•Company

A company is a legal entity formed by a group of individuals to engage in and operate a business
Or
“A Company is an artificial person created by law having separate entity with a perpetual succession and
common seal.

Nature or Characteristics of a Company

1.Separate Legal Entity

One of the most important attributes that give a company its unique nature is that it is a separate legal ent
ity, distinct from its members. It bears its own name,
has an independent corporate personality, owns assets in its own name, enters into contracts under its o
wn name and can sue and be sued in its own name.

2.Limited Liability
In a company, the liability of every member or shareholder is limited to the extent of the amount remaining
unpaid on the shares held by him.

3.Perpetual Succession
A company has a continuous existence independent of its members. It remains unaffected and continues
to exist despite the death, insolvency, incapacity of any
member or all members.

4.Common Seal
A company being an artificial person cannot sign documents for itself, and so it acts through a common s
eal which serves as the official signature of the
company.

5.Transferable Shares
The capital of the company is divided into transferable units called shares.

Types of Companies

•Private Company

Private company is defined as follows :

1) The minimum number of members in a private company is 2 and the maximum is 200.
2)It has a minimum paid capital of 1 lakh.
3)Such a company does not invite the general public to subscribe to its deposits.

•Public Company

Public company is defined as follows :

1) The minimum number of members required to incorporate a public company is 7 and there is no limit o
n the maximum number of members.
2) It has a minimum paid-up capital of 5 lakhs.
3) Any private company which is the subsidiary of a public company is also a public company.

•One Person Company

As per the Act, an OPC is a company that has only one member. The member can also be the director of
the company. Though the OPC should have only one
member, it can have a maximum of 15 directors.

•Formation of Company
Formation of a company involves completion of several legal formalities and procedures. The process of f
ormation of the company can be divided into these
stages-

1)Promotion of a company
2)Incorporation
3)Subscription of capital
4)Commencement of business.

Whereas these are two principal stages in the formation of a company:

1)Promotion of a Company

A business enterprise does not come on its own. The process of business promotions comes when some
one comes up with an idea and ends when that idea is
converted into the process of action. i.e. the formation of business enterprise and commencement of its b
usiness. It is an overall effort that the members of the
company put to make the company.

2)Incorporation of a Company
The registration of the memorandum of the association, the article of association and other documents ar
e filed with the registrar. After getting satisfied with the
application & documents submitted, Registrar will issue the Certificate of incorporation’. A certificate of inc
orporation is the ultimate proof of the existence of a
company.

• Memorandum of Association
A Memorandum of Association (MoA) represents the charter of the company. It is a legal document prepa
red during a company’s formation and registration
process. It defines the company’s relationship with shareholders and specifies the objectives for which the
company has been formed. The company can
undertake only those activities mentioned in the Memorandum of Association.

•Article of Association
The Articles of Association (AOA) of the company contains its rules or bye-laws and regulations that contr
ol or govern the conduct of its business and manage
its internal affairs. The AOA is subordinate to the MOA of a company and is governed by the MOA. Every
company must have an AOA as it plays a vital role
in defining its internal rights, workings, management and duties

•Prospectus
A prospectus is defined as a legal document describing a company’s securities that have been put on sal
e. The prospectus generally discloses the company’s
operations along with the purpose of the securities being offered