Company Law

Company law (also known as enterprise law, or corporation law) is the body of legislation that governs the rights, relationships, and actions of individuals, firms, and organisations. The phrase relates to the legal practise of corporate law, as well as the philosophy of companies. Corporate law refers to the area of law that deals with issues that arise directly from a corporation’s life cycle. As a result, it includes a corporation’s inception, financing, governance, and eventual demise.

While the minute form of corporate governance as embodied by share ownership, capital market, and company culture regulations varies, many nations have comparable legal traits – and legal difficulties. Corporate law governs the interactions between companies, investors, shareholders, directors, workers, creditors, and other stakeholders such as customers, the community, and the environment.

While the terms company and business law are sometimes used interchangeably with corporate law, business law generally refers to broader ideas of commercial law, i.e. the law governing commercial or business activity. This might entail issues such as corporate governance or financial legislation in certain circumstances. When used in place of corporate law, business law refers to the legal aspects of a business corporation (or business enterprises), such as capital raising (through stock or debt), company creation, registration, and so on.

Company Law

A company’s distinguishing qualities are as follows:-

Legal Entity in Its Own Right

When a business is legally incorporated, it becomes a distinct legal entity from its members. In law, the corporation is separate from its members. Its assets and liabilities are independent and distinct from those of its members, and it has its own name and seal. It has the ability to own property, incur debt, borrow money, open a bank account, hire people, engage into contracts, and sue and be sued individually.

Limitation of Liability

Members’ responsibility is restricted to their contributions to the company’s assets up to the face value of the shares they own. Even though the company’s obligations significantly outnumber its assets, a member is only obligated to pay the uncalled money due on shares owned by him when called upon to pay, and nothing more. Partners in a partnership business, on the other hand, have unlimited liability, which means that if the firm’s assets are insufficient to cover its responsibilities, creditors may require the partners to make up the difference from their personal assets. This is not possible in the case of a corporation after the members have paid all of their dues on the firm’s shares.

Perpetual Succession 

Unless it is officially wound up or the objective for which it was founded has been finished, a corporation does not die or cease to exist. A company’s membership may change from time to time, but this has no effect on the company’s survival. The company’s existence is unaffected by the death or bankruptcy of any of its members.

Separate Real Estate

A corporation is a separate legal entity. The corporation owns all of its assets. During the company’s existence, no member may claim ownership of the company’s assets.

Shares are transferable.

A corporation’s shares are freely transferable, subject to specific criteria, therefore no shareholder is permanently or obligated to stay with the firm. When a member transfers his or her shares to another individual, the transferee assumes the role of the transferor and inherits all of the transferor’s rights in those shares.

Seal of the Commons

A corporation is an artificial person with no physical existence. As a result, it carries out its operations and enters into numerous agreements via its Board of Directors. Contracts of this kind must be sealed by the firm. The company’s formal signature is the common seal. On the common seal, the company’s name must be carved. Any document that does not carry the company’s seal is unlikely to be recognised as legitimate and has no legal standing.

Suitability and the ability to sue

• A corporation, as opposed to its individuals, may sue or be sued in its own name.
• Management that is distinct

The Board of Directors, the firm’s management team, is in charge of administering and managing the company. The shareholders are merely the owners of the company’s stock and are not required to be the company’s management.

One vote, one share

In a corporation, the one-share-one-vote concept governs voting. In other words, if a person has ten shares, he owns ten votes in the corporation. This is in stark contrast to the voting concept of a co-operative society, which is based on the “One Member – One Vote” principle, which states that each member has just one vote regardless of the amount of shares owned.

The Difference Between a Corporation and a Partnership

A partnership company is a group of people who have banded together to share the earnings of a business they (or any of them) are running. It does not have its own legal personality. A company is a group of people who have banded together for a common goal. As soon as the business is legally formed, it becomes an independent legal entity. The partners’ liability is unrestricted. The responsibility of shareholders of a limited business, on the other hand, is limited to the number of unpaid shares or the unpaid amount guaranteed by the shareholder. The partners own the firm’s property, and they have a collective right to it.

The property of a corporation belongs to the corporation, not to its members. Without the approval of the other partners, a partner cannot transfer his interests in the partnership business. In the event of a corporation, shares may be transferred without the consent of the other members if the company’s articles of incorporation do not state otherwise. The number of participants in a partnership shall not exceed 20 in the case of a banking firm and 10 in the case of other enterprises. A public business may have as many members as it wants, as long as there are at least seven. There can’t be more than 50 people in a private corporation.

In order to start a partnership business, there must be at least two members. A public limited corporation requires seven members, but a private limited business need just two. In the event of a partnership, each decision must be made with 100 percent agreement. In the case of a corporation, the majority decision is final. Unless there is a stipulation to the contrary, the partnership is dissolved when one of the partners dies. The company’s existence does not end with the death of a stakeholder.