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Definition of a company
 Company” is derived from two latin words: “com”- group and “panies”-
bread. Therefore, it means group that eat their bread together.
 Originally, it referred to a group of persons who took their meals
together
 . A company is also called a 'corporate ‘of persons meaning “body
 ” A company is nothing but a group of persons who have come together
or who have contributed money for some common purpose and who
have incorporated themselves into a distinct legal entity in the form of a
company for that purpose.

Characteristic of a company
1. Incorporate Association (2 marks): A company is formed through a
process of incorporation under the relevant company law of a country.
This process involves registering the company with the appropriate
government authority.
Company can be formed as:
 Company limited by shares
 Company limited by guarantee
 Unlimited company
any company mentioned above can be public as well as private company
For example, a group of individuals may register a company under the
Companies Act in the UK to establish a business entity

2. Artifical Legal Person (2 marks): A company is recognized as a separate

legal entity distinct from its shareholders and members. It means its
given more or less the same status of a [Link] means it can
enter into contracts, own assets, and sue or be sued in its own name.
tho company is treated as artificial person it cannot enjoy rights of
citizens
For instance, if a customer sues a company for breach of contract, the
lawsuit is against the company itself, not its individual shareholders.
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3. Independent Corporate Personality (2 marks): The corporate

personality of a company refers to its distinct identity in the eyes of the
law. It allows the company to have rights and obligations similar to those
of a natural person.
 For example :Salomon v/s Salomon: Salomon had a business in leather and
shoe manufacturing. Due to some circumstances, he created his own
company and sells his previous business of shoe manufacturing to this
company.
 Salomon gave one share each to his wife, daughter, sons, and the rest of the
company‟s shares were held by him.
 After few years, the company was wound up and had some existing liabilities
but did not have enough assets to pay off the liabilities.
 Unsecured creditors sued Salomon for repayment of their money, but the
court held that the company was not an agent or a trustee for Salomon.
 The company is entirely different from the individual, and hence the
contentions of the creditors could not be upheld
4. Liability (2 marks):
 One of the key characteristics of a company is limited liability, where
the shareholders' liability is limited to the amount of capital they have
invested in the company. This means that shareholders are not
personally liable for the company's debts and obligations.
 For instance, if a company goes bankrupt, the shareholders will not be
required to use their personal assets to settle the company's debts
beyond their investment in the company
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5. Perpetual Succession (2 marks):

 A company has perpetual succession, meaning it continues to exist
even if its members change due to death, resignation, or transfer of
shares. This ensures continuity of the company's existence and
operations. It can only be ended by law
 For example, even if the original founders of a company retire or pass
away, the company can continue to operate under new ownership.

6. Hold and Dispose Property (1 mark): A company has the capacity to

own, hold, and dispose of property in its own name. This includes
tangible assets such as land, buildings, and equipment, as well as
intangible assets such as intellectual property rights.
For example, a company may purchase office space to conduct its
business activities or sell a portion of its assets to raise capital.
7. Transfer of Shares (1 mark): Shareholders of a company have the right
to transfer their ownership shares in the company to others. This
facilitates liquidity and investment in the company's shares
. For example, if a shareholder decides to sell their shares in a publicly
traded company, they can do so through a stock exchange, allowing
other investors to buy those shares.
8. Seal (1 mark): Historically, companies used seals as a formal mark to
authenticate documents and contracts. While the use of seals has
become less common in modern business practices, some companies
may still choose to use a corporate seal for ceremonial or traditional
purposes.
9. Sue and Be Sued : As a legal person, a company has the capacity to
initiate legal proceedings (sue) against others or be subject to legal
action (be sued) in its own name.
For example, if a company believes that a supplier has breached a
contract, it can file a lawsuit against the supplier to seek damages.
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Corporate veil
The corporate veil is the legal separation between a company and its owners,
shielding shareholders from personal liability for the company's debts. It allows
the company to operate as a distinct entity, but courts may pierce the veil in
cases of fraud or misconduct, holding individuals accountable for the
company's actions.

