1.1 Nature and characteristics of a company

1.1 NATURE AND CHARACTERISTICS OF A COMPANY

A company is a legal entity that is formed to conduct business activities and generate profits. It is an organization that brings together individuals, resources, and capital to achieve specific objectives.

Nature and characteristics of a company:

1. Legal entity: A company is a distinct legal entity separate from its owners, known as shareholders or members.
2. Limited liability: Shareholders or members are typically only liable for the debts and obligations of the company up to the extent of their investment.
3. Ownership and shareholders: A company is owned by its shareholders or members. Shareholders invest capital into the company by purchasing shares, which represents their ownership interest.
4. Separate management: The management and control of a company are entrusted to the board of directors, who are elected by the shareholders. The board appoints executives and managers who are responsible for day-to-day operations.
5. Perpetual succession: The Company continues to exist even if its shareholders change or new shareholders join. The death, retirement, or transfer of shares by a shareholder does not affect the company’s existence.
6. Transferability of shares: Shares of a company are generally freely transferable, allowing shareholders to buy or sell their ownership interest without affecting the company’s operations.
7. Profit distribution: Companies aim to generate profits through their business activities.
8. Regulatory compliance: Companies are subject to various legal and regulatory requirements.