Justice Marshall defines a company as an artificial being, invisible, intangible, existing only in contemplation of the law. Being a mere creation of law, it possesses only the properties which the charter of its creation confers upon it, either expressly or as incidental to its very existence.

Section 2 (1) of the Companies Act (cap 486) provides that �a company means a company formed and registered under this Act or an existing company�. Existing company only means a company formed and registered under any of the repealed ordinances.  For the  purposes  of 

Companies  Act  of  Kenya, a company: �

a)     A registered company under the Companies Act.

b)    An existing company.

c)     An unregistered company covered under section 357�364of the Companies Act.

d)    A produce company covered under section 388of the Companies Act..

e)     A foreign company covered under section 365�381of the Companies Act..

The main objects and purpose, of statutes relating to companies are as follows: 

1.   Encourage investments in companies by providing certain facilities, such as limitation of liability, transferability of shares. 

2.   Ensure due and proper administration of the funds and assets of companies in the interest of the investing public. 

3.   Prevent malpractices by directors and managers. 

4.   Arrange for investigation into the affairs of companies and provide for effective audit in dealing with cases of dishonesty and fraud in the corporate sector.

The formation, management and winding up of a company in Kenya is governed by the Company�s Act Cap 486 of the Laws of Kenya. The company legislation in Kenya owes its origin to the English company law. The Companies Act of Kenya which came into force on 1st January 1962 is based on English Companies Act of 1948.This Act is still applicable together with later amendments. The Act provides a basic legal framework for the regulation of companies in Kenya. It makes provision for the legal incorporation of companies and lays down rules for their constitution, management and winding up.

 Apart from the Companies Act, there is also case law which has been developed by the courts such doctrines of ultra vires. The case law and companies practice have developed so many rules which are useful for filling in the gaps which have not been provided by the Companies Act.

Features of a Company

The principal characteristics of an incorporated company can be summarised as follows: 

1. Registration

A company comes into existence only after registration under the Companies Act. However, a statutory corporation is formed and commences business as notified or stated in the Act as passed in the legislature. In case of partnership, registration is not compulsory.

2. Voluntary Association

 A company is an. association of many persons on a voluntary basis. Therefore a company is formed by the choice and consent of the members.     

3. Legal personality

 A company is regarded by law as a single person. It has a legal personality. This rule applies even in the case of �one�man company� such as in the case of Salomon v. Salomon & Co. Ltd.  Salomon had a business in boot manufacture. He formed a company called Salomon & Co. (with himself, his, wife daughter and 4 sons as shareholders) and transferred to it his business. As consideration for the transfer he received the major portion of the shares of the company and debentures for � 10,000.  Later on, the company went into liquidation. Salomon, as a debenture holder, claimed to be a secured creditor and demanded priority in the payment of � 10,000, out of the assets of the company. The unsecured creditors of the company objected on the ground that the business really belonged to Salomon and he should not be allowed to claim as a secured creditor. It was held that Solomon as an individual, was quite distinct from Salomon & Co. and he could therefore be a secured creditor of the company, even though he happened to hold the majority of the shares.

4. Contractual capacity

A shareholder of a company, in its individual capacity, cannot bind the company in any way. The shareholder of a company can enter into contract with the company and can be an employee of the company. 

5. Management 

A company is managed by the board of directors, whole time directors, managing director or manager. These persons are selected in the manner provided by the Act and the Articles of Association of the company. A shareholder, as such, cannot participate in the management. 

6. Permanent Existence 

A company has a continuous existence. Old shareholders may go and new ones may join; the death, bankruptcy or insanity of a shareholder does not affect the existence of the company. This means that  its life is independent of the life of its members. The change in the membership of the company does not affect its continuity. The company continues its operations so long as it fulfills the requirements of the law under which it has been formed.

7.Registered Office

A company must have a registered office where it carries out its day to day business dealings

8.Common Seal

A company being an artificial person cannot sign documents. The law has provided for the use of a common seal, with the name of company engraved on it, as a substitute for its signature. No document issued by the company shall be binding on it unless it bears the common seal, which is duly witnessed by at least two directors of the company.

