Commercial Applications
Answer
Three characteristics of a company are:
Separate Legal Existence — A company has a distinct legal entity independent of its members. It can own property, make contracts and file suits in its own name.
Perpetual Succession — A company is a creation of the law and only the law can bring an end to its existence. Its life does not depend on the life of its members. The death, insolvency or lunacy of members does not affect the life of a company. Members may come and go but the company goes on until it is wound up.
Limited Liability — As a company has a separate legal entity, its members cannot be held liable for the debts of the company. The liability of every member is limited to the nominal value of the shares bought by him or to the amount of guarantee given by him.
Related Questions
What advantage of a joint stock company is highlighted in this image showing a boardroom meeting of directors?
- Limited Liability
- Efficient Management
- Legal Formalities
- Lack of Motivation
What do you understand by separate legal existence of a company?
Give two points of distinction between a company and a partnership.
What is perpetual succession?