Presentation on company law

Topic: Types of companies

Presented by: D.Sathya IIPM

 SS-09-11
 Roll NO.: 09
 An introduction on company law

The Company Act:

Object of the Act:
To protect the interest of creditors
To protect the interest of investors
To help the growth of companies
classification of companies

companies

incorporated un-incorporated

statutory registered

existing newly formed

classification of companies (cont.)

limited limited unlimited

by shares by guarantee companies

Private Public Private Public Public Private

Different basis of classification:

i. On the basis of incorporation

ii. On the basis of liability
iii. On the basis of number of members
iv. On the basis of control
v. On the basis of ownership
Different basis of classification (cont):

1.On the basis of Incorporation

1.Statutory companies:
Company created by special Act of legislature
Concerned with public utilities
2.Registered companies:
Companies formed and registered under any of the
company Act
 2.On the basis of liability

1.Companies with limited liability:

Companies limited by shares

Company limited by guarantee

2.Unlimited companies
 3.On the basis of number of
members
1.A private company: (closed company)
A company which by articles:
Restricts the right to transfer its shares.
Prohibits any invitation to the public to
subscribe for shares.
Joint holders of shares are treated as a
single member.
On the basis of number of members
(cont.)
2.Public company :
A company which by its articles does not:
Restrict the right to transfer its shares ,if any
limit the number of its members to 50
Prohibit any invitation to the public to
subscribe for any shares in, or debentures, of
the company
Differences b/w public and private company

Public company Private company

Minimum no.: 7
Maximum no.: no restriction
Number of directors: at least 3
Directors must file with the registrars
their consent
Invites the public to subscribe for the
shares
Shares are freely transferable
Minimum no.:2
Maximum no.: 50
Number of directors : at least 2
Directors need not do so
Prohibits any such invitation to the
public.
Transferable of shares are restricted
When does a public company becomes
private?
1. Conversion by default: where a default is made
by a company in complying with the essential
requirements of private company.
2. Conversion by operation of law(deemed public
company)
3. When the private company holds not less than
25% of the paid-up share capital of a public
company.
4.When the private company invites, renews
or accepts deposits from public.
5. Conversion by choice or violation: if a
company so alters its articles that they do
not contain the provisions which make it a
private company, it shall cease to be a
private company as on the date of
alteration.
4.On the basis of control

1. Holding company
2. Subsidiary company
 Company controlling composition of board of
directors..
 Holding of majority of shares..
 Subsidiary of another subsidiary
5.On the basis of ownership

1.Government company.
Not less than 51% of the paid-up share capital
is held by central govt. or state govt.

2.Non-government company: the company

that is controlled and operated by private
capital.
 1. What's a foreign company ?

“Company incorporated outside India which

has established place of business in India”

2. What is an one-man company ?

“ company (usually private) in which one

man holds practically the whole of the
share capital of the company”
Associations not for profit

Section 25 of the Act: permits the

registration, under a license by the central
government ,of an association not for
profit with limited liability without using
the word limited.
Memorandum of Association

It lays down the area of operation of the

company .
It regulates the external affairs of the
operation of the company.
It shows the object of the formation of the
company.
It shows the area beyond which the actions
of the company can’t go.
Contents of the memorandum

The name of the company: with ‘limited’ as

the last word of the name in the case of a public
limited company and with ‘private limited’ as the
last words of the name in the case of a private
company.
The state in which the registered office of the
company is situate.
The objects of the company (classified as main,
incidental and other objects)
Contents of the memorandum

Limitation of liability: the MOA of a company

also states that the liability of its members is
limited
Share capital: in the case of a company
having a share capital amount of share capital
with which the company is to be registered and
division thereof into shares of a fixed amount.
Reference:

• Elements of company law - N.D.Kapoor

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