Under statutory provisons

1. Misrepresentation in the Prospectus and Fraud:
 If a company makes false or misleading statements in its prospectus or
engages in fraudulent activities, the corporate veil may be pierced to hold
the company's directors or officers personally liable.
 For instance, if a company's directors knowingly misrepresent the
company's financial status in the prospectus to attract investors, they may
be held personally liable for the misrepresentation.
2. Failure to Return Application Money:
If a company fails to return the application money to investors within the
specified time frame or under the terms of the prospectus, the corporate veil
may be lifted to hold the company and its officers liable for breach of contract
or fraudulent conduct.
3. Failure to Deliver Share Certificate:
If a company fails to deliver share certificates to shareholders as required by law,
shareholders may seek to pierce the corporate veil to hold the company
accountable for its failure to fulfill its obligations.
4. Mis description of Name:
If a company misdescribes its name or engages in deceptive practices related to
its corporate identity, the corporate veil may be lifted to hold the company and
its officers liable for misrepresentation.
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5. Holding Subsidiary Company:

If a parent company exercises excessive control over its subsidiary to the extent
that the subsidiary's separate legal identity is disregarded, the corporate veil
may be pierced to hold the parent company liable for the subsidiary's actions.
6. Investigation of Ownership of a Company:
In cases where the ownership structure of a company is unclear or there are
suspicions of hidden ownership, the corporate veil may be lifted to investigate
the true ownership of the company.
7. Prevention of Fraud:
The corporate veil may be pierced to prevent or uncover fraudulent activities
perpetrated by the company or its officers.
8. Conversion of OPC to Private or Public Company Liability:
If a One Person Company (OPC) fails to comply with the requirements for
conversion into a private or public company, the corporate veil may be pierced
to hold the company and its officers liable for non-compliance

Under judicial interpretations

1. Protection of Revenue:
 If a company engages in tax evasion or other fraudulent activities to
avoid paying taxes, the corporate veil may be lifted to hold the
company and its officers personally liable for tax liabilities
 . This is done to protect the revenue interests of the government.
2. Determination of Enemy Character of a Company:
 During times of war or national security concerns, the government
may seek to determine whether a company has enemy character or is
acting against national interests.
 The corporate veil may be lifted to investigate the ownership and
activities of the company to make such determinations.
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3. Economic Offences:
 In cases involving economic offenses such as money laundering,
insider trading, or securities fraud,
 the corporate veil may be pierced to hold the company and its officers
accountable for their involvement in illegal activities.
4. Avoidance of Welfare Legislation:
 If a company structures its operations in a way that circumvents or
avoids welfare legislation intended to protect workers' rights, health,
safety, or environmental standards, the corporate veil may be lifted to
ensure compliance with the law and prevent exploitation of workers
or resources.
5. Punishment for Contempt of Court:
 If a company fails to comply with court orders or engages in actions
that undermine the administration of justice,
 such as disobeying court injunctions or manipulating legal
proceedings, the corporate veil may be lifted to hold the company and
its officers liable for contempt of court.

TYPES OF COMPANY
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1. Chartered Company:
 Established through royal charter for special privileges in trade or
governance, historically significant in colonial expansion, e.g.,
British East India Company.
2. Statutory Company:
 Created by specific legislation for public welfare sectors like
transportation or utilities, governed by laws, e.g., national
railways or public broadcasting corporations.
3. Registered Company:
 Formed through standard registration under company law, enjoys
legal personality and limited liability, includes modern business
entities like private and public limited companies.
 It is futher divided into bais of : constitution
Liability
Control
And other

1. Associate Company:
 An associate company is one in which another company, known as the
holding company, has a significant influence, usually through ownership of
shares.
 The holding company typically owns between 20% to 50% of the voting
shares of the associate company. And both are joint venture companies
2. Dormant Company:
 Also called as “asset shielding concept”.it is formed to hold asset or future
projects.
 A dormant company is one that is registered with the relevant government
authority,but is not actively trading or generating any income.
 Dormant companies typically have no significant accounting transactions
during a financial [Link]- young Line Jwellery Company
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3. One Person Company (OPC):

