Everything You Need to Know About Company Laws

Importance of Company Laws Knowledge for the Lawyers: 

Lawyers and especially the one working for a firm must know all about the company laws. When we think of business, it is just a series of transactions, however a company is a lot more than that. It is not just about a transaction or a well performed and executed contract. Rather it is a distinct entity. And it has a pool of people who may be investing into it and are availing its products and services, hence it is functioning as a much larger figure than a mere transaction or a contract. In order to ensure the smooth functioning of a business enterprise, there were certain laws formed to uphold the transparency and accountability towards its shareholders and was called Company Laws. It provides an outline of the way in which a company must function as a legal entity (once it’s formed) and how it must be managed. The Companies Act was created in the year 1956 and it ensured that a company is treated as a separate legal entity from its members and that due to lapse or removal of one or all its members, it do not end. It must be formally wound up to end its existence. It has its own unique features and have a legal existence where it can sue others and others can sue the company without impacting any of its directors or board of member.

Features of a Company: 

As per Company law, there are certain features of a company that is important to understand the importance of the Company’s Law. The company has a perpetual existence irrespective of the existence of its members. That is a company continues to exist and function until it is legally wound up. Hence, even if all the members of a company pass away or leave it, the company will continue to exist and is not limited to its directors or its members. Only way a company can cease to exist is by formally winding it up. Even if the company is bankrupt or is not doing any form of business transactions, it is still in existence until an order to wind it up is passed. Another important feature of a company is that it is a unique and separate legal entity which have the power to sue others on its own and others can sue the company as well. In case the company finds fit, it can sue a wrongdoer and can be sued for any form of civil wrongs as a legal entity. This includes improper conduct of business, or enforcement of a special contract, etc. In such cases, the company will be held liable for its act and penalized accordingly. However, any criminal procedures do not imply over the company as a criminal procedure generally require a guilty mind and this cannot be applicable in case of a company. Company is only liable to a limited extent for the conduct of its business and rest goes on the directors and members of the company. This is so because if it is left on an individual then he may levy unlimited liability on the company and it will impact the perpetual existence aspect of the company.  Another feature of a company is its shares. Any person who contributes to the company financially by buying its shares owns that much of the company. A private company cannot have more than fifty shareholders. This is also known as restriction over the transferability of shares. However, a public company can freely trade its stocks in a stock market, hence it’s free from the transferability of shares. Since the company is a legal entity hence, it can also acquire the assets and properties in its name. Similarly, it could enter contracts as an entity and is also liable to pay taxes. All the above aspects and features of a company make it important to have a corporate lawyer, who understands and takes care of it as a legal entity and helps it comply with all the legal requirements during its existence.

Also Read: Key Terms of Companies Act, 2013 and Their Comparisons

Need of Law firm Lawyers to know the Company Laws: 

As discussed above, the company is itself a legal entity and hence there are various legal aspects that must be dealt with day in and out in a company. A corporate lawyer must know all about the Companies Act and must apply it in his daily job. A corporate lawyer may have to advice the firm on various aspects and the underlying aspect of this job is based on core of the Company’s Laws. They must make various decisions and help Management take their decisions telling them the legal implications of it. There are various contracts being signed based on these decisions and these contracts are legally binding. Hence, a corporate lawyer must keep in mind every aspect of Company Law to ensure that it keeps the company out of any sort of risks by signing such contracts or at least make them aware of the legal implications of their act as a company. Some aspects of such consulting work is, defining the duties of directors and other members of the company and helping them understand their liabilities to avoid any form of miss management. Then there are various business transactions taking place in a corporate firm. These transactions must be complaint with laws set under the Company’s Law. This also should be ensured by a corporate lawyer. Hence, he must be aware of various sections of company’s law to be applied and dealt with in these various scenarios. Knowledge of Company’s Law is also important while conducting any sort of due diligence while any making any investment or any sort of acquisition. Then a corporate lawyer must go through various books, reports, and related documents to understand all the legal aspects of that investment or acquisition. These lawyers not only help understand the risks related to these scenarios, but it also helps corporates to comply with various provisions and compliances of the Companies Act. Or else company must pay hefty penalties under the various sections of the Companies Act. Also, in case of formation of any contract, all the legal implications must be judged and must comply with the Companies Act and its various provisions. This may include various regulatory compliances, consents of various bodies to be taken before the signing of such contracts, understanding all the legal requirements and litigations and fulfilling them to make the company comply and eligible to go with such contracts. Hence, a corporate firm lawyer must have a sound understanding of various provisions of the company’s Act and underlying laws to support the firm in its standing.  

Related Article:

• Formation of a Company under Companies Act, 2013
• The Journey of Companies Act from 1956 to 2021
• What are the Salient Features of Companies Act, 2013
• All-About ‘Companies’