Page 190 - DMGT407Corporate and Business Laws

Unit 7: Concept of a Company

(iii) any other body corporate, not being a company, which the Central Government may, by Notes
notification in the Official Gazette, specify in this behalf.
Thus the word ‘body corporate’ or ‘corporation’ has a wider connotation than the word ‘company’.
A corporation is an association of persons, incorporated according to the law of the land and
clothed with legal personality. It is a legal entity separate from the persons who constitute it. A
corporation may be either a ‘sole corporation’ or an ‘aggregate corporation’. A sole corporation
consists of one corporator or member only at any given time, who enjoys corporate personality
by virtue of his capacity as occupant of some public office for the time being. Some examples are:
Queen of England, President of the Indian Union, etc. An aggregate corporation consists of a
number of individuals contemporaneously associated so that in the eyes of the law they form a
single person, for example, a municipal corporation, an incorporated company.

Definition of a Company

Lord Lindley has described the company as “associations of many persons who contribute
money or money’s worth to a common stock and employs it in some trade or business; and who
share the profit and loss (as the case may be) arising therefrom”. The common stock so contributed
is denoted in money and is ‘the capital’ of the company. The persons who contribute it, or to
whom it belongs, are members. The proportion of capital to which each member is entitled is
his ‘share’. The member may sell his share in the company, thus withdrawing himself and
making someone else a member to whom he transfers shares. Thus, shares in a company are
transferable. As a natural consequence of transferability of shares, the company has what is
commonly known as perpetual succession. With the withdrawal or death of a member of a
company, the latter does not come to an end.

Did u know? The life of the company is independent of the lives of the members of the
company. Members may come and members may go, the company continues until it is
dissolved.
Gower, L.C.B. in his book entitled ‘The Principles of Modern Company Law’ gives an interesting
example. He says, ‘During the war, all the members of one private company, while in general
meeting, were killed by a hydrogen bomb. But the company survived, not even a hydrogen
bomb could destroy it’.
Section 34(2) gives the effect of registration of a company by identifying the features it acquires
as a consequence thereof.

Self Assessment

Fill in the blanks:
1. A corporation is an association of persons, incorporated according to the law of the land
and clothed with ………………personality.

2. An artificial person is created and devised by laws for the purpose of the society and is
known as ……………………….
3. Where an association is incorporated, it becomes a ……………………….acquiring a legal
entity.

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