Characteristics and features of a company
A company under Kenya law has (but is not limited to) three distinguishing features:- its legal seperateness from the people involved in it—specifically from its owners, called shareholders;
- its potential immortality; and
- its size.
A company under Kenya laws is separate from its employees, in that the
connection between them is, usually, a mere contract of employment, which may
be terminated, leaving both parties to go their own ways. The same generally
applies, however, to those businesses which are not companies. There is also,
more importantly, usually a separation between the company and its owners.
The
locus classicus for the principle that a company is a separate entity
from its directors and shareholders is the landmark English case of Salomon v
Salomon. Shareholders are the owners of
one or more units of equal value into which the company is divided and which
are usually sold in order to raise capital, either for the company itself or
for its founders. A share carries with it a defined set of rights and duties:
most notably the right to receive a share of the company's profits and the
right to receive a share of the company's assets if the company is wound up.
The
separation between the shareholder and the company has one other important
consequence. If a company is wound up, its shareholders will lose their stake,
but their separateness from the company will prevent its creditors from
pursuing them for fulfilment of the its debts. If, on the other hand, an
unincorporated business should go bankrupt, its owners, who do not enjoy such
separation, will be liable for its debts.
Because
a company can do certain things—it can acquire rights and duties and assets and
liabilities—albeit only through the actions of human beings who are authorised
to act on its behalf, the company is itself regarded as a juristic person. It
has rights and duties, but not the body, of a natural person.
Immortality
Another
consequence of the separation between the company and the individual
shareholders is that, unlike an unincorporated business, companies do not die
with their owners. This does not mean that companies go on always and forever.
They can "die," too, through takeovers, mergers or bankruptcy, or
when their owners decide to close them down.
Size
Companies range from the very small to the very large. There
are no very large businesses which are not companies. (Even the John Lewis
Partnership in the United Kingdom, which promotes itself as "the world's
largest partnership," is in fact a company.) Part of what allows companies
to become so much bigger than other businesses is their ability to raise
capital more easily (which is in turn connected to their separation from their
owners and their immortality), and the fact of their being better regulated
than other businesses, which gives confidence to investors.
Shareholders
It
is important at the outset to appreciate what, exactly, is meant by
"holding a share in a company." The fact that a person is a
shareholder of Pick 'n Pay does not entitle him to go along to one of its
branches and leave it with an unpaid-for basket of groceries in his possession.
His share in Pick 'n Pay does not take the form of its stock.
Shareholders
are the owners of one or more units of equal value into which the company is
divided and which, usually, have been sold in order to raise money either for
the company itself or for its founders.