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.