Solution:

The distinctive characteristics of a company are as follows :

(1). Limited Liability :

• Liability of the members of a limited company is limited to the value of the shares subscribed to or to the amount of a guarantee given by them.

• Unlimited companies are an exception rather than the general rule.

• In a limited company, members cannot be asked to pay anything more than what is due or unpaid on the shares held by them even if the assets of the company are insufficient to satisfy in full the claims of its creditors.

(2). Perpetual succession :

• A company enjoy continuous or uninterrupted existence and its life is not affected by the death, insolvency, lunacy, etc. of its members, or directors.

• Members may come and go but the company survives so long as it is not wound up.

• Being a creature of law, a company can be dissolved only through the legal process of winding up.

• It is like a river which retains its identity though the parts composing it continuously change.

(3). Common Seal :

• A company being an artificial person cannot sign for itself. Therefore, the law provides for the use of common seal as a substitute for its signature.

• The common seal with the name of the company engraved on it serves as a token of the company’s approval of documents.

• Any document bearing the common seal of the company and duly witnessed (signed) by at least two directors is legally binding on the company.

(4). Transferability of shares :

• The shares of a public limited company are freely transferable.

• They can be purchased and sold through the stock exchange. Every member is free to transfer his shares to anyone without the consent of other members.

(5). Separate legal entity :

• A company has an existing entirely distinct from and independent of its members. It can own property and enter into contracts in its own name.

• It can sue and be sued in its own name. There can be contracts and suits between a company and the individual members who compose it.

• The assets and liabilities of the company are not the assets and liabilities of the individual numbers and vice versa. No member can directly claim any ownership right in the assets of the company

(6). Separation of ownership and management :

• The number of members in a public company is generally very large so that all of them or most of them cannot take active part in the day-to-day management of the company.

• Therefore, they elect their representatives, known as directors, to manage the company on their behalf. Representative control is thus an important feature of a company.

(7). Incorporated association of persons :

• A company is an incorporated or registered association of persons. One person cannot constitute a company under the law.

• In a public company, at least seven persons and in a private company atleast two persons are required.

(8). Artificial lega1 person :

• A company is an artificial person created by law and existing only in contemplation of law. It is intangible and invisible having no body and no soul.

• It is an artificial person because it does not come into existence through natural birth and it does not possess the physical attributes of a natural person.

• Like a natural person, it has rights and obligations in terms of law. But it cannot do those acts which only a natural person can do, e.g., taking an oath in person, enjoying married life, going to jail, practising profession, etc.

• A company is not a citizen an it enjoys no franchise or other fundamental rights.