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2 Accountancy : Company Accounts and Analysis of Financial Statements it has certain special features which distinguish it from the other forms of organisation. These are as follows: • Body Corporate: A company is formed according to the provisions of Law enforced from time to time. Generally, in India, the companies are formedandregisteredunderCompaniesLawexceptinthecaseofBanking and Insurance companies for which a separate Law is provided for. • Separate Legal Entity: A company has a separate legal entity which is distinct and separate from its members. It can hold and deal with any type of property. It can enter into contracts and even open a bank account in its own name. • Limited Liability: The liability of the members of the company is limited to the extent of unpaid amount of the shares held by them. In the case of the companies limited by guarantee, the liability of its members is limited to the extent of the guarantee given by them in the event of the company being wound up. • Perpetual Succession: The company being an artificial person created by law continues to exist irrespective of the changes in its membership. A company can be terminated only through law. The death or insanity or insolvency of any member of the company inno way affects the existence of the company. Members may come and go but the company continues. • CommonSeal:Thecompanybeinganartificialperson,cannotsignitsname by itself. Therefore, every company is required to have its own seal which acts as official signatures of the company. Any document which does not carry the common seal of the company is not binding on the company. • Transferability of Shares: The shares of a public limited company are freely transferable. The permission of the company or the consent of any member of the company is not necessary for the transfer of shares. But theArticlesofthecompanycanprescribethemannerinwhichthetransfer of shares will be made. • May Sue or be Sued: A company being a legal person can enter into contracts and can enforce the contractual rights against others. It can sueandbesuedinitsnameifthereisabreachofcontractbythecompany. 1.2 Kinds of Companies Companies can be classified either on the basis of the liability of its members or on the basis of the number of members. On the basis of liability of its members the companies can be classified into the following three categories: (i) Companies Limited by Shares: In this case, the liability of its members is limited to the extent of the nominal value of shares held by them. If a member has paid the full amount of the shares, there is no liability on his part whatsoever may be for the debts of the company. He need not pay a single paise from his private property. However, if there is Reprint 2026-27