Body Corporate, MCA issued Companies (CSR Policy) Amendment Rules, 2020, and amended Schedule VII of the Companies Act, 2013. Under the new Rules, companies that are engaged in R&D of a new vaccine, drugs, and medical devices are permitted to undertake such activity related to Covid-19 for financial years 2020-21, 2021-22, and 2022-23- subject to fulfillment of the prescribed conditions.
Overview
In the contemporary landscape, there exists a common confusion among individuals, including professionals and students, regarding the concept of Body Corporate. Distinguishing between Body Corporate and a Company can be perplexing for many. This blog aims to provide clarity and a better understanding of the term Body Corporate.
In essence, the term Body Corporate, or corporate, refers to an association of individuals characterised by the following features
- Incorporation under current laws.
- Possession of a distinct legal identity.
- Perpetual succession.
- Possession of a common seal.
- The capacity to initiate legal actions and be subject to legal proceedings in its own right and name.
Body Corporate, Company, and Partnership: What’s the Difference
Starting a business requires you to decide what kind of business structure you will adopt. The following aspects of your business structure will be affected:
- Taxation of your company
- Exposure to liability
- The way your company will be run
Businesses are referred to as companies. As a result, your company represents a group of people who do business in your targeted market. According to the Companies Act of 2013, companies are separate legal entities from their owners or members. They are artificial people with perpetual succession and a common seal.
There is a tendency to confuse companies with corporations on a regular basis. Corporations can be registered inside or outside a country’s borders and jurisdictions. In the past, corporations were large companies with global presence. While a company has a somewhat limited scope, the business it represents is normally physically present in the country it is registered in.
Here are five key differences between partnerships, companies, and corporations:
- Structure
- The cost of starting up
- Potential liability
- Tax scenarios
- Management structures
The structure of a corporation differs considerably from that of a partnership. A corporation’s decision-making process is usually more complex and involves more people. The ownership of a partnership, however, is typically shared by as few as two people.
Creating a corporation can be significantly more expensive than creating a partnership. Setting up a corporation requires the following minimum requirements:
- Lots of administrative fees
- Complex legal and tax requirements
- Articles of Incorporation
- Local and state licenses or permits
Partnerships, on the other hand, are much easier to form. For most businesses, forming a partnership involves registering with local state authorities and obtaining the necessary licenses and permits.
Any debts or legal obligations incurred by the partnership are generally the responsibility of the members. If a company’s debt must be repaid, a partner’s personal assets may be targeted. In this regard, a partnership agreement typically outlines what percentage each partner is responsible for. Each partner may have a different percentage. A corporation, on the other hand, does not hold its owners or members responsible for its debts.
Definition of Body Corporate
Corporations are commonly referred to as bodies corporate under the Indian Companies Act of 2013. It also states that companies may be incorporated inside or outside their jurisdiction. Body corporate excludes:
- Cooperative societies
- Sole corporations
- Corporations that notify the central government’s official gazette of the formation
This can include but is not limited to:
- Private companies
- A single personal company
- Small companies
- Limited liability partnerships
- Foreign companies
Corporations are businesses that maintain a separate legal identity from their owners. If a corporation is sued in its own name, the members of that corporation will be subject to limited liability for the legal action being pursued against them. Corporations are also subject to a corporate tax under the Income Tax Act of 1961.
Whether a company is formed in India or outside of it, a corporation is a body corporate.
- Cooperative societies registered under any laws that pertain to their specific type of business structure
- Other companies that are not defined by the Companies Act of 2013 that the central government chooses to specify.
Body Corporate As Per Companies Act, 2013
According to the Companies Act, 2013, the term ‘body corporate’ or ‘corporation’ is defined comprehensively. It includes not only companies incorporated in India but also those incorporated outside the country. However, certain entities are excluded from this definition.
The Companies Act specifies that a ‘body corporate’ or ‘corporation’ does not encompass:
(i) A co-operative society registered under any law related to co-operative societies.
(ii) Any other body corporate, not qualifying as a company under this Act, as may be notified by the Central Government.
In simpler terms, a company, as per the Companies Act, refers to an entity registered in India under the said Act, having its registered office within the country. On the other hand, the term ‘body corporate’ encompasses a broader spectrum, including all entities registered in India or outside its borders. Notably, a company is a subset of body corporates, as it pertains specifically to entities registered within India.
Examples of companies falling under the Companies Act include Reliance Industries Limited, Tata Steel Limited, Infosys Limited, among others. In contrast, examples of body corporates include Alphabet Inc, Microsoft Corporation, and Facebook Inc, which are foreign companies not incorporated in India.
It’s essential to note that if a subsidiary of such foreign companies (body corporates) is incorporated in India, it is then referred to as a ‘company’ as per the Companies Act. Examples of such subsidiaries include Google India Private Limited and Pepsico India Private Limited.
Conclusion
If you need legal assistance with body corporate issues, please do not hesitate to post your inquiries in our comment section or contact the team directly if you require any type of support in relation to your body corporate.
FAQs
Who comes under body corporate in India?
According to Section 2(11) of the Companies Act, 2013, a body corporate is encompassed within its definition. It is important to note that the term 'body corporate' comprises all entities, including both companies incorporated within India and those incorporated outside India, with the exception of a Co-operative Society.
What is the difference between a company and a corporate body?
The term 'body corporate' holds a broader scope compared to 'company.' Body corporates encompass all entities, whether registered in India or outside its borders. Conversely, a company is more restrictive, encompassing only entities registered within India.
What is body corporate in the USA?
An entity, be it a company or government, possessing distinct legal rights and responsibilities: While the U.S. parent company isn't publicly traded, it operates as a body corporate with shares available for public offering.
Is a bank a body corporate in India?
The Bank will function as a corporate body under the designation of the Reserve Bank of India. It shall possess perpetual succession, a common seal, and the capacity to initiate legal actions and be subject to legal proceedings under the aforementioned name.
Does RBI Come Under a Body corporate?
The RBI will function as a body corporate under the name of the RBI, maintaining perpetual succession and possessing a common seal. It shall, under this name, have the ability to initiate legal actions and be subject to legal proceedings.
