Share Capital and Accounting

A company means is a person, artificial, invisible, intangible and existing only in the eyes of law. Its capital is contributed by a large number of persons (shareholders) who are the real owners of the company. But it is not possible for all shareholders to participate in the management of the company. Therefore, they elect a Board of Directors to manage the affairs of the company as their representative. All affairs of the company are governed by the provision of the Companies Act 2013. A company needs to register under the Companies Act 2013 or under any other earlier Companies Act.

Features of the company

A company is an association of persons who invest money and money’s worth to a common inventory and use it for a common purpose. Special features of the company distinguish it from the other firms and organizations. These features are:

Body Corporate 

Generally in India, formation and registration of the companies are under Companies Law except in case of Banking and Insurance companies for which a separate law is applicable. Body corporate is a company which is formed according to the provisions of law applicable from time to time.

Separate Legal Entity

A company works as legal individual body and is different from its members. A company is an artificial person holds its own name and seal, separate assets and liabilities from its members. It can enter into contract and agreements with other companies and also open bank accounts in its own name. It has the power to hold property, control and dispose off.

Example: XYZ Ltd is a company, when it enters into any contract or agreement it can use its own name instead of name of any person. 

Limited Liability

In this the liability of the members or shareholders of the company are legally responsible for the debts of company only to the extent of the nominal value of shares purchased. Also in other case companies are limited by guarantee. The liability of a member or a shareholder is limited to the extent of guarantee given by them in the event of the company being wound up.

Perpetual Succession

Because a company is an artificial person and created by law continue to exist irrespective of the changes in its membership. It can be terminated by law only. The death or insolvency of any member of company in no way affects the existence of company. Members and shareholders may come and go but the company continues to work. 

Common Seal

As an artificial person the company is not able to sign any documents by itself. Therefore a company is required to have its own seal (stamp). The seal of a company acts as official signatures of the company. Any documents which does not bearing the seal are not binding on the company.

Transferability of Shares

All the shares of a public limited company are fully and freely transferable. For transfer of these shares there is no need of any permission of the company or consent of any member of the company. 

May Sue or be Sued 

Being an artificial person and having legal seal, a company can use its contractual rights against others or any other company or person can also sue the company by its name if there is a violation in the contract.