Definition
Artificial legal person incorporated under the Companies Act.
Association of persons incorporated under the Companies Act with separate legal identity and limited liability.
Statutory Definition
Companies Act, 2013, Section 2(20).
Etymology & Origin
From Old French 'compagnie' (group of people sharing bread together — from 'com', together, and 'panis', bread — 'companions'). The Latin phrase 'cum pane' (with bread) evokes the sharing of a common meal — a company originally denoted a group of people sharing a common enterprise, as companions. In legal usage, the word came to denote a formally constituted commercial association — a group of persons pooling resources for a shared commercial purpose.
Full Legal Analysis
A company, in Indian law, is a legal entity — an artificial person — incorporated under the Companies Act, 2013 (or its predecessors). Section 2(20) defines 'company' as a company incorporated under the Act or under any previous company law. The defining features of a company, as established by over a century of corporate jurisprudence: (1) Separate legal personality — the company is a distinct person from its shareholders and directors; it can own property, enter contracts, sue and be sued, and commit crimes in its own name; (2) Limited liability — shareholders are not personally liable for the company's debts; they are only required to contribute to the company's assets up to the amount of their unpaid share capital; (3) Perpetual succession — the company continues to exist regardless of changes in its membership; death or bankruptcy of shareholders does not dissolve the company; and (4) Transferability of shares — shares are freely transferable (subject to restrictions in private companies and regulatory requirements in listed companies).
Types of companies under the Companies Act 2013: (1) Public Company — may offer shares to the public; minimum 7 members; no restriction on transfer of shares; (2) Private Company — restricts the right to transfer shares; minimum 2, maximum 200 members; cannot offer shares to the public; (3) One Person Company (OPC) — a company with a single member (introduced by the Companies Act 2013); (4) Government Company — a company in which the Government holds at least 51% of the paid-up share capital; and (5) Holding and Subsidiary companies — based on ownership structure. Listed companies are additionally regulated by SEBI under the Securities Exchange Board of India Act, 1992.
Lifting the corporate veil is the most important exception to the principle of separate legal personality. Courts may 'lift' or 'pierce' the corporate veil — look behind the corporate form to the actual humans controlling the company — when: (1) the company is a mere sham or facade for fraud; (2) the company and its controller are in practice a single economic unit (agency or group cases); (3) specific statutory provisions require attribution of the company's acts to its controllers (e.g., for tax evasion, unlawful trading); and (4) the company was formed for an illegal or fraudulent purpose. Lifting the veil exposes the controllers (directors, shareholders) to personal liability — the exception that proves the rule of separate legal personality.
The House of Lords held that once a company is validly incorporated, it is a separate legal person distinct from its members — even if one person holds virtually all the shares and is effectively the sole beneficial owner of the company. Mr. Salomon incorporated his business as a company, holding most of the shares himself. When the company went insolvent, the creditors argued that Salomon should be personally liable as the company was simply his 'alter ego.' The House of Lords rejected this, holding that the company is a separate legal person — its debts are the company's debts, not Salomon's personal debts. This foundational case establishes the bedrock principle of corporate law: the veil of incorporation separates the company from its members.
The company's management structure: (1) Board of Directors — manages the company's affairs; directors are agents of the company (not owners); they owe fiduciary duties to the company and its shareholders; (2) General Meeting — the ultimate sovereign body of the company; shareholders exercise voting rights to appoint directors, approve accounts, alter the memorandum/articles; (3) Managing Director/CEO — the executive officer responsible for day-to-day management; (4) Company Secretary — responsible for statutory compliance (filing annual returns, convening meetings, maintaining statutory records). Each role has distinct statutory duties under the Companies Act 2013, and failure to comply results in specific penalties.
For advocates, company law work encompasses: (1) incorporation — preparing the MOA, AOA, and registration documents; (2) corporate governance — advising boards on director duties, related party transactions, and SEBI compliance; (3) insolvency — companies subject to the Insolvency and Bankruptcy Code, 2016; (4) merger and acquisition — share purchase, business transfer, court-approved amalgamations; and (5) disputes — shareholder oppression petitions before the NCLT under Section 241-242 CA 2013.
This Term in Indian Statutes
Companies Act, 2013, 2013
"From the date of incorporation mentioned in the certificate of incorporation, the subscribers to the memorandum and all persons, whose names are entered in its register of members, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company under this Act and having perpetual succession with power to acquire, hold and dispose of property, both movable and immovable, and to contract and to sue and be sued, by the said name."
Separate legal personality; Salomon foundational authority; lifting the veil — fraud, sham, single economic unit; types of companies; Section 241-242 oppression remedy; IBC for insolvency
