Preliminary Statement for Company & CorporationThe word “COMPANY” is derived from the Latin word Com=with or together & Panis =bread. For sake of understanding we say that it is the group of like-minded persons who sit together for earning a profit. In past, merchants took edge of festivals, parties & gatherings to discuss their business matters seriously. Nowadays, these matters of profit or lose become formal and hence cannot be discussed in gatherings. Therefore, the company form of organizations are essential and need of today.It denotes, ”A joint stock enterprise in which the capital is contributed by several people”. So, company denotes an association of likeminded persons formed for the purpose of carrying on some business.Company is called a body corporate because the persons forming it made him one body by incorporating it according to the law and cover it with legal personality. The word “CORPORATION” is derived from the Latin term Corpus which means “body”. Accordingly, corporation is a legal person incorporated by a process which is against the rules of natural birth. It is, for this reason, sometimes called artificial legal person.An incorporated company owes its existence either to a special Act of Parliament or to Company Law. Public corporations have been brought into existence through special Acts of Parliament like Associated Press of Pakistan and Civil Aviation Authority etc. Whereas companies like Attock Refinery Ltd. have been formed under the Company law i.e. Companies Act 2017.What is Company?In the legal sense, a company is an association of both natural and artificial persons and is incorporated under the existing law of a country. In terms of the Companies Act, 2017, A “Company” means, a company incorporated under this Act or the company law.In common law, a company is a “legal person and entity” separate from its members. Company is capable of surviving its life other than the lives of its members. A company is not merely a legal institution. It is a legal tool to meet the ends of socially, politically and economically needs. Thus, the term company has been described in many ways. “It is a means of cooperation and organization in the conduct of an enterprise”.Lord Justice Lindley has defined a company as “An associations of many persons who contribute money or money’s worth to a common stock and employs it in some trade or business and who share the profit and loss arising therefrom. The persons who contributed in it or form it, or to whom it belongs, are members. The proportion of capital to which each member is entitled is his share….According to the best of my knowledge, I defined company asAn artificial person which is invisible, intangible, created by or under the law of land with a discrete legal entity, perpetual succession and a common seal. It is economic and administrative structure run by professional managers who hire capital from the investors.Types of CompaniesDistinct features of CompanySeparate legal entityAfter incorporation, a company becomes a separate legal entity as compared to its members. The company is different from its members in law. It has its own name, seal, assets and liabilities which are separate from its members.Case LawThe decision of the Calcutta High Court recognized the principle of separate legal entity even much earlier than the decision in Salomon v. Salomon & Co. Ltd. case.Calcutta High Court observed: “The Company was a separate person; a separate body altogether from the shareholders and the transfer was as much a conveyance, a transfer of the property, as if the shareholders had been totally different persons.”Limited liabilityThe company, being a separate person, is the owner of its assets and bound by its liabilities. Members are neither the owners of the company’s undertakings, nor liable for its debts.Case lawIt was recognized in a case that “the members of a chartered company were not directly personally liable for the debts and obligations incurred by the company in its own name and, likewise, nor was the company liable for the members’ debts and obligations.”Perpetual successionAn incorporated company never dies, except when it is wound up as per law or the task for which it was formed has been completed. Death or insolvency of members does not affect the existence of the company.Professor L.C.B. Gower rightly mentions, “Members may come and go, but the company can go on forever. During the war all the members of one private company, while in general meeting, were killed by a bomb, but the company survived, not even a hydrogen bomb could have destroyed it”.Separate propertyA company being a legal person and entirely distinct from its members, is capable of owning, enjoying and disposing of property in its own name.Transfer of sharesThe capital of a company is divided into parts, called shares. The shares are said to be movable property and, subject to certain conditions, freely transferable, so that no shareholder is permanently or necessarily wedded to a company. Case LawWhen the joint stock companies were established, the object was that their shares should be capable of being easily transferred.Common sealA company is an artificial person & contracts made by him must be under the seal of a company which is the official signature of the company. The name of company must be