KINDS OF COMPANY

COMPANIES ACT, 2013

Anuradha
vCompany that is limited by shares
According to Section 2 (22) of the Companies Act 2013, a company that is
limited by shares is refers to a company that has the liability of the members
limited by such an amount that is unpaid on their respectively held shares. The
company can enact this liability while the company is in existence or as it is
ending Limited by shares refers to the liability of the shareholders to the
creditors of the business for the money that was invested originally.
According to the Companies Act 2013, if the liability of the company
members is limited by the amount not paid on shares they hold, this is referred
to as a company limited by shares. The shareholder has to meet the debits of
the company only to the extent that is unpaid on his shares and no separate
property can be used to meet the debt.
vWhat is the meaning of company limited by guarantee?
Company limited by guarantee is also termed as Guarantee Company. In a simpler term, it’s a
company without any shareholders but it is owned by members called guarantors who agrees to
pay a nominal amount in the event of company’s being wound up. It’s a specific form used for
non-profit organization. Under this form, profits earned by the company are re invested again in
the company to use it for different purposes. Hence, it’s a legally preferred structure for non-
profit companies, clubs, charitable trusts and other similar set ups

v Company limited by guarantee having share capital

Company will be set in motion with some initial capital or working funds from its members as
initial working capital is not available through grants, subscriptions, fees or any other sources.
But later, once the operation is started, normal working funds can be received from the services
rendered in the form of fees, charges and subscriptions.
vCompany limited by guarantee not having share capital
Such type of guarantee companies do not obtain initial capital
or working funds from its members. Instead, the company raise
the working funds through various other sources like grants,
subscriptions and fees etc. For example, non-profit companies
or charitable institutes started by public donations or
government grants. Voting power in guarantee company not
having share capital is determined by the guarantee.
 UNLIMITED COMPANY
An unlimited company or private unlimited company is a hybrid company
(corporation) incorporated with or without a share capital (and similar to its
limited company counterpart) but where the legal liability of the members or
shareholders is not limited: that is, its members or shareholders have a joint,
several and non-limited obligation to meet any insufficiency in the assets of
the company to enable settlement of any outstanding financial liability in the
event of the company's formal liquidation.
Public Company: [Section 2(71) of 2013 Act]
“public company” means a company which—
(a) is not a private company;
(b) has a minimum paid-up share capital as may be prescribed:
*Provided that a company which is a subsidiary of a company, not
being a private company, shall be deemed to be public company for the
purposes of this Act even where such subsidiary company continues to
be a private company in its articles.
v Public Company limited by shares
v Public company limited by guarantee and having share capital
v Public Company limited by guarantee and having no share capital
DIFFRENCE B/W PRIVATE AND
PUBLIC COMPANY
PRIVATE PUBLIC
COMPANY COMPANY
A Private company has "Pvt.Ltd" at A Public company has "Ltd" at the
the end of its name. end of its name.

Minimum number of members

The minimum number of members The minimum number of members
needed to form a private company is needed to form a Public Company is
at least 2 members. at least 7 members.