10.Limited Liability 

A shareholder shall be liable to contribute towards the debts of the company during its life or during winding up only at the extent of shares taken by him and only to the balance of shares taken by him or up to the guarantee given by him or both. Members cannot be asked to pay more than what is unpaid on the shares of the company held by them even though the assets of the company are not sufficient to satisfy the claims of creditors in the event of winding up. The personal property of a shareholder cannot be attached for the debts of the company if he holds a fully paid up share.

11.  Transferability

Members of public limited company are free to transfer their shares to anybody. Shares can be sold and purchased through the stock exchange. However, in a private company the articles may restrict such transfer.

12.  Statutory Obligations

A company is required to comply with various statutory obligations regarding management such as filing balance sheets, maintaining proper account books and registers etc. 

13. Artificial Legal Person

A company is an artificial person because it is a creation of law. It does not take birth like a natural person but it comes into existence through law. It exists in the eyes of the law and cannot act on its own. It has to act through a board of directors elected by shareholders. It was rightly pointed out in Bates v. Standard Land Co. that: �The board of directors is the brains of the company, which is the body and the company can and does act only through them.�

Although a company is an artificial legal person, it enjoys all the rights of a natural person. It has the right to acquire and dispose of the property, to enter into contract with third parties in its own name, and can sue and is sued in its own name.

14. Residence 

A company has a residence (for taxation and other purpose). A company does not possess any fundamental rights. 

15.  No Fundamental Rights: 

Though a company has no fundamental rights, it can challenge a law as void if the law happens to violate fundamental rights of citizens. In order to succeed, the company must prove that the impugned law is expropriatory of a citizen�s property.

 CLASSIFICATION OF COMPANIES

The various types of companies that the law recognizes in Kenya are covered under the Companies Act which allows the formation of the three types companies. These are;�

A company formed and registered under the companies Act Cap 486. These are referred to as registered Companies.

A company formed under any other Act of parliament that is called Statutory Company. A company formed by the grant of letters patent or a charter. These are called Chartered Companies.

It means that the companies may be classified as under:

1.     Corporations aggregate.

2.     Corporations sole

3.     Statutory corporation

4.     Registered company or incorporated companies

5.     Unregistered company

6.     Charted companies

7.     Private companies

8.     Public companies

9.     Foreign companies 

10. Subsidiary company

11. Holding company

Companies are classified into the following categories

1.     Corporations Aggregate

Corporations aggregate consist of two or more persons united in a society, which is preserved by a succession of members, either forever or till the corporation is dissolved by the power that formed it. Corporation aggregate can be dissolved by the death of all its members, by surrender of its charter or franchises, or by forfeiture. Such corporations are the mayor and aldermen of cities, the head and fellows of a college, the dean and chapter of a cathedral church, the stockholders of a bank or insurance company. 

2.     Corporations Sole

Corporations sole, consist of only one member at a time, with the corporate character being kept up by a succession of solitary members over time. Corporation sole are always holders of a particular office. For example the office of the presidency, the office of public trustee, the office of the bishop, the attorney general�s office the chief justice office.

3.     Statutory Corporation

These companies are incorporated by a special Act passed by the parliament. The constitution and functions of such companies are laid down by the Act of Parliament or any state legislature of Kenya Such companies are generally formed to carry out some special undertakings. The government owns these companies and the main objective of these companies is to provide some necessary services for the benefit of the entire country. These companies are generally formed to meet social needs and not for the purpose of earning profits.Such companies can only carry our functions for which it was created. Statutory companies do not have any memorandum or articles of association. They don�t use the word �limited� as part of their name .They derive their powers from the Acts constituting them. Alterations in the powers of such companies can be brought by legislative amendments.

The capital of statutory corporation is raised through borrowing of grants from treasury. Its profits are injected back to the corporation or paid to treasury as dividends. A statutory corporation cannot be dissolved. It is only dissolved on the repeal or revocation of the parent statute. 

Some examples if statutory companies in Kenya include: 1. Kenya Railways.

