Company Law Notes for Company Law Notes

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Features of Company

The most distinguishing features of company are as follows;

1. Separate Personality or Distinct Personality or Legal Personality

  • Company will have separate legal personality after its incorporation.
  • Other enterprises like Partnership, Proprietorship have no separate legal personality.
  • Personality different and distinct than shareholders or member.
  • Distinct personality is the main feature of company. Other features are the outcomes of this main feature.
  • No material existence but separate personality.
  • Section 7 of the Companies Act 2063 B.S – “Company to be body Corporate”.
  • An autonomous and corporate body with perpetual succession.
  • Company may acquire, hold, sell dispose of, or otherwise deal any movable and immovable property like an individual.
  • Company may sue and be sued like an individual.
  • Company may enter in to a contract and exercise the rights and perform the obligation as referred to in such contract.
  • Different than shareholders/ members after its incorporation.
  • Common seal.
  • The concept of separate or distinct personality originated from these cases in different time
  • Saloman V. Salomon and Co. at the end of 19th century ( See; Company Kanoon of Bharat Raj Upreti)
  • Piush Raj Pandey v. Tax Office Kathmandu(D.No 1857,NLJ 2040,) (See; Company Kanoon of Bharat Raj Upreti)
  • Bijaya Kumar Dugar V. Industrial Promotion Board (D.No 7401 NlJ 2061) (See; Company Kanoon of Bharat Raj Upreti)
  • Abdul Hok V. Das Mal (1910 19 IC 595) (See; Company Law of Ashok K Bagrial)
  • Lee and Lee’s Air Farming ltd (1960 3 All E.R.420) (See; Company Kanoon of Bharat Raj Upreti)
  • Company has a legal entity distinct from and independent of its members.

2. Limited liability

  • One of the important advantages of company is that liability of its member’s is limited.
  • The creditor can recover their money only from company, not from individual behind the company.
  • Shareholders are not liable to pay the debt personally dues. This is very limited liability nature of company’s shareholders. Only, company is liable to pay not the shareholders.
  • Actually limited liability for only its shareholders /members, not for the company.
  • The shareholders are only liable for the value of their share.
  • Shareholders liability is limited within the extent of maximum value of their shares amount.
  • If any shareholder paid the nominal value of its share his liability is nil. But in the proprietorship and partnership firm they are not free from this liability they are individually liable.
  • Section 8 of the Companies Act.

3. Perpetual Succession (Permanent Existence)

Section 7(1) of the Companies Act 2063 states about this feature.
-A company shall be an autonomous and corporate body with the perpetual secession after its incorporation.

Company shall carry on all of its activities and transactions by its name. (Section 10 (a) of the Companies Act)

  • Natural persons have age and certain period for fix time but no for company.
  • Company cannot be ended without fulfilling legal procedure determined by law.
  • Without dissolution company cannot die.
  • C.B.Gower: “The death of members leaves the company unmoved. Members may come and go but the company can go on the forever.’’ (Davies Paul L, Gower and Davies’ Principle of Modern Company law 7th Edition, Sweet& Maxwell London)

During the World War- II,
All members and their employers of one American Private Company, were killed by a bomb while they were in a general meeting, but court declared that company can survive even in this situation. Not even a hydrogen bomb could have destroyed a company.

K/g meat suppliers (Guildford ) ltd. Re 1966
(Ashish Adhikary & Sudeep Gautam; Business Law in Nepal p.no 269)

Perpetual succession leads stability and long life to a company as compared to other forms of business organization.

In Re Neel Tedman Holding Pvt. Ltd Only two members were killed in a road accident, the Company was held could operate even after their death. (Ashish Adhikary & Sudeep Gautam; Business Law in Nepal)

  • Only the shares are traded with due the process, not the company –sec 42(1) (2)
  • Corporate life of company never ends without following particular legal formalities.
  • Even One Man Company cannot be ended after the death of the shareholder. It can end by the legal procedures.
  • Incorporated Association

Section 2(a) &3, 4, 5,6&7 of the Nepalese Company Act

Common Seal
Sec 26

Transferable Share
as movable property
Sec 42, 43

Capacity to sue and being sued
Sec 7(3) of the Company Act

(Bed Krishna Shrestha v. Govinda Krishna Shrestha; Kanoon Bibarnika, 2041,Year 2 p. 13)

  • Legal capacity to enjoy property right
  • Sec 7(2) of Nepalese Company Act
  • Purshotam Aacharya v. Boris Bar & Restruant pvt. Ltd (NLJ 2044 p.934 Decision No. 3206)
  • Management of representatives
  • Sec .86, 87 of Nepalese Company Act
  • “Board of Directors are the brains and the only the brains of company, and does act only through them’’ Bates V. Standard land 1910 2 Ch. 408 at p.16
  • Registered Office
  • Section 4 , 5,6 & 10(a) & (b) of Nepalese Company Act

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