Question

What is meant by a company? Explain its characteristics.

Hint:

A company combines ownership by shareholders and management by directors, ensuring professional governance and financial security for its members.

Answer 1

A company is a legal entity formed under the Companies Act to carry out business activities. It has a separate legal identity, perpetual succession, and limited liability for its members. Characteristics of a Company: 1. Separate Legal Entity: A company is distinct from its owners and can own property, enter contracts, and sue or be sued in its name. 2. Perpetual Succession: A company continues to exist regardless of changes in ownership or management. 3. Limited Liability: The liability of shareholders is limited to the unpaid value of their shares. 4. Transferability of Shares: Shares of a public company can be freely transferred, ensuring liquidity for shareholders. 5. Common Seal: A company uses a common seal as its official signature, representing its authority.