COMPANY LAW
In order to ensure the smooth functioning of a business enterprise, there were certain laws formed to uphold the transparency and accountability towards its shareholders and was called Company Laws. It provides an outline of the way in which a company must function as a legal entity (once it’s formed) and how it must be managed.
The Companies Act was created in the year 1956 and it ensured that a company is treated as a separate legal entity from its members and that due to lapse or removal of one or all its members, it do not end. It must be formally wound up to end its existence. It has its own unique features and have a legal existence where it can sue others and others can sue the company without impacting any of its directors or board
As per Company law, there are certain features of a company which are important to understand the importance of Company’s Law. Company have a perpetual existence irrespective of the existence of its members. That is a company continue to exist and function until it is legally wound up. Hence, even if all the members of a company pass away or leave it, the company will continue to exist and is not limited to its directors or its members. Only way a company can cease to exist is by formally winding it up. Even if the company is bankrupt or is not doing any form of business transactions, it is still in existence until an order to wind it up is passed.
Another important feature of a company is that it is a unique and separate legal entity which have power to sue others on its own and others can sue the company as well. In case company finds fit, it can sue a wrong doer and can be sued for any form of civil wrongs as a legal entity. This includes, improper conduct of business, or enforcement of a special contract, etc. In such cases, the company will be held liable for its act and penalized accordingly. However, any criminal procedures do not imply over the company as a criminal procedure generally require a guilty mind and this cannot be applicable in case of a company.
Company is only liable to a limited extent for the conduct of its business and rest goes on the directors and members of the company. This is so because if it is left on an individual then he may levy unlimited liability on the company and it will impact the perpetual existence aspect of the company.
Another feature of a company is its shares. Any person who contributes towards the company financially by buying its shares owns that much of the company. A private company cannot have more than fifty shareholders. This is also known as restriction over the transferability of shares. However, a public company can freely trade its stocks in a stock market, hence it’s free from transferability of shares.
Since company is a legal entity hence, it can also acquire the assets and properties in its name. Similarly, it could enter contracts as an entity and is also liable to pay taxes.
All above aspects and features of a company makes it important to have a corporate lawyer, who understands and takes care of it as a legal entity and help it comply with all the legal requirements during its existencef member