A company plays very important role to develop the industry, trade and commerce in the world because it is an organization having separate identity from its promoters and it has covered almost all areas of the business. Today, big type of corporations or institutions or organizations of insurance, bank, industry etc. are operative as companies with the participation of private or public or government or non-government, indigenous or foreign faces. Company is an artificial person that is created, run and ended by the law. The scope of a company is wider than of a partnership firm of business. Partnership firm is a suitable device for a small group of partners who take personal interest and there is mutual trust and confidence among them.

The concept of the formation of a company is the outcome of the experiences of partnership business and incorporation by registration. In partnership, on the other hand the liability of the partners for the debts of the business is unlimited. They are bound to meet without any limit, all the business obligations of the firm. The company being a separate person, the liability of its shareholders is limited in the context of company. The shareholders are not liable personally.

 Definition of Company

 The term ‘company’ is derived from the Latin word ‘companies’. Literally, the term company means a group of persons associated to achieve some common objective such as business, charity, and research, etc.

The company is a voluntary association of persons formed to run business activities for fulfilling the objective of earning profits by collecting capital and selling shares. So, the company is an association incorporated by a person or some person interested to carry on any business of industrial or mercantile activity or other lawful trade with the motivation of earning profit by contributing money or money’s worth to the company.

The company Act, 2063, section 2(a) states that “A company shall denote the company which is incorporated in accordance with this Act.”

According to eminent writer, L.C.B. Gower “A company as an association of a number of persons for a common object that object normally being the economic gain of its member.”

According to Justice James “A company is an association of persons united for common object.”

Chief Justice Marshal defines company as “A person artificial, invisible, intangible and existing only in the eyes of law. Being a mere creation of law, it possess only those properties which the charter of its creation upon it, either expressly or identical to its very existence.”

Thus, the term ‘company’ means an association of a number of persons formed for some common purpose and registered according to the law relating to company.

Characteristics of Company


  • Perpetual succession:

A company is a corporate body with a perpetual succession system. Death or insolvency of a shareholder does not affect the existence of the company. It may come to an end only when it is liquidated in accordance with the company law.


  • Separate existence:

A company is separate and distinct from its members. Company is capable of acquiring, possessing, selling, disposing of or dealing with in any other manner of its movable or immovable property in its own name. The company becoming own of its capital and assets enjoys all the rights as an individual. The capital and assets of the company is generated from the money invested by its own members. The member of the company does not become owner of company’s property because the company itself is the owner of the whole property belongs to it.


  • Limited liability:

A company’s shareholders have to bear the liability to the extent of their share amount. The creditor of a company is not the creditor of its shareholder. So any decisions against the company shall not apply to its shareholder.


  • Transferable shares:

Capital of the company divided into different parts is called shares which are transferable. In case of a public company the shareholders can transfer their shares or debentures like movable property ever they like. But the shareholders of a private company cannot freely transfer shares or debentures ownership whenever they like. The ownership of a private company can be transferred by giving priority to the existing shareholders only.


  • Registered office:

A company has its own registered office from where the company operates its business and can establish branch office.


  • Common Seal:

A company has a seal which is an evidence of authenticity of it.


  • Voluntary association:

A company is an association of one or more than one person voluntarily agrees upon the establishment of it.


  • Contractual capacity:

As a legal person, a company can enter into a number of contracts for the achievement of its purpose and for the performance of its duties.


  • Legal person:

A company is not a citizen of a nation but it can enjoy the property right as a legal person.


  • Management by representatives:

All the shareholders is the true owners of a company. Some of the representatives are selected by the true owners to enjoy the power of the company and to perform the daily administrative functions. The committee of the representatives is called a Board of Directors. They are selected from among the shareholders.