Business Laws and Ethics · Company Types, Promotion, Formation and Related Procedures

Meaning and Features of a Company under the Companies Act, 2013

Updated 10 October 2026 · Fact-checked

A company is an artificial legal person created by registration under the Companies Act, 2013. From the date of incorporation it is a body corporate with perpetual succession, can own property, contract and sue in its own name. To answer, state the feature, explain it, then apply it to the facts.

Understand Meaning and Features of a Company

A company is an association of persons that becomes a legal person once it is registered. The law treats it as distinct from the people who own it. This one idea explains almost every feature you will be asked about.

Section 9 gives the core rule. From the date of incorporation shown in the certificate of incorporation, the subscribers to the memorandum and all later members become a body corporate by the name in the memorandum. It can exercise all the functions of an incorporated company. It has perpetual succession. It can acquire, hold and dispose of property, movable and immovable, tangible and intangible. It can contract and sue and be sued in its own name.

The features follow from this. Separate legal entity: the company owns its assets and owes its debts; members do not. Perpetual succession: members come and go, death or insolvency of a member does not end the company. Limited liability: in a company limited by shares, a member risks only the unpaid amount on shares held. This limit is a feature of the company types, not of Section 9 itself. Transferability of shares and a common seal are often listed too. The words 'and a common seal' were omitted from Section 9 in 2015, so a seal is no longer a legal feature.

Lifting the corporate veil means the court or law ignores the separate personality and looks at the real persons behind the company. It is an exception, used when the company form is a sham, a device to evade law, or to commit fraud. Some statutes also impose liability directly on members or officers in stated situations.

Compare with a partnership. A firm has no separate legal personality from its partners under the Partnership Act, and partners have unlimited liability. A company is a separate person and its members can have limited liability. A company continues despite changes in members. A firm's constitution depends on the partners.

Key rules to remember

Effect of registration (Section 9): Certificate of incorporation date → body corporate + perpetual succession + power to hold property, contract, sue and be sued; The company exists from the date of incorporation mentioned in the certificate, not from the date of application.
Separate legal entity: Company ≠ its members; Company owns its assets and owes its debts. Members are not owners of company property and are not liable for its debts beyond their share liability.
Limited liability: Maximum member liability = unpaid amount on shares held (company limited by shares); For a company limited by guarantee, liability is limited to the amount undertaken to be contributed on winding up.
Perpetual succession: Change in members (death, insolvency, transfer) → company continues; The company ends only by a legal process such as winding up or removal of its name.
Lifting the veil: Fraud, sham or evasion of law → look at the persons behind the company; An exception. Courts apply it case by case, not as a general rule.

How to solve Meaning and Features of a Company questions

Use this method for any question on features of a company, veil lifting or company versus partnership.

1Identify what is asked: define the company, list features, explain one feature, distinguish from partnership, or decide a case-based problem.
2Open with the definition: a body corporate created by registration, existing from the date in the certificate of incorporation (Section 9).
3Name each feature asked and give a one-line reason: separate entity, perpetual succession, limited liability, power to hold property and sue.
4Link each feature to an effect on facts: who owns the asset, who can sue, who pays the debt, what happens when a member dies.
5For a veil question, first state the general rule (separate personality), then ask if there is fraud, sham or evasion of law. Only then say the veil may be lifted.
6For comparison, use a two-column style in sentences: basis, company, partnership. Cover personality, liability, succession, transfer of interest.
7Close with a clear conclusion that answers the question in one line.

Quickest way: The S-P-L-V check

When to use it: Use it for case-based and short-note questions when time is limited.

S: Separate entity. Is the company's act its own, not the member's?
P: Perpetual succession. Does the change in members matter? Usually not.
L: Limited liability. Is the member's risk limited to unpaid share money?
V: Veil. Any fraud, sham or evasion? If yes, say the veil may be lifted. If no, the company stands apart.
Write the conclusion in one sentence using the company's name and the member's name.

