Business Law Assignment

COMPARISION OF
KINDS OF COMPANIES

Rajesh V S
MBA (PT), CET

11/30/14
Trivandrum

Section 3(1) of the companies act defines a company as a company formed and registered under
this act, or an existing company as defined under section 3(1) (ii) which lays down that an
existing company means a company formed and registered under any previous company law.

A company may be formed by coming together of a certain number of members and getting the
same registered and incorporated under the companies act.
The following are the characteristic features of a company.
Separate legal entity
Perpetual succession
Common seal
There are many types of companies depending upon the difference in the objects of it.
Based on incorporation, companies can be classified as

Based on
Incorporation

Chartered
Company

Registered
Company

Public

Statutory
Company

Private

Chartered Company is a company incorporated under a special charter granted by the Queen of
England. The company is regulated by its charter and companies act does not apply to this kind of
company. The charter also prescribe the nature of business and the power of the company. Examples
are East India Company & Bank of England.
A statutory company is one which is created by a special act of parliament or a state legislature. These
kind of companies are formed for achieving the purpose of public utility. The nature & power of such
companies are laid down in the special act under which they are created. Memorandum of association is

not required for statutory companies and it is not required to use limited after its name. Examples are
RBI, LIC, UTI & State Bank of India.
A registered company is one which is registered in accordance with the provisions of the companies act
1956 and includes the existing companies formed under any other law. They comes into existence by
receiving the certificate of incorporation. Such companies are governed by the companies act, 1956.
Registered companies may be private or public company.
A private company means a company which has a minimum paid up capital of Rs 100,000 or such higher
paid up capital as may be prescribed by its articles.

Restrict the right to transfer its shares if any.

Limits the number of the members to 50.
Prohibits any invitation to 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 its relatives.

Public company means a company which is either not a private and has a minimum paid up capital of
500,000 or such higher paid up capital as may be prescribed or is a private company which is a
subsidiary of public company.
There is no restriction on the number of members. However, the maximum number of members depend
upon the number of shares allotted.
Public company may be
A company with limited shares.
A company limited by guarantee.
An unlimited company.
In case, a public company is limited, then it must add the word limited at the end of the name. Also, it
must have minimum at least 7 members. It must have at least 3 directors.
According to section 25, the central govt may by license grant that an association may be registered as a
company with limited liability, without using the word limited or pvt ltd as a part of its name. An
association must satisfy below conditions for this.
The association about to be formed aims at the promotion of commerce, art, science, religion,
charity or any other useful objective.
It intends to apply its profits, if any, for promoting its objects and
It prohibits the payment of dividend to its members.
Based on Liability, companies can be classified as

Based on
Liability

Limited by
Shares

Limited by
Gurantee

Unlimited
Company

A company limited by shares is a company in which the liability of its members is limited by its
memorandum to the amount unpaid on the shares respectively held by them. It may either public or
private in nature. The liability of its members is limited up to the amount remaining unpaid on the
shares held by them. Such liability can be enforced either during the lifetime or during the winding up of
the company.
A company limited by guarantee is a company in which the liability of its members is limited by its
memorandum to such amount as the members may respectively undertake to contribute to the assets
of the company in the event of its being would up. That means, the liability of its members is limited up
to the amount guaranteed by them. Such liability can be enforced only after the commencement of
winding up of the company and not during the lifetime of it.
An unlimited company is a company in which the liability of its members is limited by its memorandum
to such amount as the members may respectively undertake to contribute to the assets of the company
in the event of its being wound up. The liability of its members is limited up to the amount guaranteed
by them. Such liability can be enforced only after the commencement of winding up of the company and
not during the lifetime of it.
Based on control, companies can be classified as

Govt or Non Govt

Holding or Subsidiary

Based on
Control

Foreign or Domestic

Public Financial Institude

Multi National Company

A government company means any company in which at least 51% of the paid capital is held by the
government, either the central or state. Even a subsidiary company of govt is regarded as a government
company. Examples is HAL.
A company which may not be termed as a government company as defined in section 617 is regarded as
a non-government company.
A company which is incorporated outside India under the law of that country is known as a foreign
company. After establishing business in India, such companies must be file below documents with
registrar of companies within 30 days.

A certified copy of the charter or statues under which the company is incorporated.
The full address of the registered office of the company.
List of directors & secretary of the company.
The full address of companys principal place of operation in India.

A company which cant be termed as foreign under the provision of companys act should be regarded
as a domestic company.
If one company controls over the another company, the controlling company is termed as holding
company and the company so controlled is termed as subsidiary company.
Public Financial Institute The central govt by notification in the official gazette is empowered to
specify any other institutions as public financial institution if
It is constructed under any central act or is held or controlled by the central govt.
Not less than 51% of its paid up capital is controlled or held by the central govt.
A Multi National Company is a huge organization which operates in more than one country and carries
out product, marketing, research on international scale in those countries.