Essential Features of a Company by Samidha Hegde@Lexcliq


A company is an association of members formed for some common object. Under Companies Act, 2013 – Section 2(20) – ‘Company’ means a company incorporated under this Act or under any previous company law.

A company once incorporated becomes a body corporate and acquires a personality of its own separate from its members. It is legally recognized as an artificial person and has a set of rights.

Company is an organization with distinct features, they are-

  1. Separate Legal entity-

Separate legal entity means a body recognized by law and has a set of its own rights different from that of its members and thus the assets of the Company are different from that of its members, it can acquire property on its own, enter into contracts and members are not liable for the acts of the Company. The Company may sue and be sued.


  1. Perpetual Succession-

Since Company is a separate legal entity it does not come to an end with the death of members. The Company continues to live even after death, insolvency, lunacy, retirement of its members. New members continue to join as old members are replaced and therefore the Company continues to live until winding up or dissolution of the Company.


  1. Limited Liability-

As the company exists as a separate entity, members of the company are not liable for the debts of the company. Liability of members of a company is limited to the extent of the shares that are held by them or by the extent of the guarantee amount.


  1. Transferability of Shares-

Shareholders of a public company or joint stock or company listed in recognized stock exchange can freely transfer shares. In a private company, there may be some restrictions placed on the transfer of shares. But the right is not taken away completely.


  1. Separate Property-

A company is a distinct legal entity. The company’s property is its own. A member cannot claim to be owner of the company’s property during the existence of the company.


  1. Common Seal-

Common seal is like the official signature of the Company and since a Company acts through its members this signature may be used by all the executives and employees of the Company while acting on behalf of it.

However, the Companies (Amendment) Act, 2015 has made the Common Seal optional. Section 9 of the Act does not have the phrase ‘and a common seal’ in it. This provides an alternative mode of authorization for companies who do not wish to have a common seal.

According to this amendment, if a company does not have a common seal, then the authorization shall be done by:

  • Two Directors or
  • One Director and the Company Secretary (if the company has appointed a Company Secretary)


  1. Capacity to sue and being sued –

A company can sue or be sued in its own name as distinct from its members.


  1. Number of Members-

As per the Companies Act, 2013the minimum number of members required to start a public limited company is seven while for a private limited company, it is two. The maximum number of members for a public limited company can be unlimited while it is restricted to 200 for a private limited company.





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