Definition of a registered company
A registered company is an association or collection of individuals, whether natural persons, legal persons, or a mixture of both. Registered company members share a common purpose and unite in order to focus their various talents and organize their collectively available skills or resources to achieve specific, declared goals.
A registered company can be created at law as legal person so that the company in itself can accept Limited liability for civil responsibility and taxation incurred as members perform (or fail) to discharge their duty within the publicly declared “birth certificate“ or published policy. Because registered companies are legal persons, they also may associate and register themselves as companies – often known as a corporate group.
Types of registered companies
- A company limited by guarantee: Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company.
- A company limited by shares: The most common form of company used for business ventures. Specifically, a limited company is a ” company in which the liability of each shareholder is limited to the amount individually invested” with corporations being “the most common example of a limited company.” A company limited by shares may be a
- publicly traded company or a
- Privately held company.
- A company limited by guarantee with a share capital: A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return.
- A limited-liability company: “A company—statutorily authorized in certain states—that is characterized by limited liability, management by members or managers, and limitations on ownership transfer”, i.e., L.L.C. LLC structure has been called “hybrid” in that it “combines the characteristics of a corporation and of a partnership or sole proprietorship”. Like a corporation it has limited liability for members of the company, and like a partnership it has “flow-through taxation to the members” and must be “dissolved upon the death or bankruptcy of a member”.
- An unlimited company with or without a share capital: A hybrid entity, a company where the liability of members or shareholders for the debts (if any) of the company are not limited. In this case doctrine of veil of incorporation does not apply.
Less common types of companies are:
- Companies formed by letters patent: Most corporations by letters patent are corporations sole and not companies as the term is commonly understood today.
- Charter corporations: Before the passing of modern companies’ legislation, these were the only types of companies. Now they are relatively rare, except for very old companies that still survive (of which there are still many, particularly many British banks), or modern societies that fulfill a quasi regulatory function (for example, the Bank of England is a corporation formed by a modern charter).
- Statutory Companies: Relatively rare today, certain companies have been formed by a private statute passed in the relevant jurisdiction. In legal parlance, the owners of a company are normally referred to as the “members”. In a company limited or unlimited by shares (formed or incorporated with a share capital), this will be the shareholders. In a company limited by guarantee, this will be the guarantors. Some offshore jurisdictions have created special forms of offshore company in a bid to attract business for their jurisdictions.
Attributes associated with registered companies
The distinctive attributes of a registered company are as follows:
- Separate legal existence: A company has a distinct legal entity independent of its members. It can own property, make contracts and file suits in its own name. Shareholders are not the joint owners of the company’s property. A shareholder cannot be held liable for the acts of the company. Similarly, members of the company are not its agents. There can be contracts between a company and its members. A creditor of the company is not a creditor of its members.
- Perpetual succession: Perpetual succession means continued existence. A company is a creation of the law and only the law can bring an end to its existence. Its life does not depend on the life of its members. The death, insolvency or lunacy of members does not affect the life of a company. It continues to exits even if all its members die. Members may come and go but the company goes on until it is wound up.
- Limited liability: As a company has a separate legal entity, its members cannot be held liable for the debts of the company. The liability of every member is limited to the nominal value of the shares bought by him or to the amount of guarantee given by him.
- Transferability of shares: The capital of a company is divided into parts. Each part is called a share. These shares are generally transferable. A shareholder is free to withdraw his membership from the company by transferring his shares. However, in actual practice some restrictions are placed on the transfer of shares.
- Common seal: Being an artificial entity, a company cannot act and sign itself. Therefore, it acts through human beings. All the acts of the company are authorised by its common seal. The name of the company is engraved on its common seal. The common seal is affixed on all important documents as a token of the Company’s approval. The common seal is the official signature of the company. Any document which does not bear the common seal of the company is not binding on the company.
- Separation of ownership and control: Members have no right to participate directly in the day-to-day management of a company. They elect their representatives, called directors, who manage the company’s affairs on behalf of the members. Thus, the ownership of a company is distributed among the shareholders while management is vested in the board of directors. The management of a company is delegated and centralised.
- Voluntary association: A joint stock company is a voluntary association of certain persons formed to carry out a particular purpose in common. Members of a company can join it and leave it at their own free will.
