Thus, a company may be defined as an association of persons formed for the purpose of some business or undertaking, carried in the name of the association, each member having the right of assigning of his shares to any other person subject to the regulations of the Chief Justice Marshall (1819) defined corporation’ as follows: company. A corporation is a person, artificial, invisible, intangible, and existing only in the eyes of the law. Being a mere creature of law, it possesses only those properties which the charter of creation confers upon it, either expressly or as accidental to its very existence.

Lord Lindley defined the term ‘company’ as follows: “By a Company is meant an association of many persons who contribute money or money’s worth to common stock and employ it for a common purpose. The common stock so contributed is denoted in money, and is the capital of the money. The persons who contributed to it or to whom it belongs are the members. The proportion of capital to which each member is entitled is his share”.

The Companies Act

The Companies Act, 1956, is mammoth legislation. It contains 658 sections, but the basic principles are very few. The Companies Act, 2013, passed by the Parliament, received the assent of the President of India on 29 August 2013. The Act consolidates and amends the law relating to companies.

The Companies Act 2013, has been notified in the official gazette on 30 August 2013. Some of the provisions of the Act have been implemented by a notification published on 12 September 2013. It should be noted that the provisions of the Companies Act, 1956, are still in force. Until the syllabus is changed adding the portion of the new Companies Act, 2013, students are expected to continue their study as per the syllabus prescribed by their respective universities.

Section 1 of the 2013 Act shall come into force at once and the remaining provisions of this Act shall come into force on such date as the Central Government may, by notification in the official gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

The Companies Act 2013, regulates the incorporation of a company, responsibilities of a company, directors, and dissolution of a company. It is divided into 29 chapters, containing 470 sections as against 658 sections in the Companies Act, 1956, and has 7 schedules. The Act has replaced The Companies Act, 1956 (in a partial manner) after receiving the assent of the President on 29 August 2013.

The Act came into force on 12 September 2013 with only 98 provisions of the Act notified. On 27 February 2014, the Ministry of Corporate Affairs (MCA) stated that Section 135 of the Act dealing with corporate social responsibility would come into effect from 1st April 2014. On 26 March 2014, the MCA stated that another 183 sections would be notified from 1 April 2014.

Private Company and public company

Private Company

A company may be private or public. According to Section 2(35) of the Companies Act, 1956, a private company means a private company as defined in Section 3 of the Act.

Section 3(1)(ii) defines a private company as a company which by its articles:

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to fifty not including-

(i) persons who are in the employment of the company; and

(ii) persons, who had been formerly in the employment of the company were members of the company while in that employment and have continued to be members after the employment ceased, and

(c) prohibit any invitation to the public to subscribe for any shares in, or debentures of, the company

(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors, or their relatives:

Provided that where two or more persons hold one or more definitions, be treated as a single member; Section 2(68) of the 2013 Act (enforced vide SO 2754(E) dated 12-9-2013, w.e f. 12-9-2013) defines a private company as follows:

(68) private company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles,-

(i) restricts the right to transfer its shares;

(i1) except in case of One Person Company, limits the number of its members to two hundred: Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that-

(A) persons who are in the employment of the company;

(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe to any securities of the company:

The exception to the above is that where two or more persons hold one or more shares. in a company jointly, they shall, for the purposes of this definition, be treated as a single member. The above definition under the 1956 Act is adopted from the definition of the private company as given in the English Act.

Also Read: Liability of a Company: Tortious, Civil, Vicarious and Criminal

Consequences of Default:

If a company commits default in complying with the above provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies. The private company is also a separate legal entity,s entirely different from its members. The minimum number of persons is two in the case of a private limited company.

Public Company:

A public company has been defined under Section 3(1)(iv) of the 1956 Act as a company that is not a private company. Thus, the public company is a residual form of čompany. According to the section, a public company is a company that has not restricted the right to transfer shares and which shall not limit the number of members to fifty and invites the public to subscribe to its shares or debentures.