COMPANY- Definitions

“’Company’ means a company incorporated under this Act or

under any previous company law”. [Sec. 2 (20)]
- Companies Act, 2013

“A corporation is an artificial being, invisible, intangible, existing

only in contemplation of the law. Being a mere creation of law, it
possesses only the properties which the Charter of its creation
confers upon it, either expressly or as incidental to its very
existence.”
- Chief Justice Marshall of the USA
”A company is an artificial person created by law, having
separate entity, with a perpetual succession and common seal.”
- Prof Haney
➢ Separate Legal Entity: Under Incorporation law, a
company is a legal entity separate and distinct from its
members who compose it.
It has its own seal and its own name, its assets and liabilities
are separate and distinct from those of its members. It is
capable of owning property, incurring debt, and borrowing
money, employing people, having a bank account, entering
into contracts and suing and being sued separately.
Nationality of a Company: A company is an Indian Company
if it is registered in India. The nationality of a company
doesnot depend on the nationality of its member.
 SALOMAN VS SALOMAN & CO LTD.(1897)
➢ Aaron Salomon was a successful leather merchant who
specialized in manufacturing leather boots. For many
years he ran his business as a sole trader. By 1892, his
sons had become interested in taking part in the
business. Salomon decided to incorporate his business
as a Limited company, Salomon & Co. Ltd.
➢ As per the legal requirement for incorporation was that
at least seven persons subscribe as members of a
company i.e. as shareholders. Mr. Salomon himself was
managing director. Mr. Salomon owned 20,001 of the
company's 20,007 shares - the remaining six were
shared individually between the other six shareholders
(wife, daughter and four sons)
Sole Proprietorship
SALOMAN & CO
LTD.
Saloman
20000 shares @ 1 UK
POUNDS

Saloman His wife- 1 share

1st Son- 1 share
2nd Son- 1 share
3rd Son- 1 share
4th Son- 1 share
1 Daughter-1 share
 SALOMAN VS SALOMAN & CO LTD.(1897)
Mr. Salomon sold his business to the new corporation for almost
£39,000, which was discharged in the following manner:

PURCHASE CONSIDERATION:
39000 £

9ooo £ in cash.

20000 £ shares to Saloman

10000 £ Secured Debentures.

 SALOMAN VS SALOMAN & CO LTD.(1897)
The company ran into difficulties and liquidation proceedings
began. After paying mortgage debt & interest thereon, there
were only £ 1055 left.

£ 10000 Saloman
Total
Liablities
£ 17,773
£ 7773 Unsecured
Creditors
Unsecured Creditors claimed that they must be paid as Saloman
and Saloman & Co Ltd are same person.
Held that, Saloman must be paid in priority to unsecured
creditor as the Company and Saloman are different persons
according to Separate Legal Entity concept.