{"id":1434,"date":"2024-07-23T15:49:35","date_gmt":"2024-07-23T10:19:35","guid":{"rendered":"https:\/\/lawtribune.in\/?p=1434"},"modified":"2024-07-23T15:49:36","modified_gmt":"2024-07-23T10:19:36","slug":"salient-features-advantages-of-forming-a-company-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/lawtribune.in\/?p=1434","title":{"rendered":"Salient Features\/Advantages of Forming a Company &#8211; The Companies Act, 2013"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/lawtribune.in\/?p=1434\/#Introduction\" >Introduction :<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/lawtribune.in\/?p=1434\/#1_Separate_Legal_Existence_Corporate_personality\" >1. Separate Legal Existence. ( Corporate personality) :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/lawtribune.in\/?p=1434\/#2_Perpetual_succession\" >2. Perpetual succession<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/lawtribune.in\/?p=1434\/#3_Limited_Liability_of_Members\" >3. Limited Liability of Members :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/lawtribune.in\/?p=1434\/#Exceptions_to_the_principle_of_limited_liability_Incorporation_by_furnishing_false_information\" >Exceptions to the principle of limited liability : Incorporation by furnishing false information. \u00a0<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/lawtribune.in\/?p=1434\/#%C2%B7_Fraudulent_conduct_of_business\" >\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Fraudulent conduct of business.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/lawtribune.in\/?p=1434\/#%C2%B7_Unlimited_company\" >\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unlimited company.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/lawtribune.in\/?p=1434\/#%C2%B7_Misleading_prospectus\" >\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Misleading prospectus.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/lawtribune.in\/?p=1434\/#%C2%B7_Acceptance_of_deposit_with_a_fraudulent_intention\" >\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acceptance of deposit with a fraudulent intention.<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/lawtribune.in\/?p=1434\/#4_Transferability_of_shares\" >4. Transferability of shares :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/lawtribune.in\/?p=1434\/#5_Capacity_to_sue_and_be_sued\" >5. Capacity to sue and be sued :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/lawtribune.in\/?p=1434\/#6_Contractual_Rights\" >6. Contractual Rights :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/lawtribune.in\/?p=1434\/#7_Common_Seal\" >7. Common Seal :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/lawtribune.in\/?p=1434\/#8_Separate_property\" >8. Separate property :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/lawtribune.in\/?p=1434\/#9_Separate_Management\" >9. Separate Management :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/lawtribune.in\/?p=1434\/#10_Voluntary_Association_for_Profit\" >10. Voluntary Association for Profit :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/lawtribune.in\/?p=1434\/#11_Termination_of_Existence\" >11. Termination of Existence :-<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/lawtribune.in\/?p=1434\/#12_Artificial_person\" >12. Artificial person<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction : <span class=\"ez-toc-section-end\"><\/span><\/h1>\n\n\n\n<p>Before starting a new business venture, its very essential to know advantages of incorporation of a company like,\u00a0limited liability, transferable shares, perpetual succession, flexibility, etc. Incorporated businesses offer many more advantages over sole proprietorship companies or partnership companies. Following are different advantages of forming a company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Separate_Legal_Existence_Corporate_personality\"><\/span><strong>1.<\/strong> Separate Legal Existence. ( Corporate personality) :<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The outstanding feature of a company is its&nbsp;<strong>independent corporate existence.<\/strong>&nbsp;A company before the law is a person. It is regarded as an entity separate from its members. By incorporation under the Act, the company is vested with a <strong>corporate personality<\/strong> which is distinct from the members who compose it. No one can say that he is the owner of the company. Now the business belongs to an institution. Thus a company continues to exist even if the members go on changing from time to time.<\/p>\n\n\n\n<p>In the landmark decision of&nbsp;<a href=\"https:\/\/lawcasesummaries.com\/knowledge-base\/salomon-v-a-salomon-co-ltd-1897-ac-22\/\" target=\"_blank\" rel=\"noreferrer noopener\"><em>Salomon v Salomon (1897)<\/em>, <\/a>it was held that a company has a<strong>&nbsp;corporate personality<\/strong>&nbsp;which is distinct from its members or subscribers. A single shareholder may virtually (\u0905\u0915\u094d\u0937\u0930\u0936\u0903) hold the entire share capital of the company; even in such a case, the company does not lose its identity. It was declared that the&nbsp;<strong>business<\/strong>&nbsp;belonged to the&nbsp;<strong>company<\/strong>&nbsp;and not to a single shareholder or number of shareholders and neither of them is liable to indemnify the company for its debts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Perpetual_succession\"><\/span><strong>2<\/strong>. Perpetual succession<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>An incorporated company never dies, except when it is wound up as per law. A company, being a separate legal person is unaffected by death or departure of any member and it remains the same entity, despite total change in the membership.