COMPANY LAW. Unit I:

PAPER-V:

COMPANY LAW.

Unit I:

Q.1. Define a company under the Companies Act, 2013. What are the essential characteristics of a company?

Under Section 2(20) of the Companies Act, 2013, a “company” means a company incorporated under this Act or under any previous company law. It is a legal entity formed by a group of individuals to engage in and operate a business—commercial or industrial—enterprise. A company enjoys a separate legal existence from its members and is recognized as an artificial legal person with rights and obligations.

Essential Characteristics of a Company:

Incorporated Association: A company comes into existence only after registration under the Companies Act. Without incorporation, an association of persons cannot attain the status of a company.
Separate Legal Entity: Upon incorporation, a company becomes a separate legal entity distinct from its members. It can own property, enter contracts, sue and be sued in its own name. This principle was established in Salomon v. Salomon & Co. Ltd.
Perpetual Succession: The life of a company is not affected by changes in its membership. Death, insolvency, or retirement of members does not dissolve the company.
Limited Liability: The liability of members is limited to the extent of their shareholding or guarantee. This provides protection to personal assets of members.
Artificial Legal Person: A company is a creation of law and lacks physical existence, but it can act through human agents such as directors and officers.
Common Seal (Optional after 2015 Amendment): Previously, a company had to use a common seal as its official signature. Now, authorization by directors is sufficient for legal documents.
Transferability of Shares: In the case of public companies, shares are freely transferable, facilitating investment and liquidity. In private companies, this right is restricted.
Capacity to Sue and Be Sued: A company can initiate legal proceedings in its own name and can also be sued, ensuring legal accountability.

In summary, a company under the Companies Act, 2013 is a structured legal entity that offers distinct legal personality, continuity, limited liability, and regulated governance. These attributes make it a preferred choice for organized and large-scale business operations.

Q.2. Discuss the major distinctions between a Partnership Firm and a Company. Support your answer with legal provisions.

A Partnership Firm and a Company are two distinct forms of business organization governed by different laws and having different legal characteristics. While a partnership is governed by the Indian Partnership Act, 1932, a company is governed by the Companies Act, 2013.

Below are the major points of distinction between the two:

1. Governing Law:

Partnership Firm: Governed by the Indian Partnership Act, 1932.
Company: Governed by the Companies Act, 2013.

2. Legal Status:

Partnership: Not a separate legal entity from its partners. The firm and the partners are treated as one.
Company: A company is a separate legal entity distinct from its shareholders and directors (Salomon v. Salomon & Co. Ltd.).

3. Number of Members:

Partnership: Minimum 2 and maximum 50 (as per Companies Act, 2013, for firms doing business).
Private Company: Minimum 2 and maximum 200 members.
Public Company: Minimum 7 members; no maximum limit.

4. Formation:

Partnership: Created by an agreement among partners. Registration is optional.
Company: Formed by registration under the Companies Act. Incorporation is mandatory.

5. Liability of Members:

Partnership: Partners have unlimited liability. They are jointly and severally liable for the firm’s debts.
Company: Liability is limited to the extent of unpaid share capital or guarantee.

6. Transfer of Interest:

Partnership: A partner cannot transfer his interest without the consent of other partners.
Company: Shares in a public company are freely transferable (Section 44 of the Companies Act, 2013).

7. Management:

Partnership: All partners have a right to participate in management unless otherwise agreed.
Company: Managed by a Board of Directors as per the provisions of the Companies Act.

8. Perpetual Succession:

Partnership: Dissolves on death, insolvency, or retirement of a partner, unless there is an agreement to the contrary.
Company: Enjoys perpetual succession, unaffected by changes in membership.

9. Audit and Disclosure:

Partnership: Audit is not compulsory unless required under tax laws.
Company: Audit and statutory disclosures are mandatory under the Companies Act, 2013.

10. Public Confidence and Fundraising:

Partnership: Limited public confidence. Cannot raise capital from the public.
Company: Especially public companies can issue shares, debentures, and accept deposits from the public (subject to compliance).

Conclusion:

While a partnership firm offers simplicity and flexibility in operations, a company provides advantages such as limited liability, perpetual existence, and better fundraising options. However, companies are subject to more stringent regulatory controls. The choice between the two depends on the nature, scale, and goals of the business.

