Difference Between Company and Body Corporate

Business entities contribute significantly and remarkably to entrepreneurship, employment and innovation in the Indian economy. According to the Companies Act 2013, a company is an artificial entity, intangible or invisible, having an independent existence other than its members. It divides companies into three categories: private, public and one-person companies. On the other hand, examples of body corporates or corporations are partnership firms, limited liability partnerships, non-banking financial institutions, public sector undertakings and statutory corporations. All of these organisations abide by the principles of the Companies Act 2013 and the LLP Act 2008, which together form a well-defined framework of structured conduct of business activities in an accountable, transparent, and legal manner.

Body Corporate – Requisites For Formation

In the eyes of the law, a body corporate constitutes a legal entity separate from its members or owners. For an entity that has such status, specific laws are required to establish it either by legislation or registration in order to facilitate the said entity to act, hold property, institute and sue in its name. Section 2(11) of the Companies Act 2013 defines body corporate as entities established by this Act or former company laws but excludes cooperative societies and others in the specified law. Thus, bodies corporate encompass,

1. Private and Public Companies.
2. Limited liability partnerships (LLPs),
3. Statutory corporations, and
4. Foreign companies.

These bodies are governed by their own Acts, such as the Companies Act, 2013, the LLP Act, 2008 or specific legislation concerned with them. All these provide features to organised business operations, such as perpetual succession, limited liability and corporate governance.

The constitution of a company in India mandates an array of legal prescriptions and procedural necessities to be followed. These have the intent to see that the company is formed per the requirements of the statute and is perceived to be an independent legal entity. Such compliance creates a solid legal framework for the corporate entity, thus making it easier to do legal and effective business.

1. Legal conditions and objectives – In every case, admission as a corporation or LLP has to be consistent with prevailing statutes like the Companies Act, 2013 or the Limited Liability Partnership Act, 2008. The purpose behind setting up a company must fall within the permissible purposes in the applicable statute.
2. Name approval and registration – A suggested name under which a corporate entity is to be established must be unique and must comply with the naming regulations issued by the Ministry of Corporate Affairs. Applications for name approval shall be made before the Registrar of Companies (RoC) or appropriate authority using forms such as SPICe+ or RUN.
3. Basic documents – A Memorandum of Association (MoA) describes the objectives, scope and structure of the organisation and is one of the most important documents for a company. Articles of Association (AoA) describe the rules and regulations for in-house management. LLPs require an LLP Agreement that details the rights, duties, obligations and liabilities of the partners.
4. Minimum capital and resources – The entity shall comply with any minimum capital requirements stipulated under relevant regulations. For example, minimum paid-up capital is not required under the Companies Act, 2013 but there are certain capital stipulations for certain sectors.
5. Minimum Number of Partners or Members – A Limited Liability Partnership shall have at least 2 designated partners and there must be at least 2 members in a private company. A public company consists of at least seven members.
6. Registered Office – The registered office addresses must be actual addresses in India for all official correspondence. Evidence of this address is required during the registration process and may include documents like utility bills or rental agreements as evidence.
7. Electronic Protocols – MCA deals with all types of electronic filing and registrations. Every director should have a Director Identification Number and each of their partners will need to secure the DPIN, while a partnership firm needs it. In case the signing is to be digital, every signatory needs a Digital Signature Certificate (DSC).
8. Payment of Statutory Fees – Registration fees shall be paid to the Registrar of Companies (RoC) or other competent authority as applicable law or regulation may prescribe for that particular type of business and authorised capital.
9. Grant of Approvals and Certifications – Upon the satisfaction of all conditions and the presentation of documentation required by law, the incorporation certificate is awarded by the Registrar of Companies. It also states that a corporation has been established.
10. Industry-Specific Rules – Companies involved in regulated industries, such as financial services Perkins by SEBI or banking or non-banking financial organisations, will need to secure appropriate approvals or licenses from the respective regulatory authority before commencing operations.

Company – Requisites For Formation

A business is a legal entity that has an identity separate from those of its owners or members, according to the Companies Act 2013 and precedent legislative acts. This legal entity has the capability to own property, sign agreements and sue and be sued in its name. This is the primary goal that a company aims to fulfil in terms of commerce and profits and, at the same time, give shareholders limited protection against liability.

A business is understood in law as a legal entity having its own identity divisible apart from the owners or members of that legal entity under the provisions of the Companies Act 2013 and earlier enactments. Such a legal entity owns property, enters into agreements and may sue or be sued in its own name. The inherent target of a company is to do business activity and earn profit out of it while shielding its shareholders within some limited liability. A company conducts its activities according to well-defined frameworks wherein its members, that is, shareholders, provide the capital, and directors manage the activities of the company. Companies can exist as private, public, one-person or Section 8, according to purposes, ownership and applicability. The exceptions to this rule are perpetual succession, limited liability to members, transferable shares and compliance with statutory regulations. Interestingly, the formation of a company and its operation are strictly safeguarded by well-defined and strict legal and procedural requirements that encourage accountability, transparency, and successful corporate governance.

