SALIENT FEATURES OF A COMPANY

1. Incorporated association— A company comes into operation after its registration under Companies

Act. Without such registration no company can come into existence.

2. Separate legal entity – A company has a separate legal entity and is not affected by changes in its

membership. Therefore, being a separate business entity, a company can contract, sue and be sued in

its incorporated name and capacity.

3. perpetual existence – Since company has existence independent of its members, it continues to be in

existence despite the death, insolvency or change of members.

4. common seal—Company is not a natural person, therefore, it can not sign the document in the

manner as a natural person would do. In order to enable the company to sign its documents it is

provided with legal tool called ‘common seal’.

5. Limited liability--- The liability of every shareholder of a company is limited to the amount he has

agreed to pay to the company on the shares allotted to him.

6. Distinction between ownership and management:-- Since the number of shareholders is very large

and may be distributed at different geographical locations, it becomes difficult for them to carry on the

operational management of the company on day to day basis. This gives rise to the need of separation

of the management and ownership.

7. Not a citizen—A company is not a citizen in the same sense as a natural person is.

8. Transferability of shares:- The capital is contributed by the shareholders through the subscription of

shares. Such shares are transferable by its members except in case of a private limited company, which

may have certain restrictions on such transferability.

9. Maintenance of books--- A limited company is required by law to keep a prescribed set of account

books and any failure in this regard attract penalty.

10. Periodic audit --- a company has to get its accounts periodically audited through the chartered

accountant appointed by the shareholders in their Annual General Meeting on the recommendation of

Board of Directors.

11. Right of access to information:-- The right of the shareholders of a company to inspect its books of

accounts is governed by article of association.

12. Incorporated association— A company comes into operation after its registration under Companies

Act. Without such registration no company can come into existence.

13. Separate legal entity – A company has a separate legal entity and is not affected by changes in its

membership. Therefore, being a separate business entity, a company can contract, sue and be sued in

its incorporated name and capacity.

14. perpetual existence – Since company has existence independent of its members, it continues to be

in existence despite the death, insolvency or change of members.

15. common seal—Company is not a natural person, therefore, it can not sign the document in the

manner as a natural person would do. In order to enable the company to sign its documents it is

provided with legal tool called ‘common seal’.

16. Limited liability--- The liability of every shareholder of a company is limited to the amount he has

agreed to pay to the company on the shares allotted to him.

17. Distinction between ownership and management:-- Since the number of shareholders is very large

and may be distributed at different geographical locations, it becomes difficult for them to carry on the

operational management of the company on day to day basis. This gives rise to the need of separation

of the management and ownership.

18. Not a citizen—A company is not a citizen in the same sense as a natural person is.

19. Transferability of shares:- The capital is contributed by the shareholders through the subscription of

shares. Such shares are transferable by its members except in case of a private limited company, which

may have certain restrictions on such transferability.

20. Maintenance of books--- A limited company is required by law to keep a prescribed set of account

books and any failure in this regard attract penalty. 21. Periodic audit --- a company has to get its

accounts periodically audited through the chartered accountant appointed by the shareholders in their

Annual General Meeting on the recommendation of Board of Directors.

22. Right of access to information:-- The right of the shareholders of a company to inspect its books of

accounts is governed by article of association.

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