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Meaning of “Company” and Definition under Corporate Law

company as a form of businessDefinition of Company by Popular Dictionaries

Oxford Dictionary defines a ‘‘Company’’ as ‘a business organization that makes money by producing or selling goods or services’.

Cambridge University defines a ‘‘Company’’ as ‘an organization that sells goods or services in order to make money’.

Definition under the Companies Act, 2013 (India)

Section 2(20) of the Companies Act 2013 defines the "company" as a company incorporated under this Act (i.e. the Companies Act 2013) or under any previous company law.

Note: Previous company law as mentioned above is described in clause (67) of section 2 of the  Companies Act, 2013.

Company as a form of business organization

A person or a group of persons (shareholders who invest money and/or ideas) has many options to start a business organisation as a legal entity. They can start it as a partnership firm or a limited liability partnership (llp) or a non governmental organisation (ngo) or a trust or a body of association or a registered company.

In the eyes of law, a company is considered as an artificial person. A limited liability company can be established and continued to be operated as a separate legal entity by natural persons, i.e. its shareholders' liability is only limited to the capital contribution made/committed by them.

The company has perpetual succession. The death of its founding shareholder(s) does not necessarily dissolve the company. New shareholders can continue to run the organisation.

The persons, who contribute to the capital to the company, entrust the management of the company in the hands of the Board of Directors of the company.

A company before its incorporation may be promoted by some persons known as the ‘Promoters’ of the company. The promoters and the directors of a company may not be the same persons.

What are the various kinds of companies?

A company can be primarily either a
(1) Private Company - having min. 2(two) and max. 200 (two hundred) shareholders, or
(2) Public Company - having min. 7(seven) and max. unlimited shareholders, or
(3) One Person Company - having one and only shareholder (it's also a private company).

A company can also be classified as either:
(1) a company limited by shares; or

Generally, companies are known by their industry sectors like pharma company, banking company, information service company, etc. This categorization gives a real picture of what product / service they are into.

Minimum paid up capital for a company

With the coming into force of the Companies (Amendment) Act, 2015, the minimum share capital requirement for companies is no more a mandatory thing. Earlier, every registered company was required to maintain a minimum paid-up capital i.e. rupees one lakh in case of a private company and rupees five lakh in case of a public company.