A PRESENTATION ON

COMPANY
Introduction
 There are many different forms of businesses like Sole
Proprietorship, Partnership Firm, Hindu Undivided Family Business,
Limited Liability Partnership, etc.
 But Company form of business has certain advantages over another
form of business like limited liability, perpetual succession, Separate
legal identity, etc.
 In common parlance, the meaning of company form of business can
be understood as an association of persons formed for the purpose of
carrying on some business.
 The company is a legal person created by a process of law other than
natural birth. For this reason, a company is also called as an artificial
legal person.
DEFINITIONS
 As per Section 2(20) of the Companies Act, 2013,
the term “Company has been defined as a company
incorporated under this Act or under any previous
company law.”
 Ashwathappa: “A Company is an artificial and
invisible being recognized by the law and created
to pursue business objectives.”
FEATURES
 An Artificial Person;- A company is legally separate from its owners. It is
a ‘legal person’ and it continues to exist even though its ownership
changes several times. Being a legal person, a company can own property,
take legal actions, and enter into contracts on its own name.
 it is not treated as a citizen either under Article 19 of the Constitution of
India or under the Indian Citizenship Act. It cannot ask for fundamental
rights like citizen. A company is creation of the Law. It is an artificial
person.
 Compulsory Incorporation (or Corporate Body)A joint stock company
is a corporate form of organisation. A company is created by registration
under the Companies Act. It comes into existence when the Registrar of
Companies enter is name in the Resister and issue a Certificate of
Incorporation. Registration is compulsory.After 30thAugust,2013 company
can be registered under the Companies Act, 2013.
 Common Seal- A company is an artificial person, and not a natural person. Therefore, it
cannot sign documents for itself. It has its common seal and is known by its name. It is
the signature of the company. Of course, signatures of two directors as witnesses are
necessary in addition to the common seal. The seal is affixed on the contract, share
certificates, documents, and the day-to-day transactions of the company.
 Perpetual Existence-A company is an artificial person and has a separate identity. Its
existence is not affected by lunacy, resignation, insolvency, withdrawal, or death of its
members/shareholders or directors.
 Note that its formation is voluntary, but continuance is compulsory. It cannot be
dissolved unless the Law in force permits. It enjoys a perpetual life and provides
stability in its operations.
 Separate Management-A company is an artificial person and its ownership is
completely separate from its management. Shareholders (who are owners of company)
do not manage the company. The management is under the charge of the Board of
Directors and a body of executives working under the Board. The Board of Directors
ran the company as per the provisions of the Article. Company can afford an efficient
and expert management.
 Transferability of Shares- Normally, a share of a company is a movable
property and can be transferable as per the provisions of the Act. A
member can enjoy a statutory right to sell his shares and get them
transferred in the name of the buyer on the company’s Register of
Members.
 People can easily buy or sell shares at any time. Shares are the liquid asset
and can be readily converted into cash. Free transferability and good
marketability of shares offer many benefits to both the company as well as
its shareholders.
 Limited Liability- In a joint stock company, the member’s liability is
usually limited to face value of shares that she/he holds. Every member
(or shareholder) knows in advance the magnitude of risk or loss.
 In case of liquidation or extraordinary loss incurred, private property of
the member is not attachable. A shareholder shall not have any future
liability if he owns a fully paid up share. A member cannot be held
personally liable for the debt of the company.
 Number of Members
 In a private company, there are minimum two members and
maximum 200 members. In case of public limited company, there
shall be minimum seven members and there is no restriction to
the maximum number of members. Under the Companies Act,
2013, a One Person Company can also be created, with only one
member.
 Voting Right
 The members of company can vote as per number of shares they
hold. If they hold more share, they can exercise more control over
the management. Thus, voting right depends on number of
shares.
MERITS
 Huge Capital: The company form of organisation is able to collect a large amount
of capital. There are millions of shareholders who can invest their money in the
company’s total share capital. Limited liability, easy transferability, efficient
management, and other benefits associated with a company form of organisation
can attract investors to invest in share capital.
 Limited Liability of Members: In a limited company, the members/shareholders
have limited liability. In case of a heavy loss or liquidation, the members’ liability
is limited to the value of shares they hold. For example, if a person holds 1000
shares of Rs. 10 each. In any type of circumstances, his maximum liability or loss
is limited to Rs. 10000 only.
 Steady or Perpetual Life Span: Obviously, a company is an artificial person,
created by the Law. It has a separate identity. Change in membership (i.e., transfer
of shares) or management does not have any impact on the company’s existence.
In short, its existence is not affected by lunacy, resignation, insolvency, withdrawal
or death of its members/shareholders or directors.
 Enterprising and Efficient Management: Shareholders elect
capable and experienced persons as the directors of the board.
 Similarly, a company can employ professionally qualified,
capable, and experienced managers to manage various activities.
Due to appreciation of merits, talented and creative people prefer
to join the company.
 Benefits of Economies of Scale: Normally, a company
undertakes its operations on a large scale. It can afford the latest
