KINDS OF

COMPANIES
 1. Private Company*
 According to sec 2(68) Companies Act, 2013

 Minimum paid up capital of one lakh rupees

 Restricts the right to transfer its share, if any

 Limits the number of its members to200

 Prohibits invitation to the public for subscription

of securities.

 Private company if subsidiary of public company

deemed to be public co.
 2. Public Company*
 According to sec 2(71) of Companies Act, 2013
a company,

 Which is not a private company

 Has a minimum paid up capital of Rs. 5 lakhs

A private company which is a subsidiary of a

public company will be a private company.
Several liability of members when
number reduces
 Section 3(1) of the Act provides for the minimum number of
persons required for formation of a company.
 However, the minimum number of persons required for
continuation of a company after it is formed and legal
consequences of number of members falling below the minimum
number is not provided in the Act.
 As per new Sec 3A, every person who is a member of the company
during the time that it so carries on business after those six
months and is cognisant of the fact that it is carrying on business
with less than the prescribed number of members shall be severally
liable for the payment of the whole debts of the company
contracted during that time, and may be severally sued therefor.
3. Statutory Company*
 A company may be incorporated by means of a special Act of the

Parliament or any state legislature. Such companies are called statutory

companies, Instances of statutory companies in India are Reserve Bank

of India, the Life Insurance Corporation of India, the Food Corporation

of India etc.

 The provisions of the Companies Act apply to statutory companies

except where the said provisions are inconsistent with the provisions of

the Act creating them. Statutory companies are mostly invested with

compulsory powers.

 e.g. LIC, Unit Trust of India, IDBI, Industrial Investment Bank of India
4. Registered Company*
 Companies registered under the Companies Act 2013, or earlier
Companies Acts are called registered companies.

 Such companies come into existence when they are registered

under the Companies Act and a certificate of incorporation is
granted to them by the Registrar.
5. Limited Liability Company –sec
3(2)*
 Limited by shares [Sec 2(2)(a)]

 When the liability of the members of a company is limited to the amount if any unpaid on the

shares, such a company is known as a company limited by shares. In a company limited by shares

the liability of the members is limited to the amount if any unpaid on the shares respectively

held by them. The liability can be enforced during existence of the company as well as during the

winding up. Where the shares are fully paid up, no further liability rests on them.

 Limited by guarantee [Sec 12 (2)(b)]

 It is a registered company in which the liability of members is limited to such amounts as they

may respectively undertake by the memorandum to contribute to the assets of the company in

the event of its being wound up. In the case of such companies the liability of its members is

limited to the amount of guarantee undertaken by them. Clubs, trade associations, research

associations and societies for promoting various objects are various examples of guarantee
6. Unlimited Company –sec 2(c)*
 A company not having a limit on the liability of
its members is termed as unlimited company. In
case of such a company every member is liable
for the debts of the company as in an ordinary
partnership in proportion to his interest in the
company.
7. Government Companies*
According to Sec 617 any company in which not
less than 51% of the paid up capital is held
by,

 Central government

 State government

 Partly by central government and partly by

the state government.
8. Foreign Company*
 According to sec 2(42), it is 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.
9. Holding and Subsidiary
Companies*
1. Holding: A company is a holding company of
another if the other is its subsidiary.

2. Subsidiary Company:

 According to sec 2(87) of the Companies

Act, a company shall be deemed to be a
subsidiary of another if and only if-
Cont.*.
 That other company control the composition of its board
of directors or

 The company holds more than half in nominal value of its

equity share capital – replaced by “ exercises or controls
more than one-half of the total voting power either at its
own or together with one or more of its subsidiary
companies.”