<\/p>\n\n\n\n<p>For understanding this point more clearly let\u2019s assume M, N, and O are the only members of a company, holding all its shares. Their shares may be transferred to or inherited by P, Q, or R who may, therefore, become the new members and members of the company as they are now the shareholders of the company. But the company will remain the same entity, with same name, privileges and immunities, property and assets.<\/p>\n\n\n\n<p>In the case of <em><u>PNB v. Lakshmi Industrial &amp; Trading Co. (P) Ltd.(2001)<\/u><\/em>, it was held by the Allahabad High court that, persons giving guarantee for co\u2019s loan could not claim to be relieved of liability because the co\u2019s management had totally changed including MD. Such changes does not effect the comtinuity of the co., or its commercial and contractual relations.<\/p>\n\n\n\n<p><strong>Perpetual succession<\/strong>&nbsp;means that membership of a company may keep on changing from time to time, but that does not affect the companies continuity.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Limited_Liability_of_Members\"><\/span><strong>3<\/strong>. Limited Liability of Members :<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>\u201cThe privilege of limited liability for business debts is one of the principal advantages of doing business under the corporate form of organization.\u201d<\/p>\n\n\n\n<p>A corporate form of business is far superior to- and much safer than that of a partnership firm as far as the monetary risk factor is concerned. A partner of a firm is personally liable for all the liabilities of the firm to an unlimited extent.<\/p>\n\n\n\n<p>A company having its separate legal entity is the owner of its own assets and bound by its liabilities.<\/p>\n\n\n\n<p>Members are neither the owner nor liable for its debts.<\/p>\n\n\n\n<p>All the debts of a company are to be paid by itself rather than by its members. Members liability becomes limited or restricted to the<strong>&nbsp;nominal value<\/strong>&nbsp;of the shares taken by them in a company.<\/p>\n\n\n\n<p>In other words, a shareholder is liable to pay the balance, if any due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets. This means that, the liability of a member is limited.<\/p>\n\n\n\n<p>For example, if A holds shares of the total nominal value of Rs. 1,000 and has already paid Rs. 500\/- as part payment at the time of allotment, he cannot be called upon to pay more than Rs. 500\/-. If he holds fully-paid shares, he has no further liability to pay even if the company is declared insolvent.<\/p>\n\n\n\n<p>No member is bound to contribute anything more than the nominal value of the shares held by them or guarantee given by them in case of winding up of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Exceptions_to_the_principle_of_limited_liability_Incorporation_by_furnishing_false_information\"><\/span><strong>Exceptions to the principle of limited liability :<\/strong> <strong>Incorporation by furnishing false information. \u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to&nbsp;<a href=\"http:\/\/corporatelawreporter.com\/companies_act\/section-7-of-companies-act-2013-incorporation-of-company\/\" target=\"_blank\" rel=\"noreferrer noopener\">section 7(7), (b)<\/a>&nbsp;of the Act, tribunal may on an application made to it in regards to any fraudulent or false information being furnished by a company during its incorporation and on being satisfied with the same, direct that<strong>&nbsp;liability<\/strong>&nbsp;of the members of such company shall be unlimited.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"%C2%B7_Fraudulent_conduct_of_business\"><\/span>\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <strong>Fraudulent conduct of business.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Under&nbsp;<a href=\"https:\/\/indiankanoon.org\/doc\/1981164\/\" target=\"_blank\" rel=\"noreferrer noopener\">section 339(1)<\/a>, during the course of winding up a company if it appears that any business of a company is carried on with the intent to defraud creditors of the company or any other persons, the tribunal may on the application of the&nbsp;<strong>Official Liquidator<\/strong>&nbsp;or the&nbsp;<strong>Company Liquidator<\/strong>&nbsp;or any other creditor on being satisfied declare that any person who is or has been a director, manager or officer of the company or any other person knowing part of aforesaid business shall be personally responsible, without any limitation of liability.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"%C2%B7_Unlimited_company\"><\/span>\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <strong>Unlimited company.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When the company is incorporated under&nbsp;<a href=\"https:\/\/indiankanoon.org\/doc\/1330413\/\" target=\"_blank\" rel=\"noreferrer noopener\">section 3(2)(c)&nbsp;<\/a>&nbsp;of the Act as an&nbsp;<strong>unlimited company<\/strong>. Then as the name clearly suggests that the liability of its members will be unlimited.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"%C2%B7_Misleading_prospectus\"><\/span>\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <strong>Misleading prospectus.