BY:

BY:
JATIN
JATIN
DHALL
DHALL
BBA 2
BBA 2
ND ND

SEM
SEM
MEANING : MEANING :
An
organization that falls under the definition of a partnership partnership and
corporation. It is artificial person having a separate legal entity
,perpetual succession, and a common seal. The shareholders are
the oners of the company hile the !oard of directors is the chief
managing !ody elected !y the shareholders. The capital of the
company is divided into smaller parts called "#$A%E#& #$A%E#& hich can
!e transferred freely from one shareholder to another person
'e(cept in a private company).

*EAT+%E#: *EAT+%E#:

ARTIFICIAL PERSON:

A company is a creation of la and e(ists independent of its

mem!ers.

,i-e natural persons, a company can on property, incur

de!ts, !orro money, enter into contracts, sue and !e sued
!ut unli-e them it cannot !reathe, eat, run, tal- and so on.

It is, therefore, called an artificial person.

SEPERATE LEGAL ENTITY:

*rom the day of its incorporation, a company ac.uires

an identity, distinct from its mem!ers.

Its assets and lia!ilities are separate from those of its

mem!ers.

The la does not recognize the !usiness and oners to

!e one and the same.

FORMATION:

The formation of a company is a time consuming, e(pensive and

/omplicated process.

It in the preparation of several documents and compliance ith

several legal re.uirements !efore it can start functioning.

%egistration of a company is compulsory as provided under "T$E "T$E

IN0IAN /1M2ANIE# A/T,3456 IN0IAN /1M2ANIE# A/T,3456&.

PERPETUAL SUCCESSION:

A company !eing a creation of la, la, can !e !rought to an end

1nly !y la.

It ill only cease to e(ist hen a specific procedure for its clod7 cease to e(ist hen a specific procedure for its clod7
sure, called inding up, is completed. sure, called inding up, is completed.

Mem!ers may come and mem!ers may go, !ut the company Mem!ers may come and mem!ers may go, !ut the company
/ontinues to e(ist. /ontinues to e(ist.

CONTROL:

The management and control of the affairs of the coman!

is "nderta#en $! the $oard of directors% &hich aoints the
then aoints the to management officials for r"nning the
$"siness'

The directors hold a osition of immense significance as

the! are directl! acco"nta$le to the shareholders% ho&e(er%
do not ha(e the right to $e in(ol(ed in the da!)to)da! r"nning
of the $"siness'

RISK BEARING:

The ris# ris# of losses in a coman! is $orne $! all the share) losses in a coman! is $orne $! all the share)
holders'

This is "nli#e the case of sole rorietorshi or artnershi

firm &here one ersons resecti(el! $ear the losses'

The ris# of loss gets sread o(er a large n"m$er of share)

holders.
ME*ITS: ME*ITS:
The coman! form of organi+ation offers a m"ltit"de of
ad(antages% some of &hich are disc"ssed $elo&'

The shareholders are liable to the extent of the amount

unpaid on the shares held by them.

Also, only the assets of the company can be used to settle

the debts, leaving the owners personal property free from any
charge.

This reduces the degree of risk borne by an investor.

Limited liability:

The ease of transfer of o&nershi adds to the ad(antage of

in(esting in a coman! as the share of a "$lic limited coman!
can $e sold in the mar#et and as s"ch can $e easil! con(erted
into cash in case the need arises'

This a(oids $loc#age of in(estment and resents the coman!

as a fa(ora$le a(en"e for in(estment "roses'

Transfer of interest:

E,istence of a coman! is not affected $! the death%

retirement% resignation% insol(enc! or insanit! of its mem$ers
as it has a searate entit! from its mem$ers'

A coman! &ill contin"e to e,ist e(en if all the mem$ers

die'

It can $e li-"idated onl! as er the ro(isions of the

.omanies Act'

Perpetal e!isten"e:

As comared to the sole rorietorshi and artnershi forms

of organi+ation% a coman! has large financial reso"rces'

/"rther% caital can $e attracted from the "$lic as &ell as

thro"gh loans from $an#s and financial instit"tions'

Th"s there is greater scoe for e,ansion'

The in(estors are inclined to in(est in shares $eca"se of the

limited lia$ilit!% transfera$le o&nershi and ossi$ilit!
of high ret"rns in a coman!'

S"ope for e!pansion:

LIMITATI0NS: LIMITATI0NS:
The ma1or limitations of a coman! form of organi+ation are as
follo&s:

The formation of a company requires greater time, effort

and extensive knowledge of legal requirements and the
procedures involved.

Complexity in formation:

As comare to sole rorietorshi and artnershi form of

organi+ations% formation of a coman! is more comle,'

Lac# of secrec!:

The .omanies Act re-"ires each "$lic coman! to ro(ide

from time)to)time a lot of information to the office of the
registrar of comanies'

S"ch information is a(aila$le to the general "$lic also'

It is% therefore% diffic"lt to maintain comlete secrec! a$o"t

the oerations of coman!'

Imersonal &or# en(ironment:

Searation of o&nershi and management leads to sit"ations

in &hich there is lac# of effort as &ell as ersonal in(ol(ement
on the art of the officers of a coman!'

The large si+e of a coman! f"rther ma#es it diffic"lt for the

o&ners and to management to maintain ersonal contact &ith
the emlo!ees% c"stomers and creditors'

N"mero"s reg"lations:

The f"nctioning of a coman! is s"$1ect to man! legal

ro(isions and com"lsions'

A coman! is $"rdened &ith n"mero"s restrictions in resect

of asects incl"ding reorts a"dit% (oting% filing of and
rearation of doc"ments% and is re-"ired to o$tain (ario"s
certificates re-"ired to o$tain (ario"s certificates re-"ired to
o$tain (ario"s certificates re-"ired to o$tain (ario"s
certificates from different agencies% (i+' registrar% SEBI% etc%'

This red"ces the freedom of oerations of a coman! and

ta#es a&a! a lot of time% effort and mone!'
Difference $et&een a 2"$lic .oman! and 2ri(ate .oman! Difference $et&een a 2"$lic .oman! and 2ri(ate .oman!
Basis Public
company
Priva!
company
Members Minimum - 7
Maximum -
unlimited
Minimum - 2
Maximum - 50
Minimum
number of
directors
Three Two
Minimum paid
up capital
Rs. 5 lakhs Rs. 1 lakh
ndex of
members
!ompulsor" #ot
compulsor"