Corporation – Meaning and Legal Nature
A corporation is an artificial legal person created by law, having a separate existence distinct from its members. Under Section 2(20) of the Companies Act, 2013, a company incorporated under this Act or any previous company law is recognized as a corporate body. A corporation comes into existence only after registration and enjoys perpetual succession, a common seal, and the capacity to own property, enter into contracts, and sue or be sued in its own name. The concept of corporation is rooted in the principle of separate legal personality, established in landmark jurisprudence. Once incorporated, the corporation is treated as an independent legal entity, irrespective of changes in membership. This legal status enables continuity, stability, and organized management of business affairs. Corporations play a crucial role in economic development by facilitating large-scale investments and limiting personal liability of members.
Types and Characteristics of a Corporation
Corporations may be classified into corporations aggregate and corporations sole. Corporations aggregate consist of multiple persons united for a common purpose, such as companies registered under the Companies Act. Corporations sole consist of a single officeholder and successors, like certain statutory offices. Key characteristics of a corporation include perpetual succession, limited liability, separate property, and transferability of interests. These features are legally supported by provisions of the Companies Act, 2013, including Sections 9 and 34. A corporation acts through its directors or authorized representatives, as it has no physical existence. The doctrine of corporate personality ensures that obligations of the corporation are not the personal obligations of its members, making corporations attractive vehicles for commerce and public enterprises.
Legal Rights and Liabilities of a Corporation
A corporation enjoys several legal rights, including the right to own movable and immovable property, to enter into binding contracts, and to initiate or defend legal proceedings. Section 9 of the Companies Act, 2013, confirms that upon incorporation, the company becomes a body corporate capable of exercising all functions of an incorporated entity. However, corporations are also subject to statutory duties and liabilities, including compliance with regulatory laws, tax obligations, and corporate governance norms. While liability of members is generally limited, courts may lift the corporate veil in cases of fraud, tax evasion, or misuse of corporate form. Thus, the law balances corporate privileges with accountability, ensuring that corporations function responsibly within the legal framework.
Realtime Example of a Corporation
A practical example of a corporation is a registered manufacturing company operating in India. Once incorporated under the Companies Act, 2013, the company enters into contracts with suppliers, hires employees, and acquires land in its own name. Even if shareholders change or directors resign, the company continues to exist unaffected. If the company incurs losses or faces litigation, shareholders are not personally liable beyond their shareholding. This real-time operation highlights how a corporation functions independently of its members, ensuring continuity and legal certainty in business activities.
Mnemonic to Remember Corporation
A simple mnemonic to remember the concept of a corporation is “S-PAL”:
S – Separate legal entity
P – Perpetual succession
A – Artificial person
L – Limited liability
This mnemonic helps law students quickly recall the essential features of a corporation during exams. By associating each letter with a core characteristic, the concept becomes easier to understand and remember. Such memory tools are especially useful in OU LLB examinations where clarity and structured answers are crucial.
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