 An OPC is a type of company that can be formed by a single individual as
its sole shareholder and director.
 To become a private company, it it requires paid up share capital exceeds
50,00,00 or average turnover exceeds two crore in preceding three years
 One person company has minimum one director and shall have minimum
paid up capital of one lakh
4. Private Company:
A private company is owned by private individuals or entities, and its shares are
not available for purchase by the general public. Private companies often have
restrictions on the transfer of shares and a limited number of shareholders.
5. Public Company:
A public company is one whose shares are listed on a stock exchange and can be
bought and sold by members of the public. Public companies are subject to strict
regulatory requirements and disclosure obligations to protect investors'
interests.
6. Small Company:
Small companies a private company is requires no company secretary no auditor
rotation only to board meetings in a year are required. A small company need
not remain so every year. It is on the base of capital or turnover
A company other than public company,where paid up shares doesnot exceed 50
lakhs

Liability
7. Guarantee Company:
A guarantee company is a type of company where the members' liability is
limited to the amount they agree to contribute in the event of the company
being wound up. Guarantee companies are often used by nonprofit
organizations, charities, or social enterprises.
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8. Limited Company:
A limited company is a type of company where the liability of its members is
limited to the amount unpaid on their shares. This means that shareholders'
personal assets are protected from the company's liabilities.
9. Unlimited Company:
An unlimited company is a type of company where the liability of its members is
not limited. This means that members may be personally liable for the
company's debts and obligations, even beyond the amount of their investment
in the company
Control
10. Foreign Company:
A foreign company is a company incorporated outside the jurisdiction in which
it operates but conducts business within that jurisdiction. Foreign companies are
often subject to registration and compliance requirements in the countries
where they operate.
11. Government Company:
A government company is a company in which a government entity holds a
significant ownership stake or control. Government companies are often
involved in providing public services or infrastructure projects.
12. Holding Company:
A holding company is a company that owns the majority of shares in another
company, known as the subsidiary company. Holding companies typically do not
engage in active business operations but exist to control and manage the
operations of their subsidiaries.

Others
13. Investment Company:
An investment company is a company whose primary business is investing in
securities, such as stocks, bonds, or real estate, on behalf of its shareholders.
Investment companies may operate mutual funds, hedge funds, or other
investment vehicles.
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14. Non-Trading Company:

A non-trading company is a company that does not engage in active business
operations, such as buying or selling goods or services. Non-trading companies
are often used for holding assets, intellectual property, or as investment
vehicles.
15. Producer Company:
A producer company is a type of company formed by farmers, artisans, or other
producers to collectively engage in agricultural or industrial activities and share
profits. Producer companies aim to empower producers by providing them with
collective bargaining power and access to markets.

MOA
Meaning of MOA:
1. The Memorandum of Association (MOA) is a legal document that sets out
the constitution and objectives of a company.
2. It is one of the foundational documents required for the incorporation of
a company and defines the company's scope of activities, powers, and
limitations.
3. The MOA establishes the company's relationship with its shareholders
and external stakeholders
4. The MOA is defined as a document that contains the fundamental
conditions upon which a company is incorporated.
Contents of MOA: The Memorandum of Association typically includes the
following key elements:
 Name Clause: Specifies the name of the company, which must end with the
appropriate corporate identifier (e.g., "Limited" for a public limited
company, "Private Limited" for a private limited company).
 Registered Office Clause: Every company must have registered office .the
moa should contain name of state in which registered office is there. Within
15 days of its incorporation it shall have a registered office
 Object Clause: Sets out the main objectives or purposes for which the
company is formed. This clause defines the scope of activities that the
company is authorized to undertake and limits its operations to those
specified objectives.
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 Liability Clause: States the liability of the company's members, which can
be limited by shares or guarantee, or unlimited.
 Capital Clause: Specifies the authorized share capital of the company, i.e.,
the maximum amount of share capital that the company is authorized to
issue.
Alterations of MOA:
 Name Clause: Change of company name requires shareholder approval and
filing with the Registrar of Companies.