- Artificial legal person: A company is an artificial person created by law. It exists only in contemplation of law. It is competent to enter into contracts and to own property in its own name. But it does not take birth like a natural person and it has no physical body of a natural human being.
- Corporate finance: The share capital of a company is generally divided into a large number of shares of small value. These shares are purchased by a large number of people from different walks of life.
- Statutory regulation and control: Government exercises control through company law over the management of joint stock companies. A company is required to comply with several legal formalities and to file several documents with the Registrar of Companies.
Definition of a public corporation
A public corporation is a corporate body created by public authority, with defined powers and functions, and financially independent. It is administered by a Board appointed by public authority, to which it is answerable. Its capital structure and financial operation are similar to those of the public company, but its stockholders retain no equity interests, are deprived of voting rights and power of appointment of the Broad.”
It is an autonomous institution created by an Act of Parliament to provide either for the nationalization of some business in a country by transferring all such business to the statutory institution established for the purpose, or for facilitating the acquisition by the institution of undertakings belonging to certain existing companies or concerns or for the extension of certain social services, utilitarian or otherwise, on a large scale; or for the promotion, development and operation of certain schemes and for diverse other public purposes; and generally to provide for regulation and control of the working and operation of the institution and for other matters connected therewith or incidental thereto.”
Attributes of a public corporation
The public corporation has the following principal attributes:
- Completely state-owned: This institution is wholly owned by the state. A public corporation has no shareholders in the usual sense of the term. In some cases the corporation might issue its own stock with a state guarantee. The private holders of such stock are regarded as mere-creditors of the company. They got only interest at fixed rates on their investment. They cannot participate in the management of the corporation. From this point of view such shareholders’ position is different from that of the shareholders of a private joint stock company. The equity of a public corporation is owned by the nation.
- Statutory body: It is established by a special Act of Parliament or legislature which defines its powers, duties and immunities. The Act prescribes the form of management and its relationship to established departments and ministries. ”It is a child of the state which grows into maturity as soon as it is born.”
- Corporate body: Another feature of a public corporation is that it is a corporate body. It has a separate entity for legal purposes and can sue and be sued, enter into contracts and acquire or dispose of property in its own name.
- Financial autonomy: Except for appropriations to provide capital or to cover losses a public corporation is usually independently financed. It is financially self-supporting. It can thus obtain its funds by borrowing either from the Treasury or the public. It can also derive revenues from the sale of its goods and services. It can earn income, accumulate savings, build up reserves and may use and reuse its resources as it deems fit.
- Elimination of treasury control: It is usually exempted from most regulatory and prohibitory statutes applicable to expenditure of funds. The finances of the public corporations are not subject to the National Budget. It is neither required to submit annual estimates to the Treasury nor see fresh Treasury approval for new expenditures. Thus it is not subject to budget, accounting and audit Jaws and procedures applicable to non-corporate agencies.
- Employees not civil servants: In most of the cases, public corporation employees are not civil servants and are recruited and remunerated under terms and conditions determined by the corporation itself.
- Responsibility to parliament: A public corporation is accountable to Parliament through the appropriate minister. Its annual reports are presented to the Parliament and its accounts can be debated.
- Independent governing board: The management of a public corporation is vested in an independent Governing Board. Executive power rests in a small board responsible for day-to-day operations and appointed by the governments. In contrast to a public company, the board is neither answerable to its shareholders nor elected by them. On the other hand, its members chosen for their ability and competence direct, organise and administer the concern which is entrusted to them.
References
Dignam, A. & Lowry, J. (2006) Company Law, Oxford: Oxford University Press.
Himbara, D. (1993). “Myths and Realities of Kenyan Capitalism”. Journal of Modern African Studies 31 (1): 93–107.
John, M. & Adrian, W. (2003). The Company: a Short History of a Revolutionary Idea New York: Modern Library
Parks, M. (2011). The Shanghai capitalists and the Nationalist government, 1927–1937. Volume 94 of Harvard East Asian monographs (2, reprint, illustrated ed.). Harvard Univ Asia Center. p. 263.
Werner, D. & David S. (2012). China’s communist revolutions: fifty years of the People’s Republic of China. Psychology Press. p. 38.
