What a Company Is
Chapter Thirty-Seven
Syllabus topic 1, "Meaning of Company, Types of Company, Maintenance of Books of Accounts"
Pages 111 to 113 of 168
In one line
A company is an association of persons registered under the Companies Act 2013, which on registration becomes a body corporate distinct in law from its members.
The definition MU expects
Section 2(20) is short and circular on purpose.
"Company" means a company incorporated under this Act or under any previous company law.
The definition tells you the route, not the nature. It says a company is a thing that has been registered. What that registration produces is in section 9, which says that from the date in the certificate of incorporation the subscribers and all later members shall be a body corporate by the name in the memorandum, capable of exercising all the functions of an incorporated company, having perpetual succession, with power to hold property and to contract, and capable of suing and being sued.
So read the two together in an answer. Section 2(20) is the definition; section 9 is what the definition gets you.
The features that follow
| Feature | Where it comes from | What it means in the books |
|---|---|---|
| Separate legal personality | Section 9, body corporate | The company's assets are its own, not the members'; the members' private accounts are nowhere in its balance sheet |
| Perpetual succession | Section 9, in terms | Death or retirement of a member changes nothing in the accounts; there is no revaluation, no goodwill adjustment, no new firm |
| Limited liability | Section 2(22) and section 4(1)(d) | A member owes only the unpaid amount on the shares, so calls in arrears are a receivable and nothing beyond them can be demanded |
| Capacity to hold property and contract | Section 9 | Property stands in the company's name, and a contract with a member is a real contract |
| Capacity to sue and be sued | Section 9 | Litigation is the company's, and a provision for it is the company's provision |
| A common seal, where used | Optional since 2015 | A document may be signed by two directors, or a director and the secretary, instead |
Perpetual succession is the feature that separates this module from the first two. In Modules I and II you dissolved a firm because its constitution changed. A company's constitution does not change when its members do, which is why there is no realisation account anywhere in Module IV.
How a company is formed: section 3
Section 3(1) says a company may be formed for any lawful purpose by:
| Persons required | Company formed | |
|---|---|---|
| (a) | Seven or more | A public company |
| (b) | Two or more | A private company |
| (c) | One person | A One Person Company, which is a private company |
They form it by subscribing their names to a memorandum and complying with the Act's requirements for registration.
Section 3(2) then says the company so formed may be limited by shares, or limited by guarantee, or an unlimited company. Those three are the liability classes, and the next chapter takes them with the rest of the types.
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 3 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
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Free either way: the syllabus, and module one of every subject.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.