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CA Intermediate · Corporate and Other Laws · Preliminary

Meridian Traders Pvt Ltd, a company in Pune, has an annual general meeting scheduled. Its articles say 'a member is entitled to vote on every resolution'. Ketan holds 100 equity shares and his friend Sunil holds 50 equity shares in the company. Ketan asks whether a company registered under the Companies Act, 2013 is an 'artificial juridical person' with its own legal identity. Which statement correctly reflects the legal position?

A company registered under the Companies Act is a separate legal person distinct from its members. It can own property, enter contracts and sue or be sued in its own name. This applies to private and public companies alike, and members do not directly own its assets.

  1. AThe company has a separate legal personality distinct from its members, so it can own property and sue in its own nameCorrect
  2. BThe company has no separate identity and its members jointly own its assets directly
  3. CThe company has a separate identity only if it is a public company
  4. DThe company's separate identity ceases whenever it has fewer than five members

Explanation

On incorporation a company becomes a body corporate with perpetual succession and a legal personality separate from its members, regardless of whether it is private or public. Members do not own the assets directly, which is why option B is wrong. Option C is wrong as private companies also have separate personality.

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