Introduction

The Company: A Third Stage of Business Organisation

After the sole proprietorship and the partnership, the company is the third — and most evolved — stage in the growth of a business organisation. Its capital comes from a large number of people called shareholders, who are the company's real owners.

It isn't practical (or even desirable) for every shareholder to take part in running the company day to day. Instead, shareholders elect a Board of Directors to manage the company's affairs on their behalf. Every company's affairs are governed by the Companies Act, 2013 (or, for older companies, by the Companies Act under which they were originally registered).

Chief Justice Marshall's classic description captures the essence of a company: "a person, artificial, invisible, intangible, and existing only in the eyes of law." A company possesses only the properties that the law confers on it.

A company typically raises its capital in two forms:

• Share capital — the ownership capital contributed by shareholders.
• Debentures — the debt capital borrowed from lenders.