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What is a Company

Written by Harpreet

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When a number of persons come together and contribute their money to a common stock i.e. capital then a company is formed. So it can be say that a company is an association of persons i.e. minimum limit in case of private company is two members and in case of public company is seven members who are working for a common objective either to earn profit or to render services to the society. However in eyes of law company is a separate legal entity. This means that the company itself liable for its acts members cannot be held liable for the acts of company. Moreover a company has not provided any citizen ship rights but fundamental rights are provided to it. As company is a separate legal person a common seal of its acts as its signature which is to be put at every agreement with company.


A company has a perpetual succession which means that the company existence does not affected by existence of its member. Death or retirement of members of company cannot affect its existence. For e.g. ABC a public company has 7 members all of the members were died in an accident it has found that the company cannot dissolve on the basis of death of its members as due to the feature of perpetual succession.

It should be noted that in a company there is a separation between the ownership and management. The members of the company do not interfere in day to day activities of business. The persons who are appointed to control affairs of companies are elected by members and are called board of directors. The directors are appointed as well as removed by the members. Thus there is ultimate control of members over the company.

Usually the liability of members of company limited to the extent of unpaid amount of shares held by them. But in some cases example when the company is limited by guarantee the members have to contribute to the amount of guarantee accepted by them. There are also some companies which are both limited by shares as well as by guarantee also. In this case the members have to contribute towards amount of shares and amount of guarantee accepted by them. Further it should be noted that sometimes the members have unlimited liability also when the nature of company is unlimited by its nature.

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