Body Corporate

The term body corporate refers to a legal entity that has been incorporated under statute and possesses a distinct legal personality separate from its members. It has perpetual succession, the capacity to hold property, and the ability to sue or be sued in its own name. The concept is widely recognised under the Companies Act, 2013, the Limited Liability Partnership Act, 2008, and other related legislations.

Definition under Indian Law

The Companies Act, 2013, under Section 2(11), defines body corporate (or corporation) as an entity that includes:

• A company incorporated under the Companies Act.
• A company incorporated outside India (foreign company).
• Other entities with corporate status created by legislation.

However, certain entities are excluded from the definition:

• Co-operative societies registered under the Co-operative Societies Act, 1912 or any similar state law.
• Any other body corporate specified by the Central Government in the Official Gazette.

Thus, while all companies are bodies corporate, not all bodies corporate are companies.

Characteristics of a Body Corporate

A body corporate in India generally possesses the following features:

• Separate Legal Entity: It exists independently of its members or shareholders.
• Perpetual Succession: The entity continues despite changes in ownership or membership.
• Common Seal: Traditionally used as its official signature (though optional under the Companies Act, 2013).
• Capacity to Own Property: It can own, transfer, or mortgage property in its own name.
• Right to Sue and be Sued: It can enter into legal proceedings independently.
• Limited Liability: In companies and LLPs, liability of members is limited to their shareholding or contribution.

Types of Bodies Corporate in India

The concept covers various incorporated entities, such as:

• Companies: Public and private companies incorporated under the Companies Act.
• Statutory Corporations: Bodies created by specific legislation, e.g., Reserve Bank of India, Life Insurance Corporation of India.
• Foreign Companies: Companies incorporated outside India but conducting business in India.
• Limited Liability Partnerships (LLPs): Entities incorporated under the Limited Liability Partnership Act, 2008.
• Government Companies: Companies in which at least 51% of the paid-up share capital is held by the government.

Distinction between Company and Body Corporate

While the terms are often used interchangeably, there are important distinctions:

• Every company registered under the Companies Act is a body corporate.
• Every body corporate may not necessarily be a company, as the term includes statutory corporations and foreign companies.
• Co-operative societies and certain government-notified entities are excluded from the ambit of a body corporate.

Legal Relevance

The classification of an entity as a body corporate has multiple legal implications:

• Contracts and Obligations: Only bodies corporate can enter into binding contracts as independent entities.
• Regulatory Compliance: Entities classified as bodies corporate are subject to provisions under the Companies Act, SEBI regulations, Competition Act, and other statutes.
• Liability: The principle of limited liability applies, protecting the personal assets of members.
• Corporate Governance: Provisions relating to directors, auditors, and accountability frameworks apply to bodies corporate.
• Foreign Direct Investment (FDI): Policies differentiate between individuals and bodies corporate when defining eligible investors.

Judicial Interpretation

Indian courts have consistently upheld the principle that a body corporate has an existence distinct from its members. In Salomon v. A Salomon & Co. Ltd. (1897), which influenced Indian corporate jurisprudence, it was held that a company is a separate legal person. Indian courts have reiterated this principle in cases such as State Trading Corporation of India v. CTO (1963), where it was confirmed that a corporation is distinct from its shareholders and can own property independently.