Kinds of Companies
A. Classification on the basis of liability
1. Companies with limited liability
(a) Companies limited by guarantee [Sec.2(21)]- where the liability of the members of a company is limited to a fixed amount which the members undertake to contribute to the assets of the company in the event of its being wound up, the company is called a company limited b guarantee.
(b) Companies limited by shares [Sec.2(22)]- where the liability of the members of a company is limited to the amount unpaid on the shares, such a company is known as a company limited by shares
2. Unlimited companies [Sec.2(92)] - A company without limited liability is known as an unlimited company. In case of such a company, every member is liable for the debts of the company.
B. Classification on the basis of number of members
1. Private company [Sec.2(68)] - A private company is normally what the Americans call a ‘close corporation’. According to Sec.2(68), a private company means a company which has a minimum paid-up capital of Rs. 1,00,000 or such higher paid-up capital as may be prescribed by CG, and by its Articles:
a. Restricts the right to transfer its shares, if any. The restriction is meant to preserve the private character of the company.
b. Except in case of one person company, limits the number of its members to 200 not including its employee-members. Joint shareholders shall be counted as one member only.
c. Prohibits any invitation to the public to subscribe for any securities. In other words, a private company shall not make a public issue of its securities.
A Private company may be:
a. One Person company [Sec. 2(62)]: It means a company which has only one person as a member. All the provisions of a private company is also applicable to this company.
b. Small Company [Sec. 2(85)]: A company shall be a small company only if it’s paid-up capital does not exceed Rs.50 lakhs or such higher amount as may be prescribed (not being more than Rs. 5 crores) and its turnover does not exceeds Rs. 2 crores or such higher amount as may be prescribed (not being more than Rs. 20 crores)
c. Other that “One Person Company” and “Small Company”.
2. Public company [Sec. 2(71)] - A public company means a company which –
a. is not a private company
b. is a private company which is a subsidiary of a company which is not a private company.
c. has a minimum paid-up capital of Rs. 5 lakh or such higher paid-up capital, as may be prescribed by CG.
C. Classification on the basis of control
1. Holding company-Section 2(46) - A company is known as the holding company of another company if is has control over that other company.
2. Subsidiary company-Section 2(87) - A company is known as a subsidiary of another company when control is exercised by the latter(called holding company) over the former called a subsidiary company.
A company is deemed to be a subsidiary of another company when:
a. where the company controls the composition of Board of Directors of the subsidiary company
b. where the company holds more than one- half the nominal value of equity share capital of another company
c. where a company is subsidiary of another company, which is itself is subsidiary of the controlling company.
D. Classification on the basis of ownership
1. Foreign company [Sec 2(42)]- it means any company incorporated outside India which has an established place of business in India.
2. Government company [Sec 2(45)] - A Government company means any company in which not less than 51 % of the paid-up share capital is held by-
a. the Central government
b. any State government or governments
c. partly by the Central government and partly by one or more State governments.
3. Non-government company: It means a company other than Government company.
E. Classification on the basis of listing of shares on the stock exchange
1. Listed Company [Sec. 2(52)]: It means a company which has any of its securities listed on any recognized stock exchange.
2. Unlisted Company: It means a company other than listed company.