 Registered Office Clause: Changing the registered office address within the
same state involves updating records and filing with the Registrar.

 Change from One State to Another: Moving the registered office to a

different state requires complex procedures, including approvals from
shareholders and regulatory authorities in both states.

 Object Clause :Altering the main objectives of the company requires

shareholder approval and compliance with legal requirements.

 Liability Clause: Changing the liability of members requires shareholder

approval and compliance with legal procedures, such as amending the
Articles of Association.
What’s the use of Memorandum of Association?
1. It defines the scope & powers of a company, beyond which the company
cannot operate.
2. It regulates company’s relation with the outside world.
3. It is used in the registration process; without it the company cannot be
incorporated
Meaning of AOA:
The Articles of Association (AOA) are a legal document that governs the
internal management, regulations, and operations of a company. It
supplements the Memorandum of Association (MOA) by providing
detailed rules and procedures for the company's administration and
decision-making processes.
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Contents of AOA:
The Articles of Association typically include the following key elements:
1. Share Capital: Specifies the authorized share capital of the company and
the rights attached to different classes of shares.
2. Shareholders' Rights: Defines the rights and obligations of shareholders,
including voting rights, dividend entitlements, and transfer of shares.
3. Directors and Board Meetings: Sets out the procedures for appointment,
powers, and duties of directors, as well as rules for board meetings,
quorum, and decision-making processes.
4. Dividends and Reserves: Specifies the procedures for declaring and
distributing dividends, as well as rules for setting aside reserves and
surplus profits.
5. Borrowing Powers: Outlines the company's authority to borrow money,
issue debentures, and create charges over its assets.
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Three doctrine
1. Doctrine of Ultra Vires:
Meaning: Ultra vires is a Latin term meaning "beyond the powers." The
doctrine of ultra vires refers to the principle that a company cannot undertake
activities or enter into contracts that are beyond the scope of its objects clause
as outlined in its Memorandum of Association (MOA).
Objective: The objective of the doctrine is to protect shareholders and
creditors by ensuring that the company operates within its authorized powers
and does not engage in activities that may jeopardize its interests.
Effect on Transactions:
 Boing (Avoiding) Ultra Vires Transactions:Actions taken to nullify or
rescind unauthorized transactions.
 Directors' Personal Liability:Directors may be personally liable for losses
resulting from unauthorized actions.
 Liability for Tort:The company may be liable for tortious acts committed
during unauthorized transactions.
 Property Acquired under Ultra Vires Transactions:Treatment of
property acquired through ultra vires transactions may vary, potentially
subject to recovery actions.
2. Doctrine of Constructive Notice:
Meaning: The doctrine of constructive notice states that all persons dealing
with a company are deemed to have knowledge of the company's public
documents, such as its Memorandum of Association (MOA) and Articles of
Association (AOA), as these documents are available for public inspection.
Effect: Third parties are presumed to have knowledge of the contents of a
company's public documents, even if they have not actually read or inspected
them. This knowledge is considered to be "constructive" and affects the legal
rights and liabilities of the parties involved.
Example: If a person enters into a contract with a company, they are presumed
to have knowledge of any limitations or restrictions contained in the
company's MOA and AOA, even if they did not actually review these
documents. Therefore, they cannot claim ignorance of the company's powers
or restrictions if the contract is later found to be ultra vires.
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3. Doctrine of Indoor Management (Procedural Irregularity Rule):

Meaning: The doctrine of indoor management, also known as the Procedural
Irregularity Rule or the Turquand rule, provides protection to third parties
dealing with a company against internal irregularities or unauthorized actions
by the company's officers.
Effect: Third parties dealing with a company can rely on the external
appearance of authority and regularity, and they are not required to inquire
into the internal affairs of the company. This protects innocent third parties
from being held accountable for internal irregularities within the company.