What is a Company? :

Section 2(20) of the Companies Act, 2013 defines the term ‘company’: “Company means a company incorporated under this Act or under any previous company law”. The definition does not bring out clearly the meaning of a company. For a layman, the term “company” signifies a business organisation. But all business organisations cannot be technically called ‘companies’. There are distinctive features between different forms of organsiations and the most striking feature in the company form of organisation vis-à-vis the other organisations is that it acquires a unique character of being a separate legal entity. In other words when a company is registered, it is clothed with a legal personality. It comes to have almost the same rights and powers as a human being. Its existence is distinct and separate from that of its members. Members may die or change, but the company goes on till it is wound up on the grounds specified by the Act. In other words, it means that it has perpetual succession. A company can own property, have banking account, raise loans, incur liabilities and enter into contracts. Even members can contract with company, acquire right against it or incur liability to it. For the debts of the company, only its creditors can sue it and not its members. Also in contrast to other forms of organization, the member of the company usually has a limited liability.

As the company is an artificial person, it can act only through some human agency, viz., directors. They control affairs of the company and act as its agency, but they are not the “agents” of the members of the company. A company has a common seal to authenticate its formal acts.