Q.3. Explain the different types of companies recognized under the Companies Act, 2013. How does a Multinational Company (MNC) differ from other types of companies?

The Companies Act, 2013 classifies companies into various types based on incorporation, liability, ownership, and control. These classifications help in determining the legal framework applicable to each kind of company.

I. Types of Companies under the Companies Act, 2013:

1. Based on Incorporation:

Statutory Companies: Formed by a special Act of Parliament or State Legislature (e.g., RBI, LIC).
Registered Companies: Incorporated under the Companies Act, 2013.

2. Based on Liability:

Company Limited by Shares (Section 2(22)): Members’ liability is limited to the unpaid amount on shares.
Company Limited by Guarantee (Section 2(21)): Members guarantee a fixed amount towards company debts in case of winding up.
Unlimited Company (Section 2(92)): Members’ liability is unlimited.

3. Based on Number of Members:

Private Company (Section 2(68)): Minimum 2 and maximum 200 members; restrictions on share transfer and public subscription.
Public Company (Section 2(71)): Minimum 7 members; can issue shares to the public.
One Person Company (Section 2(62)): Only one member; a simplified form of private company.

4. Based on Control:

Holding Company: A company that controls one or more subsidiaries.
Subsidiary Company: A company controlled by a holding company through shareholding or board control.
Associate Company: A company in which another company has significant influence (at least 20% shareholding).

5. Other Types:

Section 8 Company: Formed for charitable, religious, or non-profit objectives; profits are not distributed among members.
Small Company (Section 2(85)): A private company with prescribed capital and turnover limits.
Dormant Company (Section 455): Formed for future projects or to hold assets/IP; remains inactive for a period.

II. Multinational Company (MNC):

A Multinational Company (MNC) is not specifically defined under the Companies Act, 2013, but it refers to a company that:

Operates in more than one country;
Has its headquarters in one country but branches, subsidiaries, or joint ventures in other countries;
Carries out production, services, or investments across borders.

Examples include Google, Microsoft, Reliance, Tata, etc.

III. Distinction between MNCs and Domestic Companies:

Basis	MNC	Domestic Company
Operations	Operates in multiple countries	Operates mainly within India
Structure	Often includes subsidiaries in various nations	Generally limited to Indian jurisdiction
Capital & Investment	Large-scale, international investments	Limited capital base
Compliance	Must follow laws of multiple countries	Primarily follows Indian laws
Scope	Global market reach	Local or national market

Conclusion:

The Companies Act, 2013 offers a comprehensive classification of companies to regulate them based on size, purpose, ownership, and liability. While the Act does not define MNCs, they are recognized by their cross-border operations and international influence, making them distinct from typical Indian companies in terms of structure, scale, and compliance requirements.

Q.4. Elaborate on the advantages of incorporation of a company. How do these benefits support the objectives of business expansion and risk management?

Incorporation refers to the legal process by which a company is registered and recognized as a separate legal entity under the Companies Act, 2013. It confers a distinct legal personality on the company, different from its members. Incorporation offers a range of benefits that play a vital role in promoting business expansion and ensuring risk management.

Advantages of Incorporation:

1. Separate Legal Entity:

Upon incorporation, a company becomes a distinct legal person. It can own property, enter contracts, sue and be sued in its own name. This separation from its members allows it to continue operations regardless of changes in ownership.

2. Limited Liability:

One of the most significant benefits is limited liability of members. Shareholders are only liable to the extent of their unpaid share capital. Their personal assets are protected against company debts, thus minimizing financial risk.

3. Perpetual Succession:

A company continues to exist regardless of the death, retirement, or insolvency of its members or directors. This ensures business continuity and long-term planning, essential for growth and expansion.

4. Transferability of Shares:

In public companies, shares can be freely transferred, providing liquidity to shareholders and making it easier to raise capital. This flexibility also helps in attracting investors.

5. Ease of Raising Capital:

A company can raise funds through issue of shares, debentures, bonds, or by accepting deposits. This ability to mobilize large amounts of capital is crucial for business growth and expansion.

6. Professional Management:

Companies are managed by a Board of Directors and professional managers. This structured governance supports efficient decision-making, better compliance, and strategic business development.

7. Enhanced Credibility:

Incorporated companies are viewed as more credible by banks, investors, and regulatory authorities. This trust facilitates access to credit, government tenders, and international business opportunities.

