Company as an Artificial Person

Written by: Ms Nikita Rai

To perceive how an organization could be an artificial person we should first understand what an artificial person is as recognized by law. An artificial person is an entity recognized by law as a separate person having its legal rights, duties, and liabilities. An artificial person is in addition far-famed by completely different names sort of a judicial person, a fictitious person, or a legal person.

As per the companies Act 2013, an organization is taken under consideration as an artificial person or separate legal entity that can sue on its own and can be sued reciprocally. It has its own legal rights, duties, and liabilities. It is also been thought of as entity having perpetual succession having a lifetime period of existence unless dissolved. It’s artificial as a result, it’s created by a method other than natural birth. It comes into existence through the operation of law. It is a legal person in the eyes of the law.

The time period of the company is not plagued by the death, disability, insolvency, or disagreement of an investor. Its existence is complete once it’s dissolved under the Companies Act. The shareholders might come or go, but the company is least stricken by these changes. A company is incorporated in its name and carries out the legal functions on its name operated by a human. Being an artificial person a company has several opportunities in today’s world. However with opportunities comes challenges too. Let’s take a look at both of them.

OPPORTUNITIES:

1. Perpetual succession: The most important feature of the corporate as a Law-made person is, it’s an- going existence that may not be plagued by the death of any member, director, or shareholder.
2. Separate entity: Being an artificial person, an organization is different from its owners. The Corporate may be sued and may sue in its name.
3. Limited Liability: Liability of the shareholders of a corporation is proscribed to the face value of the shares they need purchased. It’s a noteworthy effect on investment. The personal estate of shareholders isn’t attachable to recover the dues of the corporate.
4. Stability of Existence: The organization of an organization as a separate legal entity gives it a personality of permanence or continuity. As an incorporated body, a corporation enjoys perpetual existence.
5. Economies of Scale: Since the corporate operates on an oversized scale, it’d end in the belief of economies in purchases, management, distribution, or selling. These economies would supply goods to the patron at a less expensive price.

CHALLENGES:

1. Difficulty information– The legal formalities and procedures required within the formation of a corporation are many. It’s to approach an oversized number of individuals for its capital and it cannot commence business unless it’s obtained a certificate of incorporation and a certificate to commence business.
2. Lack of Secrecy– Every issue is discussed within the meeting of the board of directors. The minutes of the meeting and accounts of the firm’s profit and loss etc., must be published during this situation maintenance of secrecy is difficult.
3. Delay in Decision Making– within the company variety of organization, all important decisions are taken by the board of directors and shareholders normally meetings. Hence, the decision-making process is time-consuming. The Board of directors itself has often to be at the mercy of bureaucracy.
4. Concentration of Economic Power– the corporate variety of organization gives scope for the concentration of economic power in a very few hands. It gives easy scope for the formation of combinations which ends up in monopoly. Large joint-stock companies tend to create themselves into combinations or associations exercising monopolistic power which can prove detrimental to other firms within the same line or the consumers.
5. Lack of private Interest– within the company sort of organization, the day-to-day management is vested with the salaried persons or executives who don’t have any personal interest within the company. This might result in reduced employee motivation and lead to inefficiency.
6. More Government Restrictions– the inner working of the corporate is subject to statutory restrictions regarding meetings, voting, audit, etc. The establishment and running of a corporation, therefore, would encourage be troublesome and burdensome due to complicated legal regulations.
7. Incapable and Unscrupulous Management– Unscrupulous individuals may bring financial ruin to the community by promoting bogus companies. The fraudulent promoters may befool the general public to gather capital and misuse it for his or her gain. Misuse of property, goods, and money by the managerial personnel may harm the interests of the shareholders and make panic among the investing public.
8. Undue Speculation within the Shares of the Company– Illegitimate speculation within the values of shares of an organization listed on the stock market is injurious to the interest of shareholders. Violent fluctuations within the values of shares as a results of gambling on the securities market weaken the arrogance of investors and will cause a financial crisis.

Although company being a man-made person, actually it’s a gaggle of one who are the useful house owners of the property of the company body. Being a man-made person, it (company) cannot act on its own, it will act solely by natural persons. The ism of lifting the veil is understood because the identification of the corporate with its members.

At times it’s going to happen that the company temperament of the corporate is employed to commit frauds and improper or dirty acts. Since a man-made person isn’t capable of doing something dirty or dishonest, the façade of company temperament might need to be removed to spot the persons who are very guilty. This can be referred to as ‘lifting of company veil’. It refers to matters wherever a shareowner is in control, accountable for its corporation’s debts despite the rule of financial obligation and separate temperament.

Although company being an artificial person, it’s a gaggle of one who are the useful house owners of the company. Being an artificial person, it (company) cannot act on its own, it will act solely by natural persons. The ism of lifting the veil is understood because the identification of the corporate with its members. At times it’s going to happen that the company temperament of the corporate is employed to commit frauds and improper or dirty acts. Since an artificial person isn’t capable of doing something dirty or dishonest, the façade of company temperament might need to be removed to spot the persons who are very guilty. This can be referred to as ‘lifting of company veil’.

It refers to matters wherever a shareowner is control accountable for its corporation’s debts despite the rule of financial obligation and separate temperament. The veil ism is invoked once shareholders blur the excellence between the corporation and therefore the shareholders.

Thus we will conclude that despite the fact that company is an artificial person having own rights, duties and liabilities, it is concerned once it involves fraud done by the persons who are responsible for their acts and concerned during this. Company being a man-made person has own opportunities to deal in its name and maintain a legal position. However it conjointly comes with challenges like, fraud done by the persons within the name of the corporate itself.

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