Definition of Company:
Company is another form of business ownership. It consists of large capital which is divided into shares of small value. There are various definitions of company. Some of them are discussed below:
According to companies Act, 2017,
“A business registered under companies Act, 2017 or an existing company is a company.”
Keeping in view the characteristics of company, a comprehensive definition of Joint Stock Company is as under:
“A voluntary organization which is an artificial person created by law, having limited liability of its members and a perpetual life with its capital divided into transferable shares and which has a common seal.”
Characteristics of Company:
A company has following characteristics.
1) Compulsory Registration:
The company cannot come into existence unless it is registered under Companies Act, 2017 in Pakistan. It requires certificate of registration and commencement certificate before starting its operation. There is no such condition in sole proprietorship and partnership.
2) Separate Legal Entity:
Company is an artificial person which has its legal existence in the eyes of law separate from its owners. It can enter into agreement, can sue and can be sued by other in its own name.
3) Common Seal:
Being an artificial person, it cannot sign on the documents itself. Therefore it has a common seal which contains company name and is used as its signature. It is in the custody of company secretary.
4) Limited Liability:
Every limited company must have the word “limited” in its name which means the liability of shares holders is limited to the amount of their investment in the company.
5) Transferability of Ownership:
Shares of the company can be bought and sold in the market that is Stock Exchange. This act is known as transferability of ownership which does not affect the life of company.
6) Large Size of Capital:
The capital of the company is larger. It can be easily increase its capital by selling more shares. Due to the large size of capital, size of company is also larger.
7) No of Shareholders:
In company owners are called shareholders. The number of owners in company is the greatest of all forms of ownership. In private company there are at least one and maximum fifty shareholders (1-50).In case of public company, the minimum number of shareholders is three and there is no limit for maximum numbers (3-as registered).
8) Separate Management:
In the joint stock company, ownership is separate from management. Company is managed by board of directors who are elected by the shareholders from among themselves.
9) Long Life or Perpetual Succession:
Company has continuity of operation. The death or bankruptcy of any of shareholder or directors does not affect the continuity of company’s operations.
10) Annual Financial Statement:
Every public company must have its annual financial statements audited by external auditors and submit it to the registrar of the companies.
11) Double Taxation:
The company is subject to double taxation. First, the tax is imposed on the profits of the company. Secondly, the shareholders pay tax on the dividends received.