Day 2

WEEK 1- DAY 2
1. What are the different types of Companies?
The different types of Companies can be classified under the following bases:
i) On the basis of Liabilities:
 Companies Limited by Shares

 Companies Limited by Guarantee
 Unlimited Companies
ii) On the basis of members:

 One Person Companies (OPC)
 Private Companies
 Public Companies
iii) On the basis of Control or Holding:

 Holding and Subsidiary Companies
 Associate Companies
iv) Companies in terms of Access to Capital
v) Other types of Companies:

 Government Companies
 Foreign Companies
 Charitable Companies
 Dormant Companies
 Nidhi Companies
 Public Financial Institutions
2. What is the meaning of Limited Liability?
According to the Indian Corporations Act, a company is defined as a legal entity.

There are several types of companies. A limited liability corporation (LLC) is a type
of business that has less formal legal requirements than a limited liability partnership
and a sole proprietorship. Since its founding, it has been known by many as a Limited
Liability Corporation. Like other types of corporations, limited liability firms are
created in accordance with the Indian Companies Act of 2013.
Limited Liability is a legal structure whereby shareholders or directors are

legally responsible for their company’s debts only up to the value of their shares.
The directors will only be liable for debts of a certain amount – this is up to the value
of the shares they hold in the business. Incorporating as a limited company provides
shareholders and directors with personal financial and legal protection from any
future company insolvency issues.
In order to be structured as limited liability, a business must be incorporated under the
companies Act as one of the following:
 Limited Liability Company (LLC)
 Private Limited Company (Ltd)
 Public Limited Company (PLC)
Limited Liability Partnership (LLP) The limited liability feature is one of the biggest
advantages of investing in publicly listed companies. While a shareholder can participate
wholly in the growth of a company, their liability is restricted to the amount of the
investment in the company, even if it subsequently goes bankrupt and has remaining debt
obligations.
3. What is the legal status of following Registered Companies

i) Small Company
ii) Holding Company
iii) Subsidiary and Associate Company
iv) Inactive Company
v) Dormant Company
vi) Government Company
1. Small Company:
A small company is a concept introduced by the Companies Act, 2013, to provide

benefits to small enterprises operating as private limited companies. These businesses
generate less revenue compared to larger companies but play a crucial role in the
economy.
To qualify as a small company, the following criteria must be met:
a. Paid-up Share Capital: The company’s paid-up share capital should be equal
to or below ₹4 crores (or a higher amount specified, not exceeding ₹10
crores).
b. Turnover: The company’s turnover should be equal to or below ₹40 crores
(or a higher amount specified, not exceeding ₹100 crores).
2. Holding Company:
A holding company is one that controls other companies (known as subsidiary companies). It
holds a majority of shares or exercises significant control over the composition of the
subsidiary’s board of directors.
Legally, a holding company and its subsidiaries are separate entities, even though they may
be considered a single economic entity for consolidated financial reporting purposes45.
3. Subsidiary Company:
A subsidiary company is one in which another company (the holding company) controls the
composition of its board of directors or holds more than half of its total voting power.
Subsidiaries can be pure investment holding companies or have independent business
activities. Listed subsidiaries often enjoy autonomy due to regulatory provisions4.
4. Inactive Company:
An inactive company is a registered entity that has not carried out any significant accounting
transactions since its inception. It may have been formed for future projects, to hold assets, or
for intellectual property purposes.
Inactivity does not imply wrongdoing or financial distress; it’s a strategic choice. Inactive
companies maintain their legal status while minimizing compliance costs67.
5. Dormant Company:
A dormant company is also recognized under the Companies Act, 2013. It remains inactive
for an extended period but retains its legal status.
Dormant companies do not engage in regular business activities or significant accounting
transactions. They exist in a state of hibernation, awaiting future operations67.
6. Government Company:
A government company is one where at least 51% of the paid-up share capital is held by the
central government, state government(s), or both. These companies often serve public
purposes and are subject to specific regulations

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WEEK 1- DAY 2

1. What are the different types of Companies?

i) On the basis of Liabilities:

 Companies Limited by Shares

ii) On the basis of members:

iii) On the basis of Control or Holding:

iv) Companies in terms of Access to Capital

v) Other types of Companies:

2. What is the meaning of Limited Liability?

According to the Indian Corporations Act, a company is defined as a legal entity.

Limited Liability is a legal structure whereby shareholders or directors are

3. What is the legal status of following Registered Companies

A small company is a concept introduced by the Companies Act, 2013, to provide

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