Companies Act Section 2(20) Company

Company Section 2(20)

A "company" means a company incorporated under this Act or under any previous company law.

Key Features:

1. Incorporation: 

A company is an entity that is legally formed and registered under the Companies Act, 2013, or any previous company law. 

Incorporation involves the creation of a separate legal entity distinct from its members or shareholders.

2. Legal Entity: 

Once incorporated, a company becomes a legal entity with perpetual succession, meaning it continues to exist even if its members change. 

It can own property, enter into contracts, sue, and be sued in its own name.

3. Limited Liability: 

Members or shareholders of a company typically have limited liability. 

This means their personal assets are protected, and they are only liable to the extent of their investment in the company.

Types of Companies:

1. Private Company:

 A private company is defined under Section 2(68) of the Companies Act, 2013. It restricts the right to transfer its shares, limits the number of its members to 200, and prohibits any invitation to the public to subscribe to its shares or debentures.

Characteristics: Private companies are often closely held by a small group of shareholders, such as family members or close associates. They are not required to disclose as much information as public companies and have fewer regulatory compliances.

2. Public Company:

 A public company is defined under Section 2(71) of the Companies Act, 2013. It does not restrict the transfer of its shares and has a minimum paid-up capital as prescribed by the Act. It can invite the public to subscribe to its shares or debentures.

Characteristics: Public companies are owned by a large number of shareholders and are subject to stringent regulatory requirements and disclosure norms. They can be listed on stock exchanges.

3. One Person Company (OPC):

 An OPC is defined under Section 2(62) of the Companies Act, 2013. It is a company that has only one person as its member.

Characteristics: OPCs are designed for sole proprietors who wish to gain the benefits of limited liability without needing a partner. They have simpler compliance requirements compared to other types of companies.

4. Section 8 Company:

 A Section 8 company is defined under Section 8 of the Companies Act, 2013. It is formed for promoting commerce, arts, science, sports, education, research, social welfare, religion, charity, or any other useful object.

Characteristics: Section 8 companies operate as non-profit organizations and are prohibited from distributing profits to their members. Any profits earned must be reinvested in furthering the objectives of the company.

Importance:

1. Separate Legal Entity: 

A company, being a separate legal entity, has its own rights and obligations. It can enter into contracts, own property, and conduct business in its own name.

2. Limited Liability: 

The principle of limited liability protects the personal assets of the company's members or shareholders, encouraging investment and entrepreneurship.

3. Perpetual Succession: 

A company enjoys perpetual succession, meaning it continues to exist irrespective of changes in its membership. This ensures stability and continuity of business operations.

4. Raising Capital: 

Companies can raise capital through the issuance of shares, debentures, and other securities. Public companies, in particular, can access capital markets to fund their growth and expansion.

5. Governance and Compliance: 

Companies are subject to a structured governance framework and regulatory compliance, promoting transparency, accountability, and good corporate governance practices.