3 Company Law
3 Company Law
3 Company Law
CHARACTERISTICS OF COMPANY
CHARACTERISTICS OF
COMPANY
It may be noted in this connection
that Section 14 (1) provides that no
association, partnership or company
consisting of more than 20 persons
be formed to carry on any business
for gain unless it is registered as a
company, under the Companies
Ordinance, 1984 and is deemed to
be an illegal association, if it is not so
registered.
Limited Liability
4 Limited Liability: One of the
Limited Liability
If a shareholder has paid the
full nominal value of shares
held by him, his liability is
nil. This means that a
shareholder remains liable to
pay the unpaid value of
shares, if any.
company limited by
guarantee
In the case of a company limited
by guarantee, the liability of each
member is to contribute a specific
amount to the assets of the company
in the event of its being wound up
while he is a member or within one
year of his cease in globe a member.
company limited by
guarantee
In effect, we find that a
member is not directly
liable to a companys
creditors but he is a limited
guarantor of the companys
debts in both cases.
company limited by
guarantee
However, the Companies
Ordinance, 1984 does not
prevent the companies from
making the liability of its
members
unlimited.
But
such companies are very
rare.
Perpetual Succession
5 Perpetual Succession: A company has
perpetual succession and is independent of the
life of its members. Its existence is not
affected in any way by the death, insolvency
or exit of any shareholder. During the war all
the members of one private company, while in
general meeting, were killed by a bomb. But
the company survived; not even a hydrogen
bomb could have destroyed it.
L.C.B. Gower, Principles of Modern Company
Law, London. Stevens and Sons, (3rd ed.) 1969
Perpetual Succession
A company can be compared with
a river which retains its identity
through the parts which compose
it
are
constantly
changing.
Perpetual succession thus means
that in spite of a change in the
membership of the company, its
continuity is not affected.
Transferable Shares
6 Transferable Shares: In a public company,
the shares are freely transferable. The right to
transfer shares is a statutory right and it
cannot be taken away by the provision in the
articles. However, the articles shall prescribe
the manner in which such transfer of shares
will be made and it may also contain bona
fide and reasonable restrictions on the rights
of the members to transfer their shares. But
absolute restrictions on the rights of members
to transfer their shares shall be ultra vires.
Transferable Shares
However, in the case of a
private
company,
the
articles shall restrict the
rights of members to
transfer their shares in
compliance
with
its
statutory definition.
Common Seal
7 Common Seal: A company is an
artificial person. It cannot act on its
own. It acts through natural persons
who are known as directors. All
contracts entered into by the directors
must be under the common seal of the
company. The common seal, with the
name of the company engraved on it,
is used as a substitute for its signature.
Common Seal
No document issued by the
company shall be binding
on it unless it bears the
common seal which is duly
witnessed by at least two
directors of the company.
Separate Property
8 Separate Property: A company
has a separate legal personality which
is entirely distinct and independent of
the persons who constitute it. It has
the right to own and transfer property
in its own name. The property of the
company is to be used for the
companys business and not for the
personal benefit of its shareholders.
Separate Property
Members
have
no
direct
proprietary rights to the companys
property, merely to their shares. It
is also important to note that the
claims of the companys creditors
will
merely
be
against
the
companys property and not that of
shareholders.
Large Capital
Large Capital: A public
company can raise its large
capital by issuing shares and
debentures to the public.
This large capital gives
confidence to the company
to excel other companies.