Types of Companies

Classification of Companies

On - On the Basis Basis of Other

On- liability
Incorporation of No Control companies
• Chartered • Limited by •Public • Govt. • Foreign
• Statutory shares • Private • Holding company
• Registered • Guarantee • Small • subsidiary • Illegal
• Unlimited Company company
• One Person
Company
 1. On the Basis of Incorporation

• A Chartered Company
• B. Statutory Company
• C. Registered or Incorporated Company
 A Chartered Company

• “company which is incorporated by the special charter

granted by the King or queen of England is known as
Chartered Company.
• These are controlled and governed by the provisions of the
Charter by which they are formed
• The provisions of the company Act is not Applicable to them
• Eg – East India Company, Harts and Hay Company, Bank of
England
• Such types of Companies cannot be formed in India”
 B. Statutory Company

• “These are Companies which are created by the Special Act of the
Legislature .
• Eg RBI, SBI, LIC etc.
• These are mostly concerned with public utilities eg. Railways ,
tramways gas and electricity companies and enterprises of
national importance.
• The provisions of Companies Act 2013 , apply to them , if they are
not consistent with the Special Acts under which they are formed”
 C. Registered Companies
• These are companies which are formed and registered under the
Companies Act , 2013 or were registered under any of the earlier
Companies Acts.
• They are by far the most commonly found companies
• These companies are known as registered or incorporated companies
• To bring these companies into existence , the certificate of
incorporation is obtained from the Registrar of Companies .
• Management of day to day affairs of the company is regulated by
the provisions of the Indian Companies Act.
 II. On the Basis of Liability
• A. Companies with Limited Liability
- Limited by shares
- limited by guarantee
• B. Companies with Unlimited Liability
 A. Company limited by shares
• “Sec 2(22) of the Companies Act, 2013 states that where the liability of
the members is limited by its Memorandum Of Association to the
amount unpaid on the shares held by them , such a company is known
as limited by shares.
• The liability can be enforced during the existence of the company as also
during the winding up of the company.
• If the shares are fully paid , the liability of the members holding such
shares is nil.
• Company limited by shares is most common.
• A company limited by shares may be a public company or a private
company”
 Companies limited by Guarantee
• According to sec 2(21) of the Companies Act , 2013, where the liability of
the members of a company is limited by its Memorandum of association
to such amount as the members may respectively undertake to
contribute to the assets of the company in the event of being wound up.
• The liability of members for the amount guaranteed can be enforced
only during the winding up of the company and not during the life time
of the company.
• Such companies are formed for promoting art, culture , science and
sports etc.
 B. Companies with Unlimited liability
• Sec 2(92) of the Companies Act , 2013 defines an
unlimited company as a Company not having any limit
on the liability of the members.
• In case of a unlimited liability company , every member
is liable for the debts of the Company to an unlimited
extend.
• An unlimited company may or may not have share
capital . If it has a share capital , it may be a public
company or a private company.
III. Classification on the basis of number of Members
• On the basis of the number of members, companies
may be classified into :
• Private company
• Public Company
• Small Company
• One person Company
 A. Public Company
• According to sec2(71) of the Companies Act , 2013
public company means a company which-
• a) is not a private company,
• b) has a minimum paid –up share capital of 5 Lakhs
or such higher paid –up capital may be prescribed .
• c) has 7 or more members
 Private Company
• “According to sec. 2(68) of the Companies Act 2013, private company
means a company having a minimum paid-up share capital as may be
prescribed and which by its Article-
• Restricts the right to transfer its shares The restriction is meant to
preserve the private character of the company
• Limits the number of its members to 200 (except in case of one person
company)
• Prohibits any invitation to the public to subscribe for any securities of
the company
• Requirement of 1 lakh or more as minimum paid –up share capital for
private companies have been omitted by the Companies( Amendment )
Act 2015.”
 Small Company
• “A small company is a private company and must fulfill the
requirements of sec 2(85 ) of the Act. A small company means a
company other than a public company –
• A paid-up share capital of which does not exceed Rs. 50 lakh or such
higher amount may be prescribed which shall not be more than 5 crore.
• Turnover of which as per its profit and loss account for the immediately
preceding financial year does not exceed Rs. 2 Cr. Or such higher amount
as may be prescribed which shall not be more than 100 cr.
• Provided that it shall not apply to-
• i) a holding company / subsidiary company
• ii) a company registered under Sec. 8
• iii) a company or body corporate governed by any Special Act.”
 One person Company
• Section 2(62) of the Companies Act 2013 defines One- Person
Company as a Company which has only one person as a
member.
• This was introduced by the Companies Act of 2013
• Features of OPC:
• It can be incorporated as private limited company which can
be either formed as company limited by shares or guarantee.
• It has only one member, who is the citizen and resident of
India , at any point of time
 Features of OPC contd..

