Characteristics of a Company:
(1) Voluntary association: A single person cannot constitute a company. At least two persons, voluntarily, must join hands to form a private company, while a minimum of seven persons are required for a public company.
(2) Artificial person: A company is created by law. Though it has no body, no conscience still it exists as a person, having a distinct personality of its own.
(3) Separate legal entity: A company has an independent status, different from its members.
(4) Common seal: Being an artificial person, a company cannot sign the documents. Hence, it uses a common seal on which its name is engraved.
(5) Limited liability: The liability of the shareholders of a company is normally limited to the number of shares held or guarantee given by them.
(6) Transferability of shares: No shareholder is forever wedded to the company. Subject to certain conditions, the shares are freely transferable. The private companies do impose some restrictions on the transfer of shares.
(7) Diffusion of ownership and management: In this form of organisation, entrepreneur should clearly understand there exists separation of ownership from management.
(8) Number of members: In case of a private company: – Minimum members required are: Two Maximum members: Fifty (excluding employees) And for a public company:– Minimum requirement is : Seven Maximum number : No Limit
(9) Limitation of action:
The scope of this artificial person is determined by:
(a) The Indian Companies Act
(b) Memorandum of Association
(c) Articles of Association
(10) Winding up: The mode of incorporation and termination (winding up) is both as per the Companies Act only. It's born out of law and can be liquidated only by law
