CAIIB BRBL Module D Unit 16 : Definition And Features of A Company

24/11/2023

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CAIIB Paper 4 BRBL Module D Unit 16 : Definition And Features of A Company (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Definition And Features of A Company”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module D (COMMERCIAL & OTHER LAWS WITH REFERENCE TO BANKING OPERATIONS) Unit 16 : Definition And Features of A Company, Aspirants must go through this article to better understand the topic, Definition And Features of A Company and practice using our Online Mock Test Series to strengthen their knowledge of Definition And Features of A Company. Unit 16 : Definition And Features of A Company

Definition of A Company

Section 3 of the Companies Act, 1956 defined a company as ‘a company formed and registered under this Act, or an existing company’.
An existing company means a company formed and registered under any of the former Companies Acts. Section 2(20) of the new Companies Act, 2013 similarly defines company as “a company incorporated under the Companies act, 2013 or under any previous company law” which also means that those companies that were incorporated under Section 3 of the Companies Act, 1956 or any previous Companies Act.

Features Of A Company

Registration:

A company has to be compulsorily registered under the Companies Act, 2013. Companies registered under Companies Act, 1956 need not re-register.

Artificial Legal Person:

A company is an artificial legal person which is created by law and can be dissolved by the law alone. It is invisible, intangible and exists only in the eyes of the law. It enjoys many rights of a natural person. A company may enter into contracts in its own name, and it can acquire and dispose of property and can be fined under the provisions of the law for violation of law.
A company is not a natural citizen like an individual and courts have held that neither the provisions of the Constitution of India nor the provisions of the Citizenship Act apply to a company.

Independent corporate personality

By incorporation under the Companies Act, 1956/The Companies Act 2013, the company is vested with a corporate personality which is independent of and different from the members who compose it.

Limited liability:

Limitation of liability is an advantage of incorporation of a company. Since under company law, the existence of a company is different from its own members and directors and a company has its own existence and is itself the owner of its assets and has its own liabilities, the members of the company are not bound to contribute anything more than the nominal value of the shares held by them and their liability ends there even though there may be creditors who may be claiming much larger sums from the company.

Perpetual succession:

An incorporated company never dies unless wound up as per the applicable law. It is a legal entity with perpetual succession.

Separate property:

On incorporation the company becomes the owner of its capital and assets. The company is capable of holding property in its own name.

Transfer of shares:

The Companies Act, 1956 (now ICA 2013) states that shares or other interest of any member in a company shall be moveable property, transferable in the manner provided by the articles of association. A shareholder may sell his shares in the open market and get back his money without changing the capital of the company.

Common Seal:

As a company is an artificial legal person, it is not capable of signing documents for itself. It acts through natural persons who are the directors appointed by the shareholders of the company. Any document bearing the common seal of the company is legally binding on the company.
As per the amendment to Sec. 46 of the Companies Act, 2013, dealing with issue of share certificates of a Company, the use of common seal has been made optional. All such documents which required affixing the common seal may now instead be signed by two directors or one director and a company secretary of the company.

Corporate veil:

Although a company is a separate legal entity distinct from shareholders, in reality it is an association of persons who are the beneficial owners of all the corporate property. Hence, it may sometime become necessary to look at the persons who are behind the corporate veil.
The corporate veil is said to be lifted or pierced when the Court ignores the separate entity of the company and directly concerns itself with the members or directors of the company. Corporate veil is normally ignored and lifted by the Court when the persons managing the company have indulged in to fraudulent, illegal acts or have siphoned off the funds of the company for their own benefit.

Distinction Between A Company And Partnership

Registration:

Registration of a company is compulsory under the Companies Act, 2013. Registration of a partnership is not compulsory under the Indian Partnership Act, 1932.

Number of members/partners:

As provided under Section 3(1)- A company may be formed for any lawful purpose by—

Seven or more persons, where the company to be formed is to be a public company;
Two or more persons, where the company to be formed is to be a private company;

Minimum number of two persons is required to form a partnership. The maximum number shall not exceed one hundred

Legal status: A company has a legal existence separate from its own members and is viewed as a separate legal person from its members. A firm does not have a separate legal existence different from its own partners.
Ownership of property: The property of the company is owned by the company itself and not its members as the company has a separate legal existence. The property of the firm is owned by the by the firm through its partners as a firm does not have a separate legal existence different from its own partners.
Management: The company is managed by a board of directors elected by the shareholders. A partnership is managed by the partners except the dormant and sleeping partners.
Perpetual existence: A company has a perpetual existence. A partnership does not have a perpetual existence and may be dissolved on the happening of certain events or otherwise even with the consent of all partners.
Contracts: A member/shareholder of the company can contract with the company. A partner cannot contract with his/her own partnership firm.
Liability: Except in case of a company with unlimited liability, the liability of the members of the company is limited to their shareholding. The liability of partners in a partnership is unlimited.
Transfer: When shares of a company are transferred to someone, he/she i.e. the transferee becomes a member of the company and the consent of all members is not required to become a member. A person can become a partner in a partnership firm with the consent of all the partners.
Death: The death of any or all members of the company does not determine (end) the existence of the company. Death of a partner dissolves the partnership unless the partnership deed provides otherwise.
Agency: The members of a company are not the agents of each other or of the company. Every partner of a firm is an agent of the firm as well as other partners.