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As per&nbsp;<a href=\"https:\/\/www.legislation.gov.uk\/ukpga\/2006\/46\/section\/35\" target=\"_blank\" rel=\"noreferrer noopener\">section 35(3) companies act<\/a>, where it is proved that a&nbsp;<strong>prospectus<\/strong>&nbsp;is issued with an intention to defraud or mislead an applicant for securities of a company or any other person for any fraudulent purpose, then every person who was a director at the time of issuance of &nbsp;such prospectus or has been named as director in the prospectus shall be personally responsible without any limitation of liability for all and any of the losses or damages.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"%C2%B7_Acceptance_of_deposit_with_a_fraudulent_intention\"><\/span>\u00b7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <strong>Acceptance of deposit with a fraudulent intention.<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As per&nbsp;<a href=\"https:\/\/indiankanoon.org\/doc\/1138156\/\" target=\"_blank\" rel=\"noreferrer noopener\">section 75(1)<\/a>, when a company fails to repay the deposit or part thereof or any interest referred under<strong>&nbsp;section 74<\/strong>&nbsp;within specified time and it is proved that deposit is accepted with the intent to defraud the depositors or for any&nbsp;<strong>fraudulent purpose,<\/strong>&nbsp;every officer of the company who was responsible acceptance of those deposits shall be liable of all or any of the losses or damages that may have been incurred by depositors.<\/p>\n\n\n\n<p>  <strong>Actions to be taken in pursuance of inspector\u2018s report.<\/strong><\/p>\n\n\n\n<p>Section 224(5) : Where the report made by an inspector states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement (a&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/situation\">situation<\/a>&nbsp;in which a&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/person\">person<\/a>&nbsp;or&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/organization\">organization<\/a>&nbsp;is&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/forced\">forced<\/a>&nbsp;to&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/pay\">pay<\/a>&nbsp;back&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/money\">money<\/a>&nbsp;that they have made in an&nbsp;<a href=\"https:\/\/dictionary.cambridge.org\/dictionary\/english\/illegal\">illegal<\/a>&nbsp;way) of such asset, property, or cash, as the case may be, and also for holding such director, key managerial personnel, officer or other person liable personally without any limitation of liability.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"4_Transferability_of_shares\"><\/span><strong>4.<\/strong> Transferability of shares :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The capital of a company is divided into parts, called shares.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.legislation.gov.uk\/ukpga\/2006\/46\/section\/44\" target=\"_blank\" rel=\"noreferrer noopener\">Section 44 companies act&nbsp;<\/a>of the Act, declares that \u201cthe shares or debentures or any other interest of any member in a company shall be a movable property that can be transferred in the manner provided in the article of the company.\u201d<\/p>\n\n\n\n<p>(Articles of Association is a document containing all the rules and regulations that governs the company.)Thus&nbsp;<strong>incorporation of a company<\/strong>&nbsp;allows its member <em>to sell their shares<\/em> in an open market and to get back his investment without any hassle of withdrawing money from the company. This unique feature of incorporation provides&nbsp;<strong>liquidity<\/strong>&nbsp;to the&nbsp;<strong>investor and stability<\/strong>&nbsp;to the company. On the other hand in a partnership firm partners can\u2019t sell their share in an open market except with unanimous consent of all the partners.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"5_Capacity_to_sue_and_be_sued\"><\/span><strong>5.<\/strong> Capacity to sue and be sued :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Being a body corporate company possesses individual capacity being sued and suing others in its own name. A company\u2019s right to sue arises when some loss is caused to the company i.e. to property or personality of the company. A company also has a<strong>&nbsp;right to sue<\/strong>&nbsp;whenever any defamatory material published about it that may affect its business.<\/p>\n\n\n\n<p>The&nbsp;<strong>criminal complaint<\/strong>&nbsp;can be filed by a company but it must be represented by a natural person. Not necessarily be represented throughout by the same person but the absence of such representative may result in dismissal of the complaint. Similarly, any default on the part of the company can be sued by the victim on the name of the company only.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"6_Contractual_Rights\"><\/span><strong>6.<\/strong> Contractual Rights :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Company, can enter into contracts for the conduct of the business in its own name. A shareholder can not enforce a contract made by his company; he is neither a party to the contract, nor be entitled to the benefit derived from it as a company is not a trusty for its shareholders.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"7_Common_Seal\"><\/span><strong>7.