Quick Summary
The Companies Act 2013 provides the legal framework for forming, managing, and regulating companies in India. For exams, the most important foundation is understanding what makes a company different from a sole trader or partnership.
Meaning of Company
A company is:
- incorporated under law
- separate from its members
- capable of owning property
- having perpetual succession
- managed according to legal rules
Main Features
1. Separate legal entity 2. Perpetual succession 3. Limited liability 4. Common seal where applicable 5. Transferability of shares 6. Separate property 7. Artificial legal person
Types of Companies
Based on Liability
- Company limited by shares
- Company limited by guarantee
- Unlimited company
Based on Members
- Private company
- Public company
- One Person Company
Private Company vs Public Company
| Private Company | Public Company |
|---|---|
| Restricts transfer of shares | Shares are more freely transferable |
| Limited number of members | Can have larger membership |
| Cannot invite public subscription in the same manner | Can raise funds from the public subject to law |
| Usually closely held | Wider ownership possible |
Basic Incorporation Ideas
- Name approval
- Preparation of constitutional documents
- Filing required documents
- Registration
- Certificate of incorporation
Important Questions
One Mark
1. Define company. 2. What is perpetual succession? 3. Name one type of company based on members.
Short Answer
1. State any three features of a company. 2. Distinguish between private company and public company. 3. What is separate legal entity?
Long Answer
1. Explain the features of a company. 2. Describe the types of companies. 3. Explain the basic steps in incorporation of a company.
Common Mistakes
- Treating a company as identical to its owners.
- Forgetting limited liability and perpetual succession.
- Mixing partnership features into company answers.
- Listing types without basis of classification.
Revision Checklist
- [ ] Meaning of company
- [ ] Seven features
- [ ] Types based on liability and members
- [ ] Private vs public company
- [ ] Basic incorporation sequence