A company is a business organisation that the law treats as a separate "person", distinct from the people who own and run it. It can own property, enter contracts, borrow money, employ people and sue or be sued in its own name. In India, companies are formed and governed under the Companies Act, 2013.
What a company is
A company is owned by its shareholders and managed by a board of directors they elect. Because it is a separate legal entity, it continues to exist even if its owners change or pass away, a feature called perpetual succession. In most companies, shareholders' liability is limited to the amount they invested, so their personal assets are protected if the company fails.
How companies work in India
Companies are incorporated with the Ministry of Corporate Affairs (MCA), which issues a certificate of incorporation and a Corporate Identification Number (CIN). The company's memorandum of association sets out its basic purpose, and its articles of association set out internal rules. Companies must keep accounts, hold meetings, appoint auditors and file annual returns and financial statements.
Types of companies
Private limited company: 2 to 200 members, restricted share transfer, cannot raise money from the public. Public limited company: at least 7 members, free share transfer, can raise money from the public and list on an exchange. One Person Company: a single member with limited liability. Section 8 company: formed for charitable or non-profit purposes. Government company: majority owned by the government. Companies can also be listed (shares traded on an exchange) or unlisted.
A simple example
"Sunrise Foods Limited" is a public company. It owns factories, employs 2,000 people and has borrowed from banks, all in its own name. Its 50,000 shareholders own it; its board, including independent directors, oversees management. When one large shareholder sells all its shares, the company continues as before. If it ever fails, shareholders lose their investment in shares, but not their homes.
Why it matters for investors
When you buy a share, you become a part-owner of a company. Understanding how companies are structured, governed and regulated helps you know your rights (voting, dividends, information), the role of the board, and why disclosures and audited accounts matter.
Company versus other businesses
A sole proprietorship and a traditional partnership are not separate legal entities, and owners usually have unlimited liability. A limited liability partnership (LLP) offers limited liability but is not a company. Only companies, and specifically public limited companies, can list shares on a stock exchange.
Who does what in a company
Shareholders own the company and vote on major matters. The board of directors sets strategy and oversees management; listed companies must include independent directors. Key managerial personnel, such as the managing director or CEO, chief financial officer and company secretary, run daily operations and handle compliance. Auditors independently check the accounts. This separation of ownership and management, with checks on both, is what makes it possible for millions of people to invest in companies they do not run.
Common misconceptions
"The owners and the company are the same." Legally, the company is separate.
"Directors own the company." Shareholders own it; directors manage it, though they may also hold shares.
"Limited liability means no one is ever personally liable." Fraud or personal guarantees can create personal liability.
Frequently asked questions
What law governs companies in India?
The Companies Act, 2013.
What is a CIN?
The Corporate Identification Number issued on incorporation.
Can a company own another company?
Yes, as a holding company with subsidiaries.
What is perpetual succession?
The company continues regardless of changes in ownership.
How to use this on PositoAI
PositoAI tracks listed companies. Search any company to see its rank, key data and red flags. Read our guides to private and public limited companies. PosiStep 3 of the free PosiCourse explains shares, ownership and promoters.
Summary
A company is a separate legal entity owned by shareholders and managed by directors, with perpetual succession and usually limited liability. In India, companies are formed under the Companies Act, 2013 and registered with the MCA. Types include private, public, one person, Section 8 and government companies. Only public companies can list their shares.