1. Association of Persons:
A company is an association of persons joining hands with a common motive. A private limited company must have at least two persons and a public limited company must have at least seven members to get it registered. Furthermore, the number of shareholders should not exceed 50 in private companies but there is no maximum limit for the members in a public limited company.
2. Independent Legal Entity:
The company is created under law. It has a separate legal entity apart from its members. A company acts independently of its members. The company is not bound by the acts of its members and members do not act as agents of the company. A person can own its shares and can be its creditor too. The life of the company is independent of the lives of its members. The company can sue and be sued in its own name.
3. Limited Liability:
The liability of its shareholders is limited to the value of shares they have purchased. In case the company incurs huge liabilities, the shareholders can only be called upon to pay the unpaid balance on their shares. The company being a separate legal entity can incur debts in its own name and the shareholders will not be personally liable for that. However, shareholders of a limited company have unlimited liability. The liability of members of a company limited by guarantee is limited to the guaranteed amount.
4. Common Seal:
A company being an artificial person cannot put its signatures. The law requires every company to have a seal and get its name engraved on it. The seal of the company is affixed on all important documents and contracts as a token of signature. The directors must witness the affixation of the seal.
5. Transferability of Shares:
The shares of a company can be transferred by its members. Whenever the members want to dispose off the shares, they can do so by following the procedure devised for this purpose. Under Articles of Association, the company can put certain restrictions on the transfer of shares but it cannot altogether stop it. However, private companies can put more restrictions on transferability of shares, virtually making it zero.
