Companies are the dominant form of business association. The fundamental concept of company law was developed based on a case decided more than 100 years ago in the UK’s House of Lords. The case of Salomon established a maxim that a company is a separate legal entity distinct from its members. When a company is formed, it is said to have become “incorporated”. Thus it is a separate legal entity or a legal ‘person’ it has features that have given a company certain capabilities under the realm of law. The capabilities would include employing personnel, making contract, owning property, paying taxes and so on. A company can also sue and can be sued.
Under the eye of the law, ...view middle of the document...
Nature of Corporate Firm:
After a company registers or is incorporated, it gains the following properties –
Perpetual Succession – the members of a company may come and go but a company never dies. It is an entity with perpetual succession. The members and other peoples including the directors in the company may change from time to time but that does not affect the company’s continuity. An incorporated company never dies. It is an entity with perpetual succession. Members of a company may come and go but a company goes forever. A member may die, may become an insolvent, he may withdraw from the company or transfer his shares to any other person, yet the life of company does not come to an end. For example A, B & C are the only members of a company holding all of the shares. Their shares may be transferred to or inherited by X, Y & Z who may therefore become the new members and manager of the company. But the company will remain same entity.
Different Personality or Independent Corporate Existence – Section 24 (2) of The Companies Act – 1994, when a Company is registered is becomes a corporate large entity distinct from its member. So, a Company is an independent corporate existence; as soon as it is registered it becomes an individual with all legal rights, duties & liabilities. It is the foremost feature of a company. Under the eye of the law, a company is seen as having a different personality. It can thus attain some characteristics.
Limited Liability – Being a separate person, the company is the owner of its assets and bound by its liability. The shareholders are not liable except to the extent of their shares in the company. According to the Companies Act 1994 of Bangladesh, the liability of the share holder may be limited by share under section 6(a) 4 or limited by guarantee under Section 7(a) (4).
Separate Property – Being a legal person the company is capable of owing, enjoying and disposing of property in its own name. The company becomes the owner of its capital and assets. The shareholders are not the several or joint owners of the company’s property. Here the case of Macaura Vs Northern Assurance Co. Ltd 1925 can be mentioned as an example. There the court held that no shareholders have any right to any item of property owned by the company.
Capacity to Sue and be Sued – A Company, being a body corporate, can file a suit in a court of law and be sued in its own name. In case of criminal case, the company can file a criminal complaint but it must be represented by a natural name. It can sue for such defamatory statements/remarks against it as are likely to damage its business or property, etc.
Financial Power – A company is given exclusive power and the only medium of organizing business, which is given the privilege of raising capital by public subscription either by way of shares or debentures. Moreover, public financial institutions or private investors lend their resources more willingly to companies than to...