technology and innovative methods. Due to large scale purchase,
production, and distribution, overall cost can be reduced. Per
unit cost can be brought to low. This can further strengthen its
competitive strengths.
 Transferability of Shares: Normally, a share of the company can be
transferable as per the provisions. Shares become the liquid asset and can
be readily converted into cash. Free transferability and good marketability
of shares offer many benefits to both the company as well as its
shareholders.
 Creditable Form of Business Organisation: A company maintains more
systematic and transparent record of economic transactions. It declares its
business record publicly. Companies also contribute liberally to social
welfare activities. It creates public confidence. Creditors, banks, or
financial institutions are eager to lend money to good companies
 Scope for Expansion: Large amount of resources, strong earning, capable
managing body, professional managers, rich contacts, strong customer base,
high credit in society, limited liability, etc., offers infinite scope for
expansions.
DEMERITS
 Lengthy and Costly Formation: Company formulation involves a lot of
documents and formalities. Experts are paid heavy fees for company formation.
Similarly, raising share capital through the public issue is also lengthy and costly
affair. Thus, promotion of a company is a difficult, expensive, lengthy, time-
consuming, and complex task.
 Possibility of Fraudulent Management: In joint stock companies, there is chance
of fraudulent transactions. The managing body may take undue advantages for
their personal benefits. Some decisions are taken on a personal ground.
Overambitious and selfish promoters and directors manipulate accounting records
and mislead the shareholders, financers, government, and the whole society.
Sahara Group, King Fisher, Satyam Computers, etc., are some of the examples.
 Dictatorship in Management: Democratic management is only ideology.
Management of company is not democratic but seems to be oligarchic. A few big
shareholders dominate the board, and consequently the company management. The
control is centralized in a few hands. The Companies Act has granted many powers
to shareholders. But they hardly exercise the powers. There is possibility of
misuse of power as well as resources.
 Lack of Business Secrecy: A company has to disclose all business affairs to the public. It
has to show its financial records – sales, profit-loss, and other information. Similarly, they
have to discuss business strategies in the annual meetings and furnish information to its
investors. Lack of business secrets may harm the company’s long term business interest.
 Very High Management Costs: Company management is expensive. Top position holder
– chairman, directors, CEO, and top officials are paid high salaries. Also, they are entitled
for a number of fringe benefits or allowances. Billions of rupees are spent for creating
facilities and conveniences for their comfort and dignity throughout the world.
Chairmen, CEOs and top executives are paid crores of rupees.
 Monopolistic control & Exploitation of consumers: Companies often forms of business
combinations to eliminate competition, thereby creating monopoly and charging maximum
prices from the consumers. By such practices companies do supernormal profits and
exploit the consumers.
 Excessive Government control and interference: As discussed earlier, there are too
many provisions and legalities that a company has to undergo from time to time. This
excessive control and interference hampers the functioning the company and reduces the
level of enthusiasm.
 INTRODUCTION
 A One Person Company (OPC) has a recent origin.
 The concept of an OPC was introduced by the Companies Act,
2013.
 As per the Act, a single national person can constitute a company
under the One Person Company (OPC) concept.
 The introduction of the One Person Company (OPC) in the legal
system is a move that would encourage corporatization of micro
business and entrepreneurship.
 It is a simple form of Limited Liability Company.
 It safeguards the businessman from unlimited liability.
 A One Person Company can be registered under the Companies
Act, 2013.
Characteristics of OPC
 Meaning: An OPC is a new type of business organisation that allows a single
entrepreneur to operate as corporate entity with limited liability protection. The One
Person Company is a hybrid form of business organisation that combines features of
sole-proprietorship and a joint stock company.
 The Act Applicable: One Person Company can be registered under the Companies Act,

2013. With the implementation of the Companies Act, 2013, a single national person can
constitute a Company under the One Person Company (OPC) concept.
 Purpose: An OPC safeguards the businessman from unlimited liability. It enables

individual capabilities to contribute to economic growth and generate employment

opportunity.
 Mandatory Conditions: As per OPC (Rule 3), only a natural person, who is an Indian

citizen and resident of India, shall be eligible to incorporate a One Person Company.
 Only One Shareholder: As the name indicates, a single person can set up a company. A

natural person, with certain mandatory conditions, can create a One Person Company.
 Separate Entity: A One person Company (OPC) has a separate legal entity. It
can operate same as private company. It can own property, can enter into the
contract, and can incur debts.
 Limited Liability: A one person company is characterized by limited liability.
Liability is limited to company’s capital and wealth.
 Continuity or Stability: This Company has separate legal entity. Its existence
is not affected by the death or departure of any member. In case of death or
inability of the member, the nominee can take the charge of company.
 Owning Property: A company is legal person. It can acquire, own, enjoy, or
sell property on its own name. The shareholder cannot make any claim as long
as the company continues.
 Number of Director: This type of company has only one director. The sole
shareholder can himself be the sole director. An OPC can employ necessary
managerial and operative staff to manage activities.