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Features of a Company


Features of a Company

A private limited company is a voluntary association of persons formed for the purpose of doing business, having a distinct name and limited liability. A company is considered to be a juristic person with a separate legal entity distinct from its members. In this article, we look at some of the major features of a private limited company incorporated in India.

Company is a Separate Legal Entity

A company is a separate legal entity distinct from its shareholders. Even if the total shareholding of a company is purchased by one person or a group of persons acting in concert, the company would still continue to have its separate legal entity. However, a company is not a citizen and cannot claim fundamental rights granted to citizens.

Company is a Juristic Person

Under the Companies Act, the terms person includes not only natural persons but also other juridical people. A company is a juristic person that a person can represent it before a Court of Law or any other place by a person competent to represent it. The power to institute a suit in the case of a company vests with the Board of Directors of the Company and an individual Director can institute a suit only if specifically empowered. However, a company cannot take an oath or make an affirmation. Hence, a company cannot become a witness.

Company has Perpetual Succession

One of the main reasons for incorporating a company is perpetual succession. After a company’s incorporation, it will continue to be in existence until its wound-up. Even in the case of death of a shareholder holding 99.99% of the shares of the company, the company will continue to be in existence.

Decree Against Company & Corporate Veil

A decree passed against a company cannot be satisfied by attachment and sale of properties belonging to other limited companies managed by the same group of Directors. The corporate veil protects the members of the company from the liability of the company.

Company not Liable for Tortuous Act of Employee

A company is not responsible for the negligence or wrongful act of an employee because it is committed at a time when the employee is engaged by the Company. For a company to be liable, it must commit a wrongful act by the employee in the course of business, so as to form a part of it, and not be merely coincident in time with it. Hence, if the employee at the time of incidence is not acting within the course of business but is doing something for himself, then the company cannot be held liable.

Company can Own Property

A company can own property and the assets of the company belong to the company itself and not to its members. However, the members of the company have a right to participate in the assets of the company, which are leftover after winding-up of the company.

Company can be Trustee

A company can be a trustee if it has a permit from the objects clause in the Memorandum of Association of the Company.

Company can be Complainant in Criminal Case

A company can be a complainant in a criminal case through a representative. For a criminal case, the complainant must be a corporeal person capable of making a physical presence in the Court. However, in the case of a company, a natural person who represents the company, for all practical purposes, as the complainant in the case.