DIFFERENT KINDS OF COMPANIES

This article is written by Khizra Khan of 6^th semester of CSJMU, Kanpur, an intern under Legal Vidhiya.

ABSTRACT

 As we know that, business have become enormously popular these days and they cannot be discussed without proper gatherings. So, we have introduced the concept of ‘Company’, which referred to a group of people who took their meals together. Therefore, it is the form of organization which has gained greater importance. In popular parlance, a company is an association of likeminded people who have come together for the purpose of carrying on business activities. It is a corporate body which is having a legal status and perpetual succession and is separate from members constituting it. There are many different kinds of companies in India on whose basis businesses are carried. So, in this article we will study about the classification of company and on what basis they are classified.

KEYWORDS

Business, Company, Organization, Legal status, Different Kinds of Companies

INTRODUCTION

 In today’s approach, Company plays a vital role and is the most extrusive type of business organization. It is said to be an artificial person created under the jurisdiction of law having a separate legal entity and have its own common seal. According to Section 2(20) of The Companies act, 2013, a company is stated as a company formed and registered under this act or under any previous acts. It is an association of persons who come together to form a corporate body. The Companies Act, 2013 has recouped the Indian Companies act, 1956. This act implemented many new sections and repealed the relevant corresponding sections of the Companies Act, 1956. Now, a bill was passed by Lok Sabha on 17 March 2020, known to be a Companies (Amendment) bill, 2020 and the main purpose of amendments is to facilitate greater ease of living to law abiding corporate.

 There are numerous kinds of companies which are incorporated under The Companies Act, 2013. These companies are mainly classified on the basis of size of size of the company, number of members, control, liability and manner of access to capital. Now, let us study about the various types of companies.

TYPES OF COMPANIES

So, under The Companies Act, 2013, companies are classified as:

• On the basis of incorporation
• On the basis of members
• On the basis of liability
• On the basis of control
• On the basis of residence
• On the basis of legality

On the basis of Incorporation

1. Royal or Chartered Companies

• These companies are formed in England and do not exist in India.  

• They are incorporated under specified charter like East India Company, Bank of England and The Companies Act is not applicable to them.

• These are created and regulated by King or Queen.

2. Statutory Companies

• These companies are formed under special act of Parliament or State Legislature.

• They are mainly formed to provide services to public and undertake business of national importance

• Like RBI, SBI, LIC, UTI, IFCI.

3. Registered Companies

• These are found and registered under the Companies Act, 2013 or any other earlier Companies act.

• This type of company is formed when they have been granted a certificate of Incorporation (ROC).

On the basis of Members

1. One Person Company

• The 2003 Act introduces a new type of identity to the existing list, i.e., apart from forming a public or private limited company, the 2013 Act enables the formation of a new entity which is known as ‘One person Company’ (OPC).

• According to section 2 (62) of The Companies Act, 2013, One Person company is defined as a company who has only one person as member.

• Examples of one person company are –

a) YUVENDRA AGRO (OPC) PRIVATE LIMITED, KANPUR

b) MAHAMEGA GOAT FARMING (OPC) PRIVATE LIMITED, KANPUR

• The characteristic features of one person company are:In this type of company, only one person is required as the shareholder as well as director.

• The minimum authorized capital required to incorporate on OPC id one Lakh rupees and the paid-up capital should be equal to or less than the authorized capital.

• Only one director is required in One Person Company.

2. Private company

• Section 2 (68) of The Companies Act, 2013 states that a company with the minimum paid-up share capital of one Lakh rupees or higher as may prescribed, is known to be a Private Company.

• The characteristic features of private company are:

i) The minimum number of members required to form a private company is two and the number of maximum members is two hundred.

ii) Only two directors are required in a private company

iii) It cannot invite the public to subscribe for its capital or shares of debentures.

iv) It restricts right to transfer shares.

v) It is necessary for a private company to use the word “Private Limited” after the company name.

3. Public Company

• Section 2(71) of The Companies Act, 2013 defines that a company which is not private and had a minimum paid-up share capital of five Lakh rupees as may be prescribed is known to be a Public Company.

• The characteristic features of public company are:

I) The minimum number of members required to form a public company is seven and there is no restriction on the maximum number of members in a public company.

ii) It needs to have at least three directors.

iii) It invites the public to subscribe for its capital or shares of debentures.

iv) In this company, shares are freely traded at secondary market.

On the basis of Liability

1. Limited Liabilities Companies:  They are of two types-

a) Companies limited by shares

• Section 2(22) of The Companies Act, 2013 states the definition of companies limited by shares.

• When there is existence of the company or the event of winding up, a member can be called upon to pay the amount remaining unpaid on the shares subscribed by him. That company is said to be company limited by shares.

• A company limited by shares may be a public company or a private company. These are the most popular type of company.

b) Companies limited by guarantee

• Section 2(21) of The Companies Act, 2013 states the definition of companies limited by guarantee.