A company in the jurisdiction of India is to be established to fulfil some preconditions according to the stipulations provided under the Companies Act 2013. These steps have been taken in a bid to make the place legally, structurally and operationally sound. In light of this argument, the process for forming a company is lengthy and involves procedural and statutory compliance under the Companies Act 2013. This interface by the MCA aids this process in gaining legal recognition, structured governance, and operational preparedness.

Amongst the many requirements for a company formation, a few are listed below:

1. Approval of Unique Names – Selected company names should be novel and in accordance with the regulations laid down by the Ministry of Corporate Affairs for unique names. Desired business names should not offend trademarks or be similar to an already existing name of a business organisation. To get the name approved, an application must be made through RUN or SPICe+.
2. Digital Signatures Certificate (DSC) – All directors and subscribers to the Memorandum of Association need to have a DSC for electronic signature of documents. DIN is necessary for Directors and can be applied while processing incorporation.
3. Required Address of Registered Office – The registered office must have a physical address in India only. Utility bills, rental agreements, ownership documents, etc., will be needed as proof of address.
4. PAN and TAN registration – Once the registration process is completed, the Permanent Account Number, as well as the Tax Deduction and Collection Account Number, is issued to the organisation for taxation purposes.
5. Specific Industrial Approvals Compliances – Enterprise businesses functioning in industries like banking, insurance, etc., and communication have to obtain permission from the concerned industry prior to starting up a venture.

Body Corporate Vs Company

The term body corporate is something wider than that of a company, though it includes limited liability partnerships and statutory corporations, among others. A company is, however, a distinct category of the corporate entity; its own scheme of law and structure is provided in the Companies Act of 2013. These distinctions in nature are required to classify the corporations appropriately with respect to business and legal considerations. Here is an in-detail analysis of their distinctions:

• Definitions

Section 2(11) of the Companies Act 2013 provides that a body corporate or corporation includes a company incorporated outside India but does not include —

(i) a co-operative society registered under any law relating to cooperative societies, and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf.

Section 2(20) of the Companies Act 2013 defines a company as “a company incorporated under this Act or under any previous company law”.

• Scope

The term body corporate is a word that covers private and public companies, Limited Liability Partnerships (LLPs), Statutory corporations like the Reserve Bank of India and Life Insurance Corporation, and Foreign companies operating in India.

A company is a specific category of body corporate registered under the Companies Act 2013, except LLPs, statutory corporations and foreign entities.

• Formation

In the case of body corporates, companies are established through registration under the Companies Act 2013, and LLPs are formed under the LLP Act 2008. Statutory corporations are established by Parliament or State Legislatures by enacting laws.

A company is formed through a very elaborate incorporation process under the Companies Act 2013, which involves name approval, submission of constitutional documents (Memorandum of Association and Articles of Association) and the acquisition of a Certificate of Incorporation.

• Ownership and Membership

The ownership and management structures of body corporates are very different.

The constituents of a company include shareholders and directors. In contrast, the LLP includes the partners. The government may also appoint the board to some of these statutory corporations.

In the case of a company, owners are the members of the company who are called the shareholders to the extent of their value in the shareholding of the company.

• Liability

The liability of a body corporate depends on the type of entity. Companies and Limited Liability Partnerships generally restrict liability to the extent of their share capital, for example, contributions made for their establishment or the time period over which contributions are made. The liability of statutory corporations is defined by the existing specific statute.

For companies, the liability of members would be related to any unpaid shares or the contributions agreed upon, especially concerning a guaranteed business.

• Compliance and Regulation

Bodies corporate differ in their compliance obligations. Companies are governed by the Companies Act 2013 and LLPs by the LLP Act 2008. Statutory corporations are governed by such provisions as are statutorily provided for. Hence, there are several compliance requirements that a company needs to follow, such as holding annual general meetings, keeping records of financial statements, maintaining statutory registers and following the principles of corporate governance as provided in the Companies Act 2013.

• Perpetual Succession

Perpetual succession is found in most bodies corporate. This assures their continued existence regardless of the changing membership over time. However, this depends on the type of entity.

A company has perpetual succession, irrespective of whether it is a public, private or non-profit company.

Conclusion

A business is synonymous with a corporate body; however, the expression corporate body signifies a much wider category of organisations, including companies, limited liability partnerships and statutory corporations. A company, on the other hand, is one particular type of body corporate, exclusively governed by the Companies Act, 2013, in respect of all aspects of its incorporation, functioning, operation and compliance. This is very important to both entities and individuals when making decisions regarding which form of entity best fits their needs, all the while adhering to any applicable legislation and regulatory requirements.