8. Tax Benefits and Incentives:

Companies may enjoy tax deductions, subsidies, and incentives under various schemes, depending on the industry and scale of operation.

9. Capacity to Sue and Be Sued:

A company can enforce its legal rights and be held accountable under law. This legal capacity ensures protection of business interests.

Support for Business Expansion and Risk Management:

Expansion: Incorporation enables companies to raise capital from a broad base of investors, scale operations, and enter new markets—both domestic and international.
Risk Management: Limited liability protects individual members from business losses. Structured governance and regulatory compliance reduce the chances of internal mismanagement and legal complications.

Conclusion:

The process of incorporation offers a stable and secure legal foundation for business. The benefits like separate legal existence, limited liability, perpetual succession, and capital mobilization not only encourage entrepreneurship and expansion, but also help in effectively managing financial and operational risks. Thus, incorporation is a strategic tool for long-term business success and sustainability.

Q.5. Discuss the disadvantages or limitations of incorporating a company. What are the statutory or practical drawbacks associated with corporate existence?

While incorporation of a company under the Companies Act, 2013 offers numerous benefits such as limited liability, separate legal entity, and perpetual succession, it also comes with certain statutory and practical disadvantages. These limitations can create legal, financial, and operational burdens on businesses, especially small and medium enterprises.

Disadvantages or Limitations of Incorporating a Company:

1. Complex Formation Process:

The process of registering a company involves multiple steps including the preparation of legal documents (like Memorandum and Articles of Association), obtaining Digital Signature Certificates, Director Identification Numbers, and approvals from the Registrar of Companies. This process can be time-consuming and requires professional assistance.

2. High Cost of Compliance:

Companies must adhere to numerous compliance requirements under the Companies Act, 2013. These include:

Regular filing of financial statements and annual returns.
Conducting Board and General Meetings.
Maintaining statutory registers and books of accounts.
Mandatory audits and disclosures. The cost of meeting these obligations is often high, especially for small businesses.

3. Loss of Privacy:

Companies are required to disclose key financial and structural information to regulatory authorities, which is available to the public through the Ministry of Corporate Affairs (MCA) portal. This transparency, while promoting accountability, also leads to reduced privacy.

4. Legal Formalities and Restrictions:

Incorporated companies face numerous legal restrictions. For example:

Limitations on the powers of directors.
Regulatory controls on borrowings and capital issues.
Restrictions on related party transactions and managerial remuneration. These formalities can limit operational flexibility.

5. Risk of Heavy Penalties:

Non-compliance with statutory provisions can attract severe penalties, fines, and even imprisonment under the Companies Act, 2013. Directors may also be held liable for defaults.

6. Separation of Ownership and Management:

In large companies, the shareholders (owners) and directors (managers) are often different persons. This separation can lead to conflicts of interest and agency problems, especially when management does not act in the best interest of shareholders.

7. Double Taxation (in some cases):

Companies may be subject to double taxation – first on corporate profits, and again on dividends distributed to shareholders. Although Dividend Distribution Tax (DDT) has been removed, dividend income is still taxable in the hands of shareholders.

8. Winding Up is Difficult:

Closing or winding up a company is a complicated legal process. It involves liquidation, repayment of debts, disposal of assets, and compliance with statutory provisions under the Insolvency and Bankruptcy Code or Companies Act.

Conclusion:

Incorporation provides several advantages for business growth, but it also imposes regulatory, financial, and administrative burdens. Entrepreneurs and stakeholders must carefully weigh these statutory obligations and practical drawbacks before opting for a corporate structure. For small businesses, the complexity and cost of compliance may sometimes outweigh the benefits of incorporation. Hence, a balanced approach is essential for choosing the right business form.

Q.6. Explain the procedure for incorporation of a company under the Companies Act, 2013. What are the key documents required and authorities involved?

The Companies Act, 2013, along with the rules framed under it, lays down a well-defined procedure for the incorporation of a company in India. The process is regulated by the Ministry of Corporate Affairs (MCA) through the online portal MCA21, and governed primarily by Sections 3 to 22 of the Act.

Procedure for Incorporation of a Company:

1. Selection of Type and Name of the Company:

Decide the type of company to be incorporated (Private, Public, One Person Company, etc.).
Apply for name reservation through Part A of SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus).
The name must comply with the rules under the Companies (Incorporation) Rules, 2014 and not be identical or similar to existing companies.

