Q.3:- Explain the following terms in brief (a) Perpetual succession (b) Common seal (c) Karta (d) artificial person
(a) Perpetual Succession Company is a legal entity separate of its owners or members. It can be brought to an end only by law as it is created by the law. It will only cease to exist when a specific procedure for its closure, called winding up, is completed. Members may come and go, but the company continues to exist through consecutive succession of old members by new members on a continuous basis. We can say that ‘perpetual succession’ implies permanent existence which is not affected by death, retirement insolvency of members.
(b) Common Seal A company is a creation of law and exists independent of its members. Company is thus considered to be an artificial person who acts through its Board of Directors. When the Board of Directors enters into an agreement with others, it indicates the company’s approval through a common seal. The common seal is the engraved equivalent of an official signature. Any agreement which does not have the company seal put on it is not legally binding on the company.
(c) Karta The head of the Hindu joint family who is the eldest member and controls the Joint Hindu family business which is a specific form of business organization found only in India is called Karta. Joint Hindu family business refers to a form of organization wherein the business is owned and carried on by the members of the Hindu Undivided Family (HUF). It is governed by the Hindu Law. The control of the family business lies with the karta. He takes all the decisions and is authorized to manage the business. His decisions are binding on the other members. The karta has unlimited liability while the liability of all other members is limited to their share of co-parcenery property of the business.
(d) Artificial Person A company is called an artificial person because just like natural persons, a company can own property, incur debts, borrow money, enter into contracts, sue and be sued but unlike them it cannot breathe, talk, walk, eat, etc. A company is a creation of law and exists as an artificial person independent of its members.