Created by Law: A legal company, unlike a sole proprietorship or

partnership, exists because of the law. It comes into being through a

formal registration process following the guidelines set out in the
Companies Act. This registration grants the company a separate legal
identity from its owners (shareholders).

Artificial entity: it's considered an artificial entity. This means it's a

legal creation, separate from the real people who own and manage it.
Here's a breakdown of this concept:

• Not a Natural Person: A company isn't a living, breathing person.

It can't act on its own and doesn't have the same rights as a human
being.
• Exists in Law: The company's existence is recognized by law. It
can own property, enter contracts, and sue or be sued in its own
name.
• Acts Through People: The company relies on its directors and
officers to make decisions and carry out its business. These
individuals act as agents of the company.
• Perpetual Succession: An artificial entity has an independent
lifespan. Unlike a person who can die, a company can continue to
exist indefinitely, even if its owners or directors change.

Perpetual succession: "Perpetual succession" is another important

characteristic of a legal company established by the Companies Act 1994.
It refers to the company's ability to exist indefinitely, separate from the
lifespans of the people involved.

Here's a breakdown of this concept:

• Independent Lifespan: A legal company isn't tied to the lives of its

owners, directors, or employees. Even if these individuals die, leave
 the company, or ownership changes hands, the company itself can
continue to operate.
• Continuity of Business: This characteristic ensures the company's
business activities can be carried on without interruption due to
changes in ownership or management. Contracts, property
ownership, and ongoing operations remain unaffected.
• Long-Term Planning: Perpetual succession allows companies to
make plans and investments for the future, knowing they won't cease
to exist simply because the original founders are no longer involved.

Common Seal: The common seal is a characteristic of a legal company

under the Companies Act 1994, but it's not as fundamental as the ones
we've discussed previously. It's a traditional method of authenticating
documents on behalf of the company.

Here's how it works:

• Official Seal: The common seal is a physical stamp with the

company's name engraved on it.
• Authentication Tool: It's used to formally approve important
documents, similar to a signature but representing the company as a
whole.
• Director Authorization: Typically, the application of the common
seal requires authorization by the board of directors.

Share capital : Shared capital is a crucial concept in understanding legal

companies formed under the Companies Act 1994 (Bangladesh). It refers
to the total amount of money that a company raises from its shareholders
through the sale of shares. Here's a breakdown:
 • Source of Funds: Shared capital is a primary source of funding for
a company. Investors purchase shares in the company, contributing
capital that the company can use to operate and grow.

Transferability of share: Transferability of shares is a key

characteristic of public companies formed under the Companies Act
1994 (Bangladesh). It refers to the ability of shareholders to sell or
transfer their ownership of shares in the company to another person.

Here's a breakdown of transferability:

• Freely Tradable: In general, shares of public companies are freely

transferable. Shareholders have the right to sell their shares to
anyone they choose, without needing permission from the
company or other shareholders. This allows for a liquid market for
shares, where investors can easily buy and sell them.

Limited liability : Limited liability is a fundamental characteristic of

companies formed under the Companies Act 1994 (Bangladesh). It
shields shareholders' personal assets from being directly liable for the
company's debts or obligations. Here's a closer look:

Protection for Shareholders:

• Limited Risk: Limited liability protects shareholders from losing

more than their investment in the company. If the company goes
bankrupt, shareholders generally only lose the money they paid for
their shares. Their personal assets (like houses, cars) are typically
safe.
Example:

Imagine a company with 100 shares, each sold for $10. A shareholder who
owns 20 shares has invested $200. If the company goes bankrupt with
outstanding debts, the shareholder's maximum liability is $200 (the value
of their shares). Their personal wealth beyond that investment remains
protected.

Separation of ownership from management : The separation of

ownership from management is a concept not explicitly defined in the
Companies Act 1994 (Bangladesh) but is a cornerstone principle of
modern corporate governance. Here's how it applies:

Ownership vs. Management:

• Owners: Shareholders are the company's owners. They invest

capital and have a stake in the company's success. Their primary role
is to elect directors and make major decisions through voting at
shareholder meetings.
• Management: The company's directors and officers are responsible
for managing the day-to-day operations. They make strategic
decisions, oversee employees, and ensure the company functions
effectively.

Statutory responsibility : Statutory responsibilities, in the context of the

Companies Act 1994 (Bangladesh), refer to the legal obligations placed
on a company by the Act itself. These responsibilities encompass various
aspects of a company's operation and ensure it functions within a legal
framework. Here's a breakdown of some key areas of statutory
responsibility:

Company Formation and Governance:

 • Registration: Companies must comply with the Act's registration
process, filing necessary documents and paying fees.
• Company Documents: Maintaining accurate and up-to-date
records like the memorandum of association and articles of
association is crucial.
• Board of Directors: The Act outlines responsibilities for board
composition, meetings, and decision-making procedures.
• General Meetings: Companies are required to hold annual general
meetings and extraordinary general meetings when necessary,
allowing shareholders to participate in decision-making.

Financial Reporting and Transparency:

• Accounting Standards: Companies must maintain proper

accounting records and prepare financial statements following
established accounting standards.
• Auditing: Companies are required to undergo annual audits by
qualified auditors to ensure the accuracy of their financial
statements.
• Disclosure: Companies have a responsibility to disclose relevant
financial information to shareholders and the public as mandated by
the Act.