Company and its characteristics

by • 10/06/2011 • B.COM PART 1 Introduction to BusinessComments (0)945

Q1-Define company. Also discuss its characteristics.


A company may be defined as:

“Any business that issues shares the liability of which is limited.”


The corporate forms of business has the following chief characteristics which the other forms do not enjoy.

1.   Separate Management:

In the corporation ownership is separated from the management. Shareholders do not take part in the affairs of the business. They elect a board of directors from among themselves who runs the corporation with the help of hired specialized and skilled personnel.

2.   Name Of The Company:

The name of the company is followed by the word “ Limited “ which becomes its part. The word limited denotes that the liability of the shareholders of the company is limited to their individual investments.

3.   Board Of Directors.

Every company must have a board of directors. These directors are the representatives of and elected by the shareholders of the company. This board runs the whole affairs of the company.

4.   Charter Restrictions:

The company can not change its name, head office, objectives, authorized capital, and liability which have already been registered with the registrar of the companies. Before the company wants any change in any of them, it must get a prior permission from its shareholders, civil court, and the government.

5.   Annual Financial Statement:

Every public company must submit its annual financial statements to the government i.e. the registrar of the companies.

6.   Compulsory Registration:

The corporation cannot come into existence unless it is registered under the companies Ordinance 1084 in Pakistan. After it is so registered, it is issued a certificate known as commencement certificate. This certificate is not required by the private company.

7.   Limited Liability:

Another important characteristics of the company which makes it quite different from other forms is its limited liability. The liability of shareholders is limited to the amount of their investment in the company.

8.   Public Subscription:

The company(public company only) should offer its shares to the general public for subscription to raise funds.

9.   Large Size:

The company is of large size in capital and in manpower. If needed, the capital can be enhanced by floating new stock on the stock exchange.

10. Number Of Shareholders:

Its another significant characteristic is that in the company the number of owner is the greatest of all other forms of ownerships. Especially, sole proprietorship, partnership, and private company.

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