixing its common seal — its "official signature," since it has no natural hand to sign with. Since the Companies (Amendment) Act, 2015, having a common seal is optional; a document may instead be authenticated by the signature of a person authorised by the Board for that purpose.
6. Transferability of shares. Shares in a company are, in principle, movable property, transferable in the manner provided by the company's Articles. A public company's shares are, as a rule, freely transferable; a private company's Articles restrict this right — the exact contrast that Section 5 of this chapter (and the Private vs Public table below) develops further.
7. Separate property. The company, as the legal owner of its own assets, holds its property in its own name — a shareholder, however large their shareholding, has no direct legal or insurable interest in any specific asset the company owns; their interest is in their shares, not in the company's individual assets.
8. Capacity to sue and be sued. Being a legal person in its own right, a company can bring a legal action in its own name, and can equally be sued in its own name — a member need not be joined to a case merely because they hold shares in the company being sued. …