engraved on the common seal. Any document not bearing the seal of the company may not be accepted as authentic and have no legal force.Sue and be suedA company can sue and be sued in its own name. To sue means to institute legal Proceedings against a person or to bring a suit in a court of law. Similarly, the company may bring an action against anyone in its own name; even sue one of its own members. The company is entitled to sue for damages in libel, slander or defamation as the case may be.Separate managementA company is managed and administered by the board of directors. The shareholders are simply the holders of the shares in the company and needed not be necessarily the managers of the company.What is Corporation?The word “CORPORATION” is derived from the Latin term Corpus which means “body”. Accordingly, corporation is a legal person created by a process other than natural birth. It is, for this reason, sometimes called artificial legal person. An incorporated company owes its existence either to a special Act of Parliament or to Company Law. In the legal sense, a company is an association of both natural and artificial persons and is incorporated under the existing law of a country.Corporation in the Pakistan Companies Act 2017: The expression Body corporate OR Corporation is wider than the word ‘Company’. Both these words are used in the Pakistan Companies Act 2017 with exceptions.Body Corporate OR Corporation includes—(a) A company incorporated under this Act or company law; or (b) A company incorporated outside Pakistan, or(c) A statutory body declared as body corporate in the relevant statute, but does not include—(i) A co-operative society registered under any law relating to cooperative societies; or(ii) Any other entity, not being a company as defined in this Act or any other law for the time being which the concerned Minister-in-Charge of the Federal Government may, by notification, specify in this behalf.According to the best of my knowledge, I defined corporation asAn association of persons incorporated according to the relevant law and clothed with legal personality separate from the persons constituting it is known as corporation.Essence of corporationThe Indian Supreme Court laid down the 5 essence of corporation in a famous Unani Tibbia College case10 given below:-Lawful authority of incorporationThe persons to be incorporatedA name by which the persons are incorporatedA placeSufficient words in law to show incorporationCharacteristics of CorporationThe five core structural characteristics of the business corporation are:-Legal personalityLimited liabilityTransferable sharesCentralized management under a board structureShared ownership by contributors of capitalAs we can study these characteristics above in distinct features of company thoroughly so there is no such need to explain them.John Armour, Henry Hansman & Reinier stated in their paper thatIn virtually all economically important jurisdictions, there is a basic statute that provides the formation of firms with these five characteristics. As this pattern of five characteristics suggests; these characteristics have strongly complementary qualities for many firms globally.Saloman Vs. Saloman 1897 A.C. 22Saloman had a sole proprietor business of a leather merchant. He formed a company on his name Saloman & Co. LTD. He himself, his wife, daughter and 4 sons are members of this company. The wife, daughter and 4 sons have a one share each. Saloman sold his sole proprietor business to his company Saloman & Co. LTD. & obtained 20 thousand shares and 10 thousand debentures. Debentures were secured as the assets of Company.As Saloman act as director of his company so he borrowed a round about £6000 from outside creditors on which security is not given to them. After company suffered from heavy losses and became bankrupt. The asset of Company was £7000 but the liabilities are nearly £16000. As a result company was wound up and the question arose that whether the debentures secured on assets issued to Salomon will get preference against the other debt of company. The argument brought by creditors was that Salomon and Salomon & Co. LTD is same person so he should be payed after the payment of outside debtors.In this situation court held that Salomon and Salomon & Co. LTD are 2 different persons and Salomon can claim to be a secured creditor for his debentures. Therefore proceeds of the assets should be first allocated to settle the debentures of Salomon.Different rules established in Salomon caseFollowing are the rules settled in Salomon case..Recognition of family owned companies.Recognition of principal of separate legal entity.Recognition of members limited liability.Recognition of a loan to company given by a member of it.Corporate VeilThe doctrine in Salomon’s Case creates “thin wafer clothing” on the company due to which no one can access that who is behind the curtain of company.This curtain on company is well known as Veil on the corporation of Company OR Veil of corporation. But there are exceptions under which court ordered to break this veil of incorporation. Following are some instances when court pierces this veil.Company is agency of another company / Alter ego doctrineFraudSingle economic unitDetermination of residence for taxationDanger to national security and many more.