2.     Kenya Post and Telecommunications Corporations.

3.     Kenya Power 

4.     Kenya Ports Authority

4. Registered Company or Incorporated Companies

A company must be registered under the Companies Act. After registration, the registrar of the companies issues a certificate of incorporation. Such companies come into existence only when they are registered under the Act and the registrar has issued a certificate of incorporation. Such companies derive their powers from the Companies Act and the memorandum of association. Private persons usually form these companies.

Registered companies may be further classified as under:

a)        A company limited by shares.

b)       A company limited by guarantee.

c)        An unlimited company.

a) Company Limited by Shares

A company having the liability of its members limited to the value of shares held by them is called a company by limited shares. If a member has paid the entire value of the share, he does not owe any further liability to the company and in case he has partly paid the value of a share, the liability of such members is limited to the value of the unpaid amount of the shares held by him. The liability of the shareholder to pay the unpaid amount can be enforced during the existence of the company and during its winding up.

A company is defined as a company having the liability of its members limited to such amounts as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. The amount guaranteed by each member cannot be demanded until the company is wound up. Hence it�s the nature of a �reserve capital�. Such companies may or may not have a share capital. They are generally formed without share capital for non�trading purposes, such as the promotion of art, science, culture etc. the article of such a company must state the number of members with which the company is to be registered. Sec 21(1) permits a limited company to dispense with the requirements of the use of the word �limited� as part of the name if it has been formed to promote art, science, religion, charity etc.

b)Company Limited by Guarantee

In these companies, each member promises to pay a fixed sum of money in the event of liquidation of the company. This amount is called the guarantee. 

Sometimes the members are required to buy a share of a fixed value and also give a guarantee for a further sum in the event of liquidation. There is no liability to pay anything more than the value of the share (where there is a share) and the guarantee.  

c) Unlimited Company

In these companies the liability of the shareholder is unlimited, such as in partnership firms. Such companies are permitted under the Companies Act but are not known statutory public company

5.     Unregistered Company

If an association or company is not registered it is called unregistered company.

6.     Charted Companies

A charted company is formed by a grant of charter by the crown operating undereither prerogative powers or special statutory powers. Most chartered companies were formed during the late nineteenth century's during the scramble for Africa. They were formed with the purpose of seizing, colonising and administering the last 'virgin' African territories. However, these companies proved generally less profitable than earlier trading companies. With time, most of their colonies were either lost (often to other European powers) or transformed into crown colonies. This form of company is a very old model of companies which does not exist today because businessmen prefer to trade through the modern registered companies. The English practice was that if people wanted to create a chartered company they would:

i.        Come together and take a decision to carry on business as a group.

ii.      Contribute capital towards the intended business.

iii. Draw up business objectives.

iv. Then petition the crown to grant them a charter or a letter patent that would legally bind them as a group by the name they have chosen.

Chartered Companies have the following characteristics:

i.              These companies were never created under a statute of parliament but by the mere grant of a charter by the crown. There was no requirement for registration at all.

ii.            The charter operated like letters patent i.e. just like patent, which gives the owner the exclusive right to exploit specified business in an area without rivalry from any other company in the territory.

iii.          The crown always granted a charter on grounds of certain conditions and the company had to observe those conditions or else the crown would withdraw the charter or the exclusive right to exploit the business in question.

7. Private companies

A private company according to Sec 30 of the Companies Act means a company which by its articles�

a)    restricts the right to transfer its shares; 

b)    Limits the number of its members to fifty, not including the employees of the companies

c)    Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company.

Where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member. 

8. Public Companies

The Companies Act defines public companies as a company that is not a private company. Some of the characteristics of a public company include: 

i. It does not have any restriction on the transfer of its shares ii. It does not limit the maximum number of members

iii.  It can invite the public to subscribe to its shares or debenture (but it�s under no obligation to invite the public)

iv.   The minimum number of members required is seven.

9. Foreign Companies 

Foreign companies according to Sections 366 of the Companies Act, companies incorporated outside Kenya. Within 30 days of establishment of the business in Kenya, it must provide the following documents and information:

(a)        A certified copy of the charter, statutes or memorandum and articles of the company or any other instrument that defines the constitution of the company. If the instrument is not written in the English language, a certified translation should be presented.

(b)        A list of the directors and secretary of the company containing their names address, nationality, any business they undertake and particulars of any other directorship they hold.