We all deal with companies every day but do we really know much about them? Their nature, their powers and the different types of companies that exist? Here are 3 basic characteristics of the most popular business structure known as the ‘company’

 

Separate Legal Entity

A company is an entirely fictional creature and is also a fairly recent invention, only existing in its current form since the mid 19^th Century. It is artificial entity which is recognized by law as a legal person with its own rights and liabilities. Just like a natural person it can sue and be sued. It can acquire, hold and dispose of property. It can enter into contracts. However, having no physical form of its own, it can only act through its authorized agents. The law allows its directors and other authorized officers to execute contracts and other documents on its behalf. Finally, a company is formed through the act of registration through the Australian Securities and Investments Commission or ASIC. It’s birth certificate is the Certificate of Registration. It can exist indefinitely or until it is deregistered.

Continue reading article on entrelegal.com 

Limited Liability

The feature which makes the company structure the most popular business structure is limited liability. This means that the owners of a limited liability company are only liable to contribute to the debts of a company up to any unpaid amount on the issue price of the shares they hold. This allows an individual to invest in a business without risking his or her personal assets.

 

Ownership and Control

Company law distinguishes between the ownership and control of a company.

 

Shareholders, or members, are the owners of a company. They initially contribute capital by paying the issue price on their shares and may also receive dividends if the company makes a profit.

 

Directors, referred to collectively as a ‘board’, have control of the management of a company. Directors may manage the company directly, or they may appoint managers to control the company. Directors are subject to strict duties such as the duty to act in good faith and to use reasonable care and diligence.

 

Over the coming weeks I’d like to share with you more topics relevant to companies including types of companies, registering a company and directors’ duties. Sign up to my mailing list here and feel free to email any questions you have directly to me.