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A company is legal entity firm by a group of individuals to engage in a commercial or business activity with a primary aim of earning profit. They can also be distinguished between private and public companies based upon their nature of incorporation. Both have different ownership structure, regulations, financial reporting and compliance requirements.

As per the Companies Act following can be highlighted as the characteristics of a company:-

1. Incorporated association of persons
2. Artificial legal person
3. Separate legal entity
4. Perpetual existence
5. Common seal
6. Limited liability
7. Financial structure and reporting relationship.

It can be classified into various types depending upon the following requirements:-

1. Classification mode of incorporation

   • Statutory company- e.g. RBI Act, 1934
   • Registered or incorporated companies.

2. Classification based on the liabilities of the members.

   • Company is limited by share
   • Company is limited by guarantee
   • Unlimited company

3. Classification based on the number of members

   • Public company
   • Private company
   • Section 24 company
   • One person company

A company is an entity which is formed and incorporated under Indian law for the furtherance of business activities. A company is a separate person or entity has independent existence from its members. It may be private or public limited company. The liability of its members may be limited by shares held, the members or guarantee. Any two person may form a private company. But recently one person company has also been allowed under Indian law.

Constitution of a company

The constitution of a company is contained in the memorandum of association which is registered with the registrar of companies. The internal regulations of the company are mentioned in the article of association.It is registered with the registrar of companies under the companies Act, 1956.

Management of the company

The management of the company is in the hence of the board of directors. A company may appoint a sole selling agent for any area for any term. Such appointment has to be approved in the general meeting of the company. A company is a legal person under Indian law which have all the rights similar to a private person.

An agreement is an internal document for a limited liability company. That provides the framework for how a limited liability company operates. So, it governs the relationship among members and officers of the company. Assignees, of membership interest in the company and the company itself and other internal affairs of the company are prescribed in detail in this document.

Following information mentioned below is covered in company agreement:-

1. Ownership structure
2. Management
3. Members right and responsibility
4. Allocation of profit and loss
5. Distribution of profits
6. Voting powers of members and shareholders
7. Transfer of membership interest
8. Dissolution or liquidation of the company.

It is the key agreement used by limited liability companies because it outlines the businesses financial and functional decision, rules, regulation and bylaws. Once the company member signed it acts as a binding contract between the members of the company.

The condition for its enforceability is that the shareholders agreement should not curtail statutory powers of the company. It should not bind future shareholders than they can be enforced against the company. Even if they are not incorporated in the article of association of the company.

Memorandum of association

A memorandum of association is a legal document prepared in the formation of a company to defined its relationships with shareholders. It’s primary area of business and the identification of the company itself in the eye of law. Memorandum of association is accessible to the general public. It describes the name its physical address and the distribution of the shares between the shareholders and promoters.

Section 399 of the companies Act, 2013

Section 399 of the companies Act, 2013 provides for memorandum of association. It is considered as a primary document for a companies identification. It  contains the object of the company the scope of operation and boundaries which it cannot cross in its entire life. 

Section 4 of the companies act states that a memorandum of association contained following:-

• Name clause
• Domicile state clause
• Object clause
• Liability clause
• Capital clause

A Table — If shares limit a company.

B Table —  If company limited by guarantee.

C Table —  If a company limited by guarantee and share capital.

D Table —  Unlimited liability company

E Table —  Unlimited liability company having share capital.

Memorandum of association being charter of the company. It is the Supreme legal document prepared at the time of the incorporation of the company. It defines object of the companies formation, nature of business and the utmost possible scope of delivering. Its corporate responsibilities in social domain which it cannot debar.

section 2 (5) of the companies Act, 2013

As per section 2 (5) of the companies Act, 2013 “Article” , means the article of association of a company as altered from time to time for its convenient operations designed by7 the members of the company. It deals with the right of the members of the company inter se.

The documents lays out how tasks are to be accomplished within the organization. Including the process for appointing directors and officers and the handling of financial records. Article of association also prescribes the inter relationship governed inside the company.

It is the articles of association of a company or organization. It lays down all rules, provisions, powers, duties, rights. Moreover, responsibilities related with the overall governance and management of the company mutually decided by members and shareholders.

A company can alter its article of association in the way of addition, deletion, modification, substitution or any other way. If it wants to by the general majority of its shareholders in the general meeting by giving a notice of alteration of at least 7 days at the board meeting. The given resolution in respect of alteration in articles of association must be passed. 

An entrenched clause or entrenchment clause of a basic law or constitution is a provision which makes certain amendments either more difficult or impossible i.e. inadmissible in the company’s article of association. It may require a form of super majority of referendum submitted to the people or the consent of another party to such an article.