Common mistakes in Meaning and Features of a Company

Saying the company exists from the date of application or from the date the certificate is issued.
Students mix filing with registration.
Fix: Section 9 says the status begins from the date of incorporation mentioned in the certificate of incorporation.
Listing a common seal as a legal feature of a company.
Older textbooks and notes still list it.
Fix: The words 'and a common seal' were omitted from Section 9 in 2015. Do not list it as an essential feature.
Saying every company has limited liability.
Limited liability is taught as the headline feature.
Fix: Section 366 itself recognises unlimited companies. Say limited liability applies to companies limited by shares or by guarantee, not to unlimited companies.
Treating the veil as lifted whenever the company is small or owned by one person.
Students think control means no separate identity.
Fix: Ownership or control alone does not lift the veil. Look for fraud, sham or evasion of law.
Saying a member owns the company's property in proportion to shares.
Confusion between owning shares and owning assets.
Fix: The company owns the assets. The member owns only shares, a right to profits and some rights of voting.
Writing only a list of features with no explanation or application.
Memorising headings without reasons.
Fix: For each feature, add one line of why and one line of effect on the facts.

Worked examples

Example 1

Ramesh holds all the shares of Ramesh Traders Private Limited. The company owes a supplier ₹8,00,000 and cannot pay. The supplier wants to recover from Ramesh's personal house. Advise, assuming the shares are fully paid and there is no fraud.

Show the solution

Rule: from the date of incorporation the company is a body corporate (Section 9). It contracts and is sued in its own name.
The debt is the company's debt, not Ramesh's, since the company is a separate legal entity from its members.
Ramesh's liability is limited to the unpaid amount on his shares. The shares are fully paid, so the unpaid amount is nil.
The veil can be lifted only for fraud, sham or evasion of law. Facts show none, so there is no ground to ignore the separate personality.
Conclusion: the supplier can proceed only against the company's assets.

Answer: The supplier cannot recover the ₹8,00,000 from Ramesh's personal house. The company is the debtor, and Ramesh's liability is nil because his shares are fully paid and there is no fraud.

Example 2

Distinguish a company from a partnership firm on four points.

Show the solution

Pick four standard bases: legal personality, liability, succession, transfer of interest.
Legal personality: a company is a body corporate separate from its members from the date of incorporation (Section 9). A firm is not a separate person from its partners under the Partnership Act.
Liability: members of a company limited by shares are liable only for the unpaid amount on shares. Partners are personally liable for the firm's debts without limit.
Succession: a company has perpetual succession, so death or insolvency of a member does not end it. A firm is generally affected by the change in partners unless the contract says otherwise.
Transfer of interest: a member of a company can generally transfer shares subject to the articles. A partner cannot transfer his interest so as to make the transferee a partner without the consent of the other partners.

Answer: A company is a separate legal person with limited liability for members, perpetual succession and transferable shares. A firm has no separate personality, its partners have unlimited liability, and its continuity and the transfer of a partner's interest depend on the partners.

Exam tips

For a 2-mark MCQ on Section 9, remember the three key words: body corporate, perpetual succession, sue and be sued. 'Common seal' is the usual wrong option.
In case-based answers, always state the general rule of separate personality first, then test for veil lifting. Marks go for this order.
If you cite a landmark case on separate personality or veil lifting, give the principle in one line and apply it. Name only cases you are sure of. A wrong name loses more than it gains.
For distinguish questions, use equal points on both sides and at least four bases. A neat list in sentences earns step marks.
Do not state that every company has limited liability. A one-line mention of unlimited companies shows precision.

Practice questions from Company Types, Promotion, Formation and Related Procedures

Meaning and Features of a Company: frequently asked questions

What is the meaning of a company under the Companies Act, 2013?

A company is a body corporate formed by registration under the Act. From the date of incorporation in the certificate it has perpetual succession and can hold property, contract, sue and be sued in its own name (Section 9).

What does separate legal entity mean?

It means the company is a legal person distinct from its members. The company owns its assets and owes its debts. Members are not liable for its debts beyond their share liability, unless the veil is lifted.

When can the corporate veil be lifted?

The veil may be lifted when the company is used as a sham, to commit fraud or to evade the law. Courts decide this case by case. Control or ownership by one person is not enough on its own.

Is a common seal still a feature of a company?

No, it is not a legal requirement. The words 'and a common seal' were omitted from Section 9 with effect from 29 May 2015. Do not list it as an essential feature in your answer.

How is a company different from a partnership?

A company is a separate legal person with perpetual succession and, in most cases, limited liability for members. A partnership firm is not separate from its partners and the partners have unlimited liability.