• This type of company may or may not have a share capital. For the payment of debt and liabilities, each member of the company promises to pay a fixed amount specified in the Memorandum in the event of liquidation. The amount promised by him is called “Guarantee”. The number of members of the company is stated in the Articles of Association with which the company is to be registered. This type of company is known as company limited by guarantee.

• These companies depend for their existence on entrance and subscription fees as they may or may not have a share capital.

• If company limited by guarantee has a share capital, then it may be a public company or a private company.

c) Unlimited Liability Company

• Section 2(92) of The Companies Act, 2013 states the definition of unlimited liabilities companies.

• An “Unlimited Company” is a company which is not having any limit on the liability of its members.

• This type of company may or may not have a share capital. If it has a share capital, then it may be a public company or private company.

• The article shall state the amount of share capital and the number of members with which the company is to be registered, if the company has a share capital. 

  On the basis of Control

1. Government Company

• Section 2(45) of The Companies Act, 2013 provide the definition of Government company.

• A company which is having not less than 51% of paid-up share capital held by the Central government or by any State government or partly by central government and on or more state government or company which is subsidiary of a government company.

• Example – Hindustan Machine Tools Limited, Heavy Engineering Corporation.

2. Holding Company and Subsidiary Company

• A holding company is defined under Section 2(46) and a subsidiary company is defined under 2(87) of The Companies Act, 2013

• A holding company is a company which owns another company. It acts as a parent company which controls another company’s policies, assets and management decisions.

• A subsidiary company is a company which is owned by the holding company. And the holding company controls the structure of the board of directors of subsidiary company or more than the 50% of its voting power. 

On the basis of Residence

1. Indian or Domestic Company

• Section 2(22) A of The Companies Act, 2013 states that the company having control and management wholly situated in India.

• This type of company is incorporated and registered in India.

• Its head office and business are conducted within country.

• Domestic company can be private or public.

2. Foreign Company

• Section 2(42) of The Companies Act, 2013 states the definition of foreign Company.

• Foreign companies are incorporated outside India but have place of business within India through agent, physically or in electronic mode.

On the basis of Legality

1. Legal companies

• A company which is registered under The Companies Act, 2013 or any previous law is said to be a Legal Company. 

2, Illegal companies

•  Under section 464 of The Companies Act, 2013 any group of persons in which the number of members is more than 50 and it carries on business for profit, it is known to be Illegal Company.

• It does not apply to charitable companies because the objective of not earning profit.

Some other Companies

1. Charitable Companies

• This type of company is provided in Section 8 of The Companies Act 2013.

• These are the association which is not of commercial nature and object of association must be promotion of charity, science, commerce, sport, art, religion, culture or some other social useful activity.

• It must utilize its income or profit, if any, for the promotion of its object as stated above.

• It cannot distribute its profit as dividend to its members.

2. Small company

• This type of company is defined under Section 2(85) of The Companies Act, 2013.

• Small company other than a public company whose paid-up share capital does not exceed two crore rupees or such higher amount may be prescribed which shall not be more than 10 crore and whose turnover as per its last profit and loss account for immediately preceding financial year does not exceed twenty crore rupees or such higher amount as may be predetermined which shall not be more than one hundred crore rupees.

• It is not applicable to-

i) Holding and Subsidiary company

ii) Company under Section 8

iii) Company governed by Special Act

3. Nidhi company

•  The Companies Act, 2013 defined Nidhi Company under Section 406.

• According to Rule 4 of Nidhi Rules in Hindi Company shall be a public company and must have a minimum paid-up equity share capital of five lakh rupees.

• Nidhi Company shall have only one object in its memorandum that is of cultivating the habit of thrift and savings amongst its members, receiving deposit from and lending to its member only for their mutual benefit.

• The Central Government is responsible for deciding rules.

4. Dormant Company

• These are also known as Inactive Company and are defined under Section 455 of The Companies Act, 2013.

• Where a company is formed and registered under this act for a future project or to hold an asset of intellectual property and has no significant accounting transaction or an inactive company.

• Such company may make an application to register for obtaining the status of a dormant company.

• Such company can maintain status for five years. 

CONCLUSION

A perception can be depicted by the above article how companies play an important role in our day-to-day life. It also states the data about the different kinds of companies which an insight to an individual in relation with its credibility and group of likeminded people for the aim of carrying out the undertaking of the company. As we are aware that, every company is important for the World Development. The companies are govern under the Companies Act, 2013 replacing the previous laws in the history of Company Law and have been given eye catching amendments which have improved the quality of law to the next level. It states that all the listed companies should have at least 1/3^rd of the board as independent directors. It makes the whole process of both rehabilitation and liquidation of the companies in the financial crisis, time-bound.

REFERENCES

BOOKS

1 Company Law

Author: Avtar Singh

Publication: Easter Book Company

2. The Companies Act, 2013 (Bare Act)

3. Taxmann in Blog, An Overview of Different Types of Companies in India (January 2, 2019, 12:50 pm), https://www.taxmann.com

4. IndianFillings, Types of Company (October 26, 2021, 06:54 pm), https://www.indianfillings.com