2. Obtain Digital Signature Certificate (DSC):

Every proposed director and subscriber must obtain a DSC, as all forms are filed online and require digital signatures.

3. Obtain Director Identification Number (DIN):

DIN can be obtained through the SPICe+ Form (Part B) at the time of incorporation for up to 3 directors.

4. Filing of SPICe+ Form (Part B):

This integrated web form includes:

Incorporation application,
DIN allotment,
PAN and TAN application,
GST, ESIC, EPFO registration (if applicable),
Opening of bank account.

5. Preparation and Filing of Key Documents:

a. Memorandum of Association (MoA):

Defines the objectives and scope of the company’s activities.
Filed in e-form INC-33.

b. Articles of Association (AoA):

Lays down the internal rules and regulations for managing the company.
Filed in e-form INC-34.

c. Declaration by Subscribers and Directors:

Filed in Form INC-9, declaring they are not convicted or disqualified.

d. Consent to Act as Director:

Filed in Form DIR-2.

e. Address Proof:

Form INC-22 is used to declare the registered office address of the company.

6. Issuance of Certificate of Incorporation:

After scrutiny and approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation in Form INC-11.
The company also receives its Corporate Identification Number (CIN).

7. Commencement of Business (for Companies with Share Capital):

As per Section 10A, companies must file Form INC-20A within 180 days of incorporation, declaring receipt of subscription money.

Key Authorities Involved:

Authority	Role
Registrar of Companies (ROC)	Approves incorporation, issues CIN, maintains company records.
Ministry of Corporate Affairs (MCA)	Regulates and administers company law in India.
Professionals (CA/CS/CMA)	Usually assist in preparation, certification, and filing of documents.

Conclusion:

The incorporation process under the Companies Act, 2013 is digitally streamlined and legally robust. Through the SPICe+ portal, it offers a single-window clearance for multiple registrations, ensuring ease of doing business. However, due care must be taken in preparing accurate documents, obtaining necessary approvals, and complying with post-incorporation formalities to ensure a legally valid and smooth start to a company’s operations.

Q.6. Explain the procedure for incorporation of a company under the Companies Act, 2013. What are the key documents required and authorities involved?

Procedure for Incorporation of a Company:

1. Selection of Type and Name of the Company:

Decide the type of company to be incorporated (Private, Public, One Person Company, etc.).
Apply for name reservation through Part A of SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus).
The name must comply with the rules under the Companies (Incorporation) Rules, 2014 and not be identical or similar to existing companies.

2. Obtain Digital Signature Certificate (DSC):

Every proposed director and subscriber must obtain a DSC, as all forms are filed online and require digital signatures.

3. Obtain Director Identification Number (DIN):

DIN can be obtained through the SPICe+ Form (Part B) at the time of incorporation for up to 3 directors.

4. Filing of SPICe+ Form (Part B):

This integrated web form includes:

Incorporation application,
DIN allotment,
PAN and TAN application,
GST, ESIC, EPFO registration (if applicable),
Opening of bank account.

5. Preparation and Filing of Key Documents:

a. Memorandum of Association (MoA):

Defines the objectives and scope of the company’s activities.
Filed in e-form INC-33.

b. Articles of Association (AoA):

Lays down the internal rules and regulations for managing the company.
Filed in e-form INC-34.

c. Declaration by Subscribers and Directors:

Filed in Form INC-9, declaring they are not convicted or disqualified.

d. Consent to Act as Director:

Filed in Form DIR-2.

e. Address Proof:

Form INC-22 is used to declare the registered office address of the company.

6. Issuance of Certificate of Incorporation:

After scrutiny and approval, the Registrar of Companies (ROC) issues the Certificate of Incorporation in Form INC-11.
The company also receives its Corporate Identification Number (CIN).

7. Commencement of Business (for Companies with Share Capital):

As per Section 10A, companies must file Form INC-20A within 180 days of incorporation, declaring receipt of subscription money.

Key Authorities Involved:

Authority	Role
Registrar of Companies (ROC)	Approves incorporation, issues CIN, maintains company records.
Ministry of Corporate Affairs (MCA)	Regulates and administers company law in India.
Professionals (CA/CS/CMA)	Usually assist in preparation, certification, and filing of documents.

