What is a company? Explain its essential characteristics.

A company is a voluntary association of persons formed for carrying on business for profit. Its capital is divided into transferable shares, and the persons holding these shares are called members or shareholders. It comes into existence only after registration under the Companies Act.

Essential Characteristics of a Company

1. Separate Legal Existence — A company has a legal identity separate from its members. It can own property, make contracts, and sue or be sued in its own name.

2. Perpetual Succession — Its existence is not affected by the death, insolvency, or retirement of its members.

3. Limited Liability — Members are liable only up to the value of shares held or the guarantee given by them.

4. Transferability of Shares — Shares are generally transferable, though some restrictions may apply.

5. Common Seal — A company acts through authorised persons, and its common seal is treated as its official signature.

6. Separation of Ownership and Control — Shareholders are the owners, but directors manage the company.

7. Voluntary Association — Persons join and leave the company by their own free will.

8. Artificial Legal Person — It is created by law and has no physical existence.

9. Corporate Finance — Its capital is divided into small shares, enabling many people to invest.

10. Statutory Regulation and Control — It must follow rules and file required documents under company law.

11. Registered Body — A company is formed only after completing legal registration formalities.