• The words “one person company” must be mentioned( in brackets) below the name
of the company.
• The name of the nominee to be provided in the event of death or incorporating of
the member.
• A single person is entitled to incorporate a maximum of one OPC.
• There is no limit prescribed for minimum paid-up capital but maximum paid up
capital should not exceed 50 lakhs or average income of a finanacial year should
not exceed Rs 2 crore.
• One person would constitute the Board of Directors
• One person company cannot be formed either in a section 8 company or for non –
banking financial activities.
 Difference between Private & Public Company
Sl Points of Difference Private Public
No
1 Minimum No 2 7
2 Maximum No 200 No restriction
3 Minimum paid up 1 lakh 5 lakh
capital
4 Name Private limited Limited ( by
shares and
guarantee)
Sl Points of Private Public
No Difference
5 Min. No. two three
Directors
6 Transfer of Restricted Easily transferred &
shares transfer traded on stock
exchange
7 Public Articles of such, Can invite general
subscriptio prohibits inviting public for subscribing
n of general subsc. its share capital
8 Acceptanc Prohibited to Can invite and accept
e of invite & accept deposits from public
deposits deposits
Sl No Points of Private Public
Difference
9 Commence soon after the Procure a certificate of
ment of certificate of commencement of business
business incorporation.
10 Allotment No restriction Can allot only after min.
of shares subscription
11 Statutory Not required After 1 month and before 6
meeting months after obtaining certf. Of
incorporation
12 Managerial Not Total remuneration should not
remunerati applicable exceed 11%
on
 IV. On the Basis of Control

• 1. Govt.Company
• 2.Holding Companies
• 3. Subsidiary Companies
• 4. Associate Company
 Government Company
• A Govt. company means any company in which not less than 51%
of the paid –up share capital is held by –
• a) the Central Govt.
• b) any State Govt. or Govts. Or
• c) partly by the Central Govt. and partly by one or more State
Govts. eg , State Trading Corporation of India Ltd and Minerals
and Metals Trading corporation of India Ltd. Are Govt.
Companies .
• The subsidiary of the Govt. company is also a Govt. Company
 Holding Company and Subsidiary Company
• Incase one company controls another company, the controlling company
is known as holding company and the company so controlled is known as
subsidiary company”
• A company is to be subsidiary of another company only in the following
cases:
• A) When the Company controls composition of board of directors of other
company
• When the company holds more than half of the equity share capital of a
company in terms of a nominal value. In other words , a company has a
controlling amount of equity shares to have controlling power in other
company
• When a company is a subsidiary of any company which in turn is
subsidiary of a holding company
 Other Companies
• Foreign Company
• Illegal Company
 Foreign Company
• “Acc. To sec 591(1) of the Act , foreign company means “ a company incorporated
outside India but having place of business in India “
• Within 30 days of its establishing business in India , a foreign company is required to
file the following documents with the Registrar of Companies :
• A certified copy of charter/ statutes or memorandum/ articles of the company. In case
the instruments is not in English language , certified translation of the same will have
to be provided
• A full address of the registered or principal office of the company abroad
• A list of Directors and secretary of the Company along with their names, residential
addresses a, nationalities , business occupations and directorship held by them
• The name and addresses of the person or persons authorized to accept on behalf of the
company services of processes or any notices or documents
• The full address of the office of the company in India which is to be deemed to be a
principal place of business in India”
 Illegal association
• According to Companies Act , no company association or
partnership consisting of more than 10 persons for the purpose of
carrying business on business of banking and more than 20 persons
for the purpose of carrying or any other business shall be formed
,unless it is registered as a company under this Act or is formed in
pursuance of some other law.
• If it is not registered it becomes an illegal association
 Following points may be noted:
• An illegal association is not an association for
illegal purpose
• It remains an illegal association unless it is
registered under Indian Companies Act or other
Indian law.
• Illegality of an association cannot be cured even by
subsequent reduction in the number of members
• Profits made by such illegal association are however
liable to be assessed under Income Tax Act