<\/strong> Common Seal :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Though a company has an artificial personality, it acts through human beings, who are called as directors. They act as agents to the company but not to its members. All the acts of the company are authorized by its \u201ccommon seal\u201d. The \u201ccommon seal\u201d is the official signature of the company. A document not bearing the common seal of the company will not be binding on the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"8_Separate_property\"><\/span><strong>8. <\/strong>Separate property :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company being a legal person and entirely distinct from its members, is capable of owning, enjoying and disposing of property in its own name. The corporate property is clearly distinguished from the members\u2019 property and members have no direct proprietary rights to the company\u2019s property&nbsp;<\/p>\n\n\n\n<p>It was held in <em><u>R.F. Perumal v. H. John Deavin<\/u><\/em> that, \u201cno member can claim himself to be the owner of the company\u2019s property during its existence or in its winding-up\u201d.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"9_Separate_Management\"><\/span><strong>9.<\/strong> Separate Management :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The members may derive profits without being burdened with the management of the Company. They elect their representatives as Directors on the Board of Directors of the company to conduct corporate functions through managerial personnel employed by them.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"10_Voluntary_Association_for_Profit\"><\/span><strong>10.<\/strong> Voluntary Association for Profit :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company is a voluntary association foor profit. It is formed for the accomplishment of some stated goals and whatsoever profit is gained is divided among its shareholders or saved for the future expansion of the company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"11_Termination_of_Existence\"><\/span><strong>11.<\/strong> Termination of Existence :-<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A company, being an artificial juridical person, does not die a natural death. Generally, the existence of a company is terminated by means of winding up. However, to avoid winding up, sometimes, companies adopt strategies like reorganisation, reconstruction and amalgamation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"12_Artificial_person\"><\/span><strong>12.<\/strong> Artificial person <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Company is an artificial person created by law. It is not a human being but it acts through human beings. It is considered as a legal person which can enter into contracts, possess properties in its own name, sue and can be sued by others etc. It is called an artificial person since it is invisible, intangible, existing only in the contemplation of law. It is capable of enjoying rights and being subject to duties.<\/p>\n\n\n\n<p><strong><u>Company is not a citizen:<\/u><\/strong> The company, though a legal person, is not a citizen under the Citizenship Act, 1955 or the Constitution of India. A company can act only through natural persons. Nevertheless, it is to be noted that certain fundamental rights enshrined in the Constitution for protection of \u201cperson\u201d, e.g., right to equality (Article 14) etc. are also available to company. Section 2(f) of Citizenship Act, 1955 expressly excludes a company or association or body of individuals from citizenship.<\/p>\n\n\n\n<p>To sum up,<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>\u201c A company is a voluntary association for profit with capital divisible into transferable shares with limited liability, having a distinct corporate entity with perpetual succession \u201c.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction : Before starting a new business venture, its very essential to know advantages of incorporation of a company like,\u00a0limited<\/p>\n","protected":false},"author":2,"featured_media":948,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","footnotes":""},"categories":[36,31],"tags":[],"class_list":["post-1434","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-companies-act-2013","category-law-notes"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Salient Features\/Advantages of Forming a Company - The Companies Act, 2013 - Law Tribune<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/lawtribune.in\/?p=1434\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Salient Features\/Advantages of Forming a Company - The Companies Act, 2013 - Law Tribune\" \/>\n<meta property=\"og:description\" content=\"Introduction : Before starting a new business venture, its very essential to know advantages of incorporation of a company like,\u00a0limited\" \/>\n<meta property=\"og:url\" content=\"https:\/\/lawtribune.in\/?p=1434\" \/>\n<meta property=\"og:site_name\" content=\"Law Tribune\" \/>\n<meta property=\"article:published_time\" content=\"2024-07-23T10:19:35+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-07-23T10:19:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/lawtribune.in\/wp-content\/uploads\/2023\/10\/paper-3261159.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"787\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Prof. Mangesh Jawlekar\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Prof. Mangesh Jawlekar\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"9 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/lawtribune.in\\\/?p=1434#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/lawtribune.in\\\/?p=1434\"},\"author\":{\"name\":\"Prof. Mangesh Jawlekar\",\"@id\":\"https:\\\/\\\/lawtribune.in\\\/#\\\/schema\\\/person\\\/8df91e1fe8b6b55dff856efd61c0b3fa\"},\"headline\":\"Salient Features\\\/Advantages of Forming a Company &#8211; 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