There are many categories of companies which are classified on the following basis.

1. On the Basis of Liability

On the basis of liability companies may be classified into:

Companies with liability:

Companies limited by shares:

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.

Companies limited by guarantee:

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.

These are not formed for the purpose of profit but for the promotion of art, science,
culture, charity, sports, commerce.

Unlimited companies:

(Section 12) specifies that any 7 or more persons (2 or more in case of a private
company) may form an incorporated company with or without limited liability.

A company without limited liability is known as an unlimited company.

Every member is liable for the debts of the company in proportion to his interest in the
company.

Limited by shares-Is the one where the liability of members is limited to the face value of
shares that the members have in the Co.

Limited by guarantee-Is the one where the liability of members is limited to a fixed
amount which they have guaranteed. This is where members have agreed to contribute
their assets to pay the outstanding liabilities of the company in the event of winding up.

Unlimited companies-This one is where the liability of members is unlimited. They have
to pay the liabilities of the Co from their personal assets.

2. On the Basis of Members

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Private company:

A ‘private company’ means a company which has a minimum paid-up capital of Rs.
1,00,000 or such higher paid-up capital.

Restricts the right to transfer its shares.

Limits the number of its members to 50 not including its employee-members (present or
past);

Prohibits any invitation to the public to subscribe for any shares in, or debentures of the
company;.

Prohibits any invitation or acceptance of deposits from persons other than its members,
directors or their relatives.

Public company:

3. A public company- has a minimum paid-up capital of Rs. 5 lakh or such high
paid-up capital; it is a private company which is a subsidiary of a company which
is not a private company.

Private Co-It is defined as one with a minimum of twenty members but with a maximum
of fifty.

Public Co-Is defined as one with a minimum of seven members but with no maximum
number of members.

4. On the Basis of Incorporation or Registration

Statutory companies:

The company which is created by a special Act of the legislature called statutory
companies. For example – the Reserve Bank of India, the State Bank of India, the Life
Insurance Corporation, the Industrial finance Corporation, the Unit Trust of India etc.

These are mostly concerned with public utilities.

Registered companies:

Companies registered under the Companies Act 1956 are known as registered companies.
These are by far the most commonly found companies.
 5.

Chartered Co-They come into existence under a special charter that is only issued by a
monarch or a crown.

Statutory Co-This one is incorporated under a special or separate act of legislature.

Registered Co-Their existence come about by registration with the registrar of companies
under the companies act.

4. On the Basis of Ownership

Government Co-Is the one which the central government or state governments or the
central government together with one or more state governments partly owns not less
than 51% of the share capital of the company.

Non government Co-Is owned and managed by private investors.

5. On the Basis of Nationality

Domestic Co-Is incorporated in the country.

Foreign Co-Is incorporated in a foreign country but has a place of business in a foreign
country.

6. On the Basis of Control

Holding Co-Is the one that owns more than 50% of nominal value of equity share capital
of another Co or is controlling the composition of the board of directors of another Co.
This means that it is a company that is controlling subsidiary Co.

Subsidiary Company-Is one that is controlled by a holding Co since it owns less than
50% nominal value of equity share capital or is not controlling the composition of the
board of directors of another Co.

Classifications On The Basis Of Incorporation:

Classification On The Basis Of Control:

Holding company:
A company is known as the holding company of another company if it has control over
that other company. According to sec. 4 (4), a company is “deemed to be the holding
company of another if, that other is its subsidiary.”

Subsidiary company:

A company is known as a subsidiary of another company when control is exercised by

the latter (called holding to company) over the former called a subsidiary company.

A company is deemed to be a subsidiary of another company in the following 3 cases:

Company controlling composition of board of directors.

Where a company (Company A) controls the composition of board of directors of another
company (Company B), the latter (Company B) becomes the subsidiary of the former
(Company A).

Holding of majority of shares:

Where a company (Company A) holds more than half in nominal value of equity share
capital of another company (Company B) the latter (Company B) becomes the subsidiary
of the former (Company A).

Subsidiary of anther subsidiary:

Where a company (Company B) is subsidiary of anther company (say Company A1)

which is itself subsidiary of the controlling company (Company A), the former
(Company B) becomes the subsidiary of the controlling company (Company A).

Classification On The Basis Of Ownership:

Government company, or

Non-government company

Government Company:

A Government company means any company in which not less than 51 per cent of the
paid-up share capital is held by.
The central government, or
Any state government or governments, or
Partly by the central Government and partly by one or more state Governments.

Foreign Company:

It means any company incorporated outside India which has an established place of
business in India.
Where a minimum of 50 per cent of the paid-up share capital of a foreign company is
held by one or more citizens of India.