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Various Types of Companies under the Companies Act' 2013 | Company Law Notes for B.Com, BBA and MBA | CBCS Pattern

Types of Companies Under Companies Act' 2013

Company Law Notes for B.Com, BBA and MBA

Types of Companies under Companies Act' 2013

A. Classification on the basis of incorporation

On the basis of incorporation, companies are divided into three categories:

1. Chartered Companies: A chartered company is a company which is formed under a charter issued by the king or queen of a country of monarchy. Such companies are rare and found mainly in UK. Examples of this type of companies are Bank of England, East India Company etc.

2. Statutory Companies: Companies which are incorporated under the Special Act of Parliament or state legislature are called statutory Companies. Such companies are generally formed to carry out some special public undertakings such as insurance, electric generations etc. Examples of statutory Companies are Life Insurance Corporation of India, Food Corporation of India, Unit Trust of India etc. These companies are also called statutory corporations.

3. Registered or incorporated companies: Companies registered under the Companies Act, 2013 or the earlier Companies Acts are called registered companies. Such companies come into existence whey they are registered under the Companies Act and a certificate of incorporation is granted to them by the registrar. These companies are divided into three categories – Companies limited by shares, Companies limited by guarantee and unlimited companies.

B. Classification on the basis of liability

1. Companies with limited liability

(a)   Companies limited by guarantee [Sec.2 (21)]: where the liability of the members of a company is limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wound up, the company is called a company limited b guarantee.

(b)    Companies limited by shares [Sec.2 (22)]: where the liability of the members of a company is limited to the amount unpaid on the shares, such a company is known as a company limited by shares

2. Unlimited companies [Sec.2 (92)]: A company without limited liability is known as an unlimited company. In case of such a company, every member is liable for the debts of the company.

C. Classification on the basis of number of members (Private and Public Company)

1. Private company [Sec.2 (68)]: A private company is normally what the Americans call a ‘close corporation’. According to Sec.2 (68), a private company means a company which has a minimum paid-up capital as may be prescribed, and by its Articles:

a.       Restricts the right to transfer its shares, if any. The restriction is meant to preserve the private character of the company.

b.      Except in case of one person company, limits the number of its members to 200 not including its employee-members. Joint shareholders shall be counted as one member only.

c.       Prohibits any invitation to the public to subscribe for any securities. In other words, a private company shall not make a public issue of its securities.

A Private company may be one Person Company or small company:

a.       One Person company (OPC) [Sec. 2(62)]: It means a company which has only one person as a member. All the provisions of a private company is also applicable to this company.

One-person company (OPC): According to Sec. 2(62) of the Indian Companies Act, 2013, one person company means a company which has only one person as a member. Sec. 3 of the Companies Act, 2013 classify OPC as private company and all the provisions of a private company is also applicable to this company.

Features of OPC:

1. There is only one director.

2. It can have only one member.

3. The word OPC is mentioned in the bracket with the name of the company.

4. OPC is exempted from conducting annual general meeting and board meeting.

b.      Small Company [Sec. 2(85)]: A company shall be a small company only if it’s paid-up capital does not exceed Rs.50 lakhs or such higher amount as may be prescribed (not being more than Rs. 5 crores) and its turnover does not exceeds Rs. 2 crores or such higher amount as may be prescribed (not being more than Rs. 20 crores)

But the following companies are not treated as small companies:

1. A holding company or a subsidiary company.

2. A company registered under section 8.

3. A company or body corporate governed by any special Act.

c.       Dormant company [Sec. 455]: Section 455 of the Act provides that where a company is formed and registered under the Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar for obtaining the status of a dormant company. Section 455 (i) defines ‘inactive company’ as a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.

2. Public company [Sec. 2(71)]: A public company means a company which:

A. is not a private company

B. is a private company which is a subsidiary of a company which is not a private company.

C. has a minimum paid-up capital as may be prescribed by the articles.

D. Classification on the basis of control

1. Holding company-Section 2(46): A company is known as the holding company of another company if is has control over that other company.

2. Subsidiary company-Section 2(87): A company is known as a subsidiary of another company when control is exercised by the latter (called holding company) over the former called a subsidiary company.

A company is deemed to be a subsidiary of another company when:

a.       Where the company controls the composition of Board of Directors of the subsidiary company

b.      Where the company holds more than one- half the nominal value of equity share capital of another company

c.       Where a company is subsidiary of another company, which is itself is subsidiary of the controlling company.

E. Classification on the basis of ownership

1. Foreign company [Sec 2(42)]: It means any company incorporated outside India which has an established place of business in India.

2. Government company [Sec 2(45)]: A Government company means any company in which not less than 51 % of the paid-up share capital is held by-

a.       the Central government

b.      any State government or governments

c.       Partly by the Central government and partly by one or more State governments.

3. Non-government company: It means a company other than Government Company.

F. Classification on the basis of listing of shares on the stock exchange

1. Listed Company [Sec. 2(52)]: It means a company which has any of its securities listed on any recognized stock exchange.

2. Unlisted Company: It means a company other than listed company.