Conclusion:

Q.8. Differentiate between a Private Company and a Public Company under the Companies Act, 2013. What are the key privileges and restrictions associated with each?

Under the Companies Act, 2013, companies are classified into Private and Public companies based on their structure, membership, and level of public involvement. These classifications determine the extent of regulation, compliance requirements, and privileges enjoyed by the company.

Definition:

Private Company [Section 2(68)]:

A Private Company is a company which:

Restricts the right to transfer its shares,
Limits the number of members to 200 (excluding past and present employees),
Prohibits invitation to the public to subscribe to its securities.

Public Company [Section 2(71)]:

A Public Company is one which:

Is not a private company,
Has a minimum of 7 members (no maximum limit),
May offer its shares and debentures to the public.

Key Differences Between Private and Public Companies:

Basis	Private Company	Public Company
Minimum Members	2	7
Maximum Members	200	No limit
Minimum Directors	2	3
Transfer of Shares	Restricted by Articles	Freely transferable (unless restricted by law)
Issue of Securities	Cannot invite public to subscribe	Can raise capital through public issue (IPO)
Name Suffix	Must end with ‘Private Limited’	Must end with ‘Limited’
Commencement of Business	Can commence upon incorporation and filing of declaration (INC-20A)	Same, but stricter compliance
Quorum in General Meeting	2 members	5 members (if ≤ 1000), more if larger
Filing and Compliance	Comparatively relaxed	Extensive statutory compliances required
Disclosure Requirements	Limited disclosures in financial reports	Full disclosures as per SEBI and Company Law
Listing on Stock Exchange	Not permitted	Permitted (if listed company)

Privileges of a Private Company:

Lesser Compliance Burden – Exempted from certain provisions like filing Board Resolutions under Section 179(3).
No Requirement to Issue Prospectus – Since they don’t raise funds from the public.
Quicker Decision-Making – Fewer members mean faster resolutions and flexible internal management.
Exemption from Certain Statutory Limits – E.g., on managerial remuneration and private placement rules.

Privileges of a Public Company:

Access to Capital Markets – Can raise funds from the public via shares, debentures, or public deposits.
Listing on Stock Exchanges – Enhances credibility, visibility, and investor confidence.
Large Ownership Base – Enables expansion and large-scale operations through widespread investment.

Restrictions on Private Companies:

Cannot raise capital from the general public.
Must include restrictive clauses in their Articles of Association.
Limited number of shareholders restricts fundraising potential.

Restrictions on Public Companies:

Stringent compliance with SEBI guidelines (if listed).
Must follow detailed disclosure, audit, and governance norms.
Subject to regulatory scrutiny from multiple authorities.

Conclusion:

The Companies Act, 2013 distinguishes between Private and Public Companies to regulate them in proportion to their public interface and financial exposure. While private companies enjoy greater flexibility and lower compliance, public companies benefit from easier capital access but are subject to stricter governance and accountability norms. The choice between the two depends on the size, objectives, and growth strategy of the business.

Q.9. Describe the concept of a One Person Company (OPC). How does it differ from other types of companies? What are its advantages and limitations?

The concept of One Person Company (OPC) was introduced under the Companies Act, 2013, to encourage individual entrepreneurs to operate as a company with limited liability and a separate legal entity, without the need to partner with others. It offers a hybrid structure—combining the benefits of both sole proprietorship and a private company.

Definition of One Person Company (Section 2(62)):

A One Person Company (OPC) means a company that has only one person as a member. It is essentially a private company with a single shareholder, who can also act as the sole director.

Salient Features of OPC:

Can be formed with only one member and one nominee.
Treated as a separate legal entity distinct from its owner.
The sole member’s liability is limited to the extent of the unpaid capital.
Must include “(OPC) Private Limited” in its name.
Can have only one director (maximum 15).
Required to file annual returns and financial statements with the Registrar of Companies (ROC).

