Briefly explain the following terms in brief.


(a) Perpetual succession

(b) Common seal

(c) Karta

(d) Artificial person

By Harshvardhan, the Subject Matter Expert at Edumarz


  1. A company is a creation of the law that can be brought to an end only by law. It will only cease to exist when a specific procedure for its closure called winding up is completed. Members may come and members may go, but the company continues to exist.
  2. The company being an artificial person cannot sign its name by itself. Therefore, every company is required to have its own seal which acts as the official signature of the company. Any document which does not carry the common seal of the company is not binding on the company.
  3. The Joint Hindu Family business is controlled by the head of the family who is the eldest member and is called Karta. The Karta, however, has unlimited liability. 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 business continues even after the death of Karta as the next eldest member takes up the position of Karta, leaving the business stable. The Karta has absolute decision making power. This avoids conflicts among members as no one can interfere with his right to decide. This also leads to prompt and flexible decision making.
  4. A company is a creation of law and exists independent of its members. 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, eat, run, talk and so on. It is therefore called an artificial person.

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