Question

the company said to be an artificial person created by law having a separate entity with perpetual succession and a common seal. discuss (five marks)

Answer 1

Dear Student,

A company is a separate legal entity which is distinct from its directors, shareholders and promoters. It can enter into contracts, buy or sell property, sue and be sued, and carry on business in its own name. Being a separate entity, its life is not affected at all by the death, insolvency and retirement of its members.Hence, its succession is perpetual, that is, members may come and go but the company can go forever. Also, to carry on business in its own name, every company has its own common seal. Common seal is the official signature of the company. A company is bound by those documents which bear its common seal.

Further for better understanding, point wise explanation of standard terms is:

• Artificial person: Unlike human beings, a company cannot sign its documents, cannot negotiate with its customers and cannot even breathe and talk.
• Separate legal identity: The company has a legal identity different from its members, thereby, it can carry out business in its own name.
• Perpetual succession: It is not affected by any such event as death, retirement, insolvency of its members.
• Common seal: The board of directors use a common seal on all the official documents of the company to validate them.

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