Maximum number of members

The Maximum number of members in The Public Company have no
a Private Company is restricted to restriction on a maximum number of
Commencement of Business
A Public Company can only Commence its
Commencement of business of a Private
business after receiving a certificate of
Company takes place immediately after
incorporation and Certificate to
getting the certificate of incorporation.
commencement.
Number of Directors
A Private Company must have at least 2 A Public Company must have at least 3
directors to head and supervise the affairs of directors to manage and lead the affairs of
the company. the company.
Issue of Prospectus
A Private Company cannot issue a
Public Company can issue a Prospectus.
Prospectus. Private Company is not allowed
Public Company is free to invite public for
for inviting the public for subscription of its
subscription of its shares.
shares.
Minimum Subscription
A Private Company can allot shares without A Public Company cannot be able to allot
waiting for the completion of minimum shares before the minimum subscription of
subscription limit. shares is completed.
Transferability of shares
The Articles of Association of a Private Company lays
The Public Company is free to transfer the shares of its
restriction on transfer of the shares from one person to
company from one person to another.
another person.
Quorum
A Private Company is obligated to have at least 2
A Public Company is obligated to have at least 5
members personally present for holding the company
members personally present to constitute the meeting.
meeting.
Statutory meeting
A Private Company is not required to conduct a Statutory A Public Company is required to conduct a statutory
Meeting of the members or filing of Report to the Meeting and file the Report to the Register of
Register of Companies. Companies.
Managerial remuneration
There are some restrictions on payments and
There are no restrictions on payments and remunerations
remunerations offered to the directors or managers and
offered to the directors or managers of a Private
the remuneration should not exceed 11% of the net
Company.
profits.
 PRIVATELY OWNED COMPANY
Privately owned firms are run the same way as publicly traded firms, except
that ownership is limited to a relatively small number of investors. Some of
the most famous companies in the world are privately owned, including
Facebook, Reliance.
Though privately owned companies come in all sizes, a vast majority are
small businesses. Investors in privately owned companies tend to be people
closest to the founders: family, friends, colleagues, employees and angel
investors.
If a privately owned company grows large enough, it may eventually decide
to "go public," meaning it issues shares via an initial public offering (IPO).
Dormant company: The 2013 Act states that a company
can be classified as dormant when it is formed and registered
under this 2013 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 one may apply to
the ROC in such manner as may be prescribed for obtaining
the status of a dormant company.[Section 455 of 2013 Act]
Statutory Companies - When a Company is
incorporated/formed by passing a Special Act at the Legislature, it is
called as a Statutory Company.
• Though primarily they are governed under that Special Act, still the
Companies Act, 2013 will be applicable to them.
• These companies are formed mainly with an intention to provide the
public services like gas, water, electricity, etc.
• These companies are also known as the Statutory corporations or
public corporations.
The examples of such companies in India would be : Reserve Bank of
India, Food Corporation of India, Life Insurance Company etc.
Registered Companies – A Company which is
formed and registered under the Companies Act,
2013, including the companies which are earlier
registered under any of the previous company, are
called as the Incorporated or Registered Company.
Government Company [section 2(45) of 2013 Act] -
“Government company” means any company in which not
less than fifty one per cent. of the paid-up share capital is
held by
• the Central Government,
• or by any State Government or Governments,
• or partly by the Central Government and partly by one or
more State Governments,
• and includes a company which is a subsidiary company of
such a Government company;
Foreign Company [section 2(42) of 2013 Act] -
“foreign company” means any company or body
corporate incorporated outside India which—
(a) has a place of business in India whether by itself
or through an agent, physically or through
electronic mode; and
(b) conducts any business activity in India in any
other manner.
•What Is a Subsidiary
A subsidiary company is a company owned and
controlled by another company. The owning
company is called a parent company or sometimes
a holding company.
Producer Companies [section 465(1) of 2013 Act] -
The concept of Producer Company in India was introduced to allow
cooperatives to function as a corporate entity under the Ministry of Corporate
Affairs. we look at the procedure for registering a Producer Company in India,
under the Companies Act, 2013.
• The Companies Act defines Producer as any person engaged in any activity
connected with or relatable to any primary produce (Produce: “things that
have been produced or grown, especially by farming”). A Producer Company
is thus a body corporate having an object that is one or all of the following:
• production, harvesting, procurement, grading, pooling, handling, marketing,
selling, export of primary produce of the Members or import of goods or
services for their benefit.
Charitable Company [Section 8 of 2013 Act] –
(1) Where it is proved to the satisfaction of the Central
Government that a person or an association of persons proposed
to be registered under this Act as a limited company—
(a) has in its objects the promotion of commerce, art, science,
sports, education, research, social welfare, religion, charity,
protection of environment or any such other object;
(b) (b) intends to apply its profits, if any, or other income in
promoting its objects.
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