Definition of a company

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Definition of a Company
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Company Section 3(1) of Companies Act, 1956

• The definition of Company in sub-section (1)(1)
  of section 3 of the 1956 Act, is subject to the
  other definitions given in other provisions of
  the 1956 Act for the limited purposes stated
  therein. In Telesound India Ltd., it was held
  that though the word companies is generally
  defined in section 3 of the 1956 Act, the
  definition cannot be used to cut down the scope
  of the word companies  as defined in other
  sections for their own different purposes. For
  Example, Section 390(a) of the 1956 Act defines
  the  companies for the purposes of the section
  as  a company liable to be wound up under this
  Act. The court said that if the word companies 
  were to be restricted to the definition of
  section 3 of the 1956 Act, a large number of
  companies, such as, unregistered companies
  and foreign companies would be outside the
  preview of the provisions contained in Chapter 5
  of the 1956 Act with regard to compromise,
  arrangement, reconstruction etc., even though
  these categories would be within the winding up
  sweep of the Act.

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Company Registration
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• For the purposes of Industries Development and
  Regulations Act, 1951 which permits the take-over
  of the companys management, it has been held
  that a word  Company does not include a
  partnership firm. A banking company registered
  under the Sikkim Registration of Companies Act,
  1961 has been held to be a company within the
  meaning of section 5(d) of the Banking Regulation
  Act, 1949 and section 3 of the 1956 Act. Note
  that the word Company as defined in section 3
  of the 1956 Act does not include a  foreign
  company. But the word when used with holding
  and subsidiary is wider in scope and includes
  also a foreign body corporate.Section 4(5) of
  the 1956 Act.

5
Existing Company

• The definition necessarily implies the actual
  existence of the company. A company which has
  become defunct and whose name has been struck off
  the register under section 560 of the 1956 Act,
  will not come within the definition of
  existing company. A business registered under the
  Sikkim registration of Companies Act, 1956, is
  not  a company within the meaning of section 3(1)
  (2) of the 1956 Act nor  an existing company withi
  n the meaning of section 3(1)(2) of the 1956 Act.
  The provisions of the 1956 Act do not extend to
  the state of Sikkim.

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Company Registration
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Section 3 of the Companies Act, 1956 Foreign
company

• The term company as defined in section 3 of the
  1956 Act. It denotes a group of persons and the
  effect of registration under the Act is that such
  a group becomes a corporate body having perpetual
  succession and a common seal. The 1956 Act, in
  its several provisions, has given effect to a
  democratic set-up to the association called the
  Company, the management vesting in its Board of
  Directors and the ultimate control remaining with
  the organisation in general meeting. The legal
  fiction created by sub-section (2) of section 591
  of the 1956 Act does confer on a foreign
  companies any exalted state so as to be treated
  as a business incorporated in India.

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Company and Partnership

• The points of difference between a company and a
  partnership as noted in  PALMER. The principle
  that, apart from exceptional cases, the business
  is a body corporate, distinct from its members,
  lies at the root of many of the most perplexing
  questions, that beset companys Law. It is a
  fundamental or cardinal distinction-a distinction
  which must be firmly grasped. The principle is
  thrown  into clear relief by contrasting an
  incorporated companies with a partnership, for
  under English Law (though not the Scottish law or
  that of most Continental systems) a firm or
  partnership is not  a separate entity from its
  members.

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Business Registration
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• In case of a partnership the property of the firm
  belongs to the individual members. They are
  collectively entitled to it , whereas, in the
  case of a business, it belongs to the companys
  and not to the members.
• Creditors of a firm are creditors of the members
  of the firm, and on obtaining judgement against
  the firm can levy execution on the property of
  the partners in the firm, whereas, in the case of
  a business, the creditor has no debtor but that
  impalpable thing, the corporation, and the
  judgement against the companies normally gives no
  right to levy execution against the members.
• A member of a firm can on behalf of the firm
  dispose of property and incur liabilities ,
  within the scope of the business, to any extend,
  whereas  a member of a company, as such, has no
  power.
• A partner cannot contract with the firm, whereas
  a member of the companies  can contract with the
  organisation.

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COMPANY AS PARTNER

• The 1956 Act recognizes that a company can be a
  partner in a partnership firm. Under Schedule 6
  of the 1956 Act, under the Sub-head loans and
  advances, advances and loans to a partnership
  firm in which the companies or any of its
  subsidiaries is partner, has to be disclosed
  separately. Thus,it is possible for companies  to
  be a partner in a firm, as the business  is a
  legal person. The object clause of the memorandum
  of association must contain the power enabling
  the companies to enter into partnership with any
  person or company. There was not be any
  operational difficulty in case of a
  organisation/business becoming a partner in a
  firm . Such partner-company could act through its
  officers duly authorized in this behalf.
  Nationally and juristically if two incorporated
  companies under the Indian Companies Act enter
  into a partnership , then each organisation
  becomes the agent for the other and agrees to
  share the profits.

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Business Registration
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• This will create many problems for the two
  incorporated companies. Both the companies will
  have to be, therefore, the agents for each other
  in a manner which may not be permissible at all
  by their own articles and memorandum. It would be
  difficult to apply the very specific rights and
  obligations as between partners in the case of
  companies as partners, such as Chapter 3 ,and
  Chapter 4 and Chapter 6 of the Partnership Act,
  1932. Then  there is need also for the
  registration of firms and the companies as such
  partners in a partnership will have to,
  therefore, obey the two masters, the Registrar of
  Firms and Registrar of Companies. It is not only
  the individuals who can be partners in a firm, an
  incorporated companies may form a partnership
  with an individual. Companys may also enter
  into  a joint venture with any person or firm or
  any other form of association. A company may also
  become partner in a limited liability partnership
  (LLP). In short,  a business being a juristic
  person is to entitled to almost all of the rights
  of association conferred on natural persons.

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• Where a company can enter into partnership or not
  is no longer open to doubt. The Department of
  Companys affairs has in its circular no. 1-81,
  dated 14-09-1981. The 1956 Act itself recognizes
  the legality of a business being partner in a
  partnership firm. A business being a juristic
  person can do all that a natural person can, add
  there is nothing in the principles of partnership
  which excludes a business from being  a partner.
  A business which is authorized to carry on a
  business is by implication authorized to carry
  the same business in partnership or  as the joint
  venture. The position of companies as a partner
  is thus stated A company may be a partner in a
  partnership, indeed all the partners in the
  partnership may be companies. These Companies,
  like all partners (except limited partners of a
  limited partnerships), are liable for all the
  departments of the partnership without
  limitation, that the liability of the
  incorporators that is members of those
  partnerships, is limited is irrelevant