 It is a subsidiary of a third company which itself is a

subsidiary of the controlling company.
10. Investment Companies*
According to sec 372(10), a company whose
principal business is the Acquisition of
shares, stocks, debentures or other
securities [sec 372(10)]

Companies can make investment only through

two layers of investment companies.
11. Public Financial Institutions*
Sec 2(72) lists Public Financial Institution
 (i) the Life Insurance Corporation of India, established under section 3 of the Life Insurance
Corporation Act, 1956 (31 of 1956);
 (ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) of sub-
section (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465
of this Act;
 (iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal)
Act, 2002 (58 of 2002);
 (iv) institutions notified by the Central Government under sub-section (2) of section 4A of the
Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;
 (v) such other institution as may be notified by the Central Government in consultation with the
Reserve Bank of India:
 Provided that no institution shall be so notified unless—
 (A) it has been established or constituted by or under any Central or State Act; or
 (B) not less than fifty-one per cent of the paid-up share capital is held or controlled 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
12. Small Company*
 Sec 2(85) defines a Small Company as a company other than a
public company having-

(i) paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which shall
not be more than five crore rupees; or

(ii) turnover of which as per its last profit and loss account does
not exceed two crore rupees or such higher amount as may be
prescribed which shall not be more than twenty crore rupees:

 Provided that nothing in this clause shall apply to—

(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act
12. Associate Company*
 Sec 2(6) defines it as in relation to another company,
means a company in which that other company has a
significant influence, but which is not a subsidiary
company of the company having such influence and
includes a joint venture company.

 Explanation.—For the purposes of this clause, “significant

influence” means control of at least twenty per cent. of
total share capital, or of business decisions under an
agreement.
Amendments in 2016*

 The word “share capital” replaced

with “total voting power, or control
of or participation in business
decisions under an agreement”.
13. One Person Company*
 Section 2(62) of the Companies Act, 2013 (“Act”) defines
OPC as a company which has only one person as a member.
 Only a natural person, who is an Indian citizen
and resident in India shall be eligible to incorporate a One
Person Company.
 Only a natural person, who is an Indian citizen and
resident in India shall be a nominee for the sole member
of a One Person Company.
 OPC can be registered only as a private company which
means that all the provisions applicable to private company
will be applicable to an OPC, unless otherwise expressly
excluded in the Act or rules made thereunder.
 OPC is different from a Sole Proprietorship.
 13. Illegal Association [sec 464]
 No association or partnership consisting of more than such number of
persons as may be prescribed shall be formed for the purpose of carrying
on any business that has for its object the acquisition of gain by the
association or partnership or by the individual members thereof, unless it
is registered as a company.

 The number of persons which may be prescribed under this sub-section

shall not exceed 100.

 According to section 11 every association consisting of more than 10

persons in banking business and 20 in the case of any other business must
either be registered as a company under the Companies Act or be formed
according to the provisions of some other Indian Law. An association not so
registered is an illegal association having no legal existence.
 According to Rule 10 of Companies (Miscellaneous) Rules,
2014, no association or partnership shall be formed, consisting
of more than 50 persons for the purpose of carrying on any
business that has for its objects the acquisition of gain by the
association or partnership or by individual members thereof,
unless it is registered as a company under the Act or is formed
under any other law for the time being in force.

 This Section is not applicable to—

a. a HUF carrying on any business; or
b. an association or partnership, if it is formed by professionals
who are governed by special Acts.
c. Foreign companies

 If 2 or more HUF carry on business in partnership, than while

calculating total number of members involved in that business
for the purpose of this section, minor members should be
ignored as a minor cannot be considered as partner.
 Illegality of an association, however, can in no case be
cured by subsequent reduction in the number of its
members to below 20. Subsequent registration cannot
legalize contracts made earlier.
 Since, the law does not recognize an illegal association
therefore such association:
a. cannot enter into any contract;
b. cannot sue any member, or outsider, not even if the
company is subsequently registered;
c. cannot be sued by a member, or an outsider for recovery
of any debts;
d. cannot be wound up by an order of the Court. In fact,
the Court cannot entertain a petition for its winding up
as an unregistered company, for if it did, it would be
indirectly according recognition to the illegal association.