Companies Act Section 9

Companies Act Section 9: Effect of Registration

1. Formation of a Body Corporate

Issuance of Certificate of Incorporation

Section 9 of the Companies Act provides that once the Registrar issues the certificate of incorporation, a crucial transformation occurs. 

The subscribers to the company's memorandum those individuals or entities who initially agreed to the formation of the company along with any future individuals who become members, will collectively constitute a legal body known as a "body corporate."

Creation of the Corporate Entity: 

Upon registration, the company becomes a corporate entity under the name specified in its memorandum of association. 

This means that the company now has a legal existence, distinct from the individuals who initially formed or who later become members of the company.

Legal Status of the Company

The moment a company is incorporated, it is considered a separate legal entity, which exists independently of its members. 

This distinction between the company and its shareholders or members is foundational to corporate law.

Separate Legal Identity: 

As a separate legal entity, the company can conduct its business and affairs without directly involving its members in every transaction. 

The company, in essence, "lives" and operates under the name provided in the memorandum, acting in its own legal capacity.

Implications of Corporate Status

The significance of this separate legal identity is profound, as it means the company is legally responsible for its own actions. 

It can own property, incur liabilities, and enter into contracts independent of its shareholders. 

The obligations and debts of the company do not extend to its members beyond their commitment to their shares, which fosters limited liability protection.

2. Corporate Powers and Attributes

Perpetual Succession

One of the most important attributes of an incorporated company is perpetual succession. 

This principle ensures that the company continues to exist indefinitely, regardless of any changes in its membership or management.

Independence from Membership Changes: 

The concept of perpetual succession signifies that the company remains in existence even when members, directors, or shareholders leave or pass away. 

Unlike partnerships or sole proprietorships that may dissolve upon changes in their membership, an incorporated company remains a permanent entity until it is officially wound up or liquidated in accordance with the law.

Continuity of the Corporate Entity: 

Perpetual succession provides stability to the company, as the changes in its members or the death of shareholders do not affect its continued operation or legal standing. 

This feature of corporate existence ensures that the company can pursue long-term goals and commitments without being disrupted by the personal circumstances of its members.

Corporate Powers and Rights

The registration of a company grants it the capacity to perform various actions and enjoy rights under the law. 

As a legal person, the company is empowered to conduct business and perform all functions necessary for its operation and growth. These powers include the ability to:

Carry Out Transactions: The company is empowered to buy, sell, lease, or otherwise manage assets in its name.

Enter Contracts: The company can form legally binding agreements and contracts with other entities, either individuals or organizations.

Raise Funds: The company has the power to raise capital through issuing shares, debentures, or other financial instruments.

3. Property Rights of the Company

Ownership and Management of Property

As a distinct legal entity, the company has the authority to own and manage property, just like any individual. 

However, in the company's case, the property it acquires, holds, or disposes of belongs exclusively to the company itself, not to its shareholders or members.

Types of Property:

Movable Property: The company may own movable property, such as machinery, office equipment, and vehicles. These assets are integral to the day-to-day functioning of the company.

Immovable Property: The company can also own immovable property, such as land, buildings, or real estate. This allows the company to establish business premises, offices, or other permanent installations to support its operations.

Tangible and Intangible Property: The company’s assets can also include intangible property, such as intellectual property rights (patents, trademarks, copyrights), goodwill, and brand value. This broad scope of property ownership ensures that the company can build and protect its assets, furthering its commercial interests.

Right to Dispose of Property: In addition to owning property, the company has the right to sell, lease, or otherwise dispose of its property as part of its business operations. This power allows the company to manage its assets efficiently and to enter into transactions that align with its business strategy.

4. Contractual Capacity

Entering into Contracts: A significant legal effect of a company’s registration is its ability to enter into contracts in its own name. This capacity is one of the defining characteristics of corporate existence and is critical for the company’s business operations.

Binding Agreements: The company, as an independent legal entity, can negotiate and sign contracts with other businesses, individuals, or organizations. These contracts are binding on the company, meaning it must honor its commitments under the terms of the agreement.  

Liability Under Contracts: When the company enters into a contract, the members or shareholders are not personally liable for the company's obligations under the contract. Instead, the company itself is responsible for fulfilling the terms and bearing any consequences of breach or default.

Enforceability of Contracts: The ability to enter into contracts is fundamental to a company’s operations, allowing it to engage with suppliers, clients, employees, and investors. The company’s contractual capacity ensures that it can enforce the rights it obtains under contracts and defend itself if disputes arise.

5. Legal Actions and Liabilities

Right to Sue and Be Sued

One of the key consequences of a company's registration is its right to initiate or defend legal proceedings in its own name. 

The company, as a legal person, can sue other entities and individuals or be sued by them.

Suing Others: 

If the company’s rights are violated, or it suffers damages due to the actions of others, it has the legal capacity to bring a lawsuit in its own name to seek remedies. 

This could involve breach of contract, intellectual property infringements, or other commercial disputes.  

Being Sued: 

Conversely, the company can also be sued if it fails to fulfill its legal obligations or causes harm to others. 

Lawsuits brought against the company must be directed at the company itself, and not its shareholders or directors, preserving the principle of limited liability for its members.

Liability in Legal Matters

When the company is found liable in legal proceedings, any penalties, fines, or compensation awarded against it must be paid from the company’s assets. 

The shareholders and members are not personally responsible for the company's liabilities, reinforcing the protection that corporate status offers to individual members.