Difference Between OPC and Other Types of Companies:

Basis	OPC	Private Company	Public Company
Minimum Members	1	2	7
Maximum Members	1	200	Unlimited
Public Issue	Not allowed	Not allowed	Allowed
Transfer of Shares	Not permitted	Restricted	Freely transferable
Board of Directors	Minimum 1	Minimum 2	Minimum 3
Flexibility	High	Moderate	Low (due to compliance)
Capital Raising	Limited to private funding	Moderate	High (through market)

Advantages of OPC:

Limited Liability:
The sole member is not personally liable beyond the amount invested in the company.
Separate Legal Entity:
OPC enjoys a distinct identity, allowing it to own property, enter contracts, and sue or be sued.
Single Ownership and Control:
No conflict in decision-making. The sole member has complete control over the company’s affairs.
Easy to Incorporate and Manage:
OPC involves simpler procedures, fewer filings, and relaxed compliance norms compared to other companies.
Perpetual Succession:
The nominee takes over in case of death or incapacity of the member, ensuring continuity.
Conversion Option:
OPC can voluntarily convert into a private or public company for future growth.

Limitations of OPC:

Restriction on Types of Business:
OPC cannot engage in Non-Banking Financial Investments (NBFC) or investment in securities of other companies.
Limited Capital and Growth Potential:
OPC cannot raise equity capital from the public, which limits expansion.
Not Suitable for Venture Funding:
Investors prefer multiple promoters and broader ownership.
Mandatory Conversion (before 2021 Amendment):
Previously, OPCs had to mandatorily convert to private/public companies after crossing thresholds of ₹2 crore capital or ₹20 crore turnover. This has now been relaxed.
Lesser Credibility Compared to Other Companies:
Since only one person manages it, lenders or investors may hesitate due to lack of governance oversight.

Conclusion:

The One Person Company (OPC) is a revolutionary concept for Indian entrepreneurs, especially startups and professionals, providing a corporate structure with simplified governance. While it offers numerous benefits such as limited liability and separate legal identity, its limitations in raising capital and scalability must be considered. It serves as an ideal starting point for individual entrepreneurs, with the flexibility to evolve into a larger entity when required.

Q.10. Discuss the legal status and personality of a company. How is a company treated as a separate legal entity distinct from its members? Refer to the landmark case Salomon v. Salomon & Co. Ltd.

One of the most fundamental principles under the Companies Act, 2013 is that a company, once incorporated, becomes a separate legal entity. It is distinct from its members (shareholders), directors, and promoters. This doctrine of separate legal personality is the foundation of company law and governs the rights, liabilities, and existence of companies in India and globally.

Legal Status of a Company:

Under Section 2(20) of the Companies Act, 2013, a company means a company incorporated under this Act or any previous company law. Upon incorporation, the company gains:

Separate Legal Personality:
It exists independently of its owners and managers.
Perpetual Succession:
The company continues to exist even if members die, retire, or become insolvent.
Capacity to Own Property and Enter Contracts:
It can acquire, own, and transfer property in its own name, and enter into binding contracts.
Right to Sue and Be Sued:
The company can initiate legal proceedings and be held liable independently of its members.

Doctrine of Separate Legal Entity:

The principle was established in the historic case of:

Salomon v. Salomon & Co. Ltd. (1897) AC 22 (HL)

Facts:

Mr. Salomon was a leather merchant who incorporated a company, Salomon & Co. Ltd., and sold his business to it.
He was the major shareholder, held debentures, and his family were nominal shareholders.
When the company went into liquidation, creditors claimed that Mr. Salomon and the company were the same person, and he should be personally liable for company debts.

Held:

The House of Lords held that the company was a separate legal person, even if controlled entirely by Mr. Salomon. He was not liable for the company’s debts beyond his capital contribution.

Implications of the Salomon Principle:

Limited Liability:
Members are liable only to the extent of their shareholding or guarantee.
Corporate Veil:
The law recognizes a “veil” between the company and its members, protecting them from personal liability.
Independent Existence:
The company can enter contracts, sue, and be sued independently of its members.
Ownership of Assets:
Property acquired by the company is owned by the company, not by its shareholders.

Exceptions – Lifting the Corporate Veil:

While the company is usually treated as a separate person, courts may “lift the corporate veil” in cases of:

Fraud or sham companies,
Evasion of taxes,
Misrepresentation to creditors,
Public interest or statutory violations.

Conclusion:

The legal status of a company as a separate legal entity ensures that it is treated as a person in the eyes of law, distinct from its members. This principle, laid down in Salomon v. Salomon, forms the cornerstone of modern corporate law and facilitates business by limiting liability and enabling perpetual succession. It supports entrepreneurship, risk-taking, and large-scale investment while ensuring legal accountability of the corporate body.