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Privileges and Exemptions to Private Company
Headings Explanation 1. Members Only 2 members are required to form a Pvt. Company.
2. Allotment of shares A Pvt. Company can allot shares without filing a statement in
lieu of Prospectus to ROC.
PRIVATE COMPANY means a company which has a minimum paid-up capital as may be
prescribed, AND by its articles-
a) RESTRICTS the right to transfer its shares, if any;
b) Except in case of one person company, limits the number of its members to two
hundred (200) not including-
i. Persons who are in the employment of the company; and
ii. Persons who, having been formerly in the employment of the company, were
the members of the company while in that employment and have continued
to be members after the employment ceased; and
c) PROHIBITS any invitation to the public to subscribe for any securities of the
company;
PROVIDED that where two or more persons hold one or more shares in a company
jointly, they shall, for the purposes of this definition, be treated as a single member.
2. Types of company
PRIVATE COMPANY
{SEC– 2(68)}
COMPANY
{SEC- 2(20)}
COMPANY means a company incorporated under this Act or under any previous company law;
3. Issue further capital Restriction relating to further issue of capital does not
apply to Pvt. Company.
4. Demand of Poll One or two persons, present in proxy or person can demand a
poll.
5. No. of directors Only two directors are required in case of Pvt. company.
6. Managerial Remuneration Limits on Managerial Remuneration do not apply on Pvt.
companies.
Q. Your client Vivek wants to form a private company with a share capital of 50,000. Examining
the relevant provisions of the Companies Act, 2013, advise Vivek on the following issues with
proper justification :
(i) Whether Vivek will be successful in the formation of the proposed company ?
(ii) Whether public can be invited for subscribing to the share capital of the proposed company
?
(iii) Whether registration of articles of association of the proposed company is mandatory ?
(iv) Whether Vivek will be able to convert the proposed private company into 'one person
company' at a later date, if need be ?
(v) As regards to stamp duty state whether it will make any difference if the proposed company
is incorporated in the State of Haryana or in the State of Kerala. (Dec, 15(F) – 5 marks)
Hint: Write Definition of Private Company
(i) Private or public company can be started with any capital. So having share capital of Rs.
50,000 doesn’t raise any problem if other provisions relating to registration are met with.
(ii) No, Private company cannot raise capital from the public.
(iii) Yes, Private company is required to register its own Articles.
(iv) Yes, it can be converted into ‘One Person Company’ any time later on by fulfilling relevant
conditions relating to paid up capital, nominee etc.
(v) Yes, Stamp Duty is a State subject, different states have different rates of stamp duty. So
stamp duty shall be payable according to rates prevailing in that State where the Registered
office of the company is proposed to be established.
Q. Is a private company exempt from the operation of section 167? What is its position under
this section? (Dec, 12(F) – 4 marks)
Ans. A private company is not exempt from the operation of section 167. However, as per
section 167, a private company which is not a subsidiary of a public company may, by its articles,
provide that the office of director shall be vacated on any grounds in addition to those
specified in section 167.
Crux: Reasons of vacancy in case of private company not being a subsidiary of public company -
Vacation as per section 167 + Additional Grounds as prescribed in AOA
In case of public company and private companies which are subsidiaries of public companies –
Vacation as per section 167.
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;
NOTE: a company registered under section 8 before or after the commencement of
Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up
capital specified in this section.
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) intends to apply its profits, if any, or other income in promoting its objects; and
(c) intends to prohibit the payment of any dividend to its members,
the Central Government may, by licence issued in such manner as may be
prescribed, and on such conditions as it deems fit, allow that person or association
of persons to be registered as a limited company under this section without the
addition to its name of the word “Limited”, or as the case may be, the words
“Private Limited” , and thereupon the Registrar shall, on application, in the
prescribed form, register such person or association of persons as a company under
this section.
Q. Mason (Pvt.) Ltd. is a private limited company as per the articles of associations of the company.
However, a public company acquired shares in Masons (Pvt.) Ltd. thereby making the company,
Masons (Pvt.) Ltd, a subsidiary of that public company. State the impact of such acquisition of shares
by a public company on Masons (Pvt.) Ltd.
Ans. Write Section 2(71)
PUBLIC COMPANY
{SEC– 2(71)}
COMPANY WITH
CHARITABLE
OBJECTS {SEC– 8}
NOTES-
In a company limited by guarantee and having share capital the initial funds are arranged through
share capital, and a member has dual liability- one, for the amount unpaid on the shares held by
him, and second for the amount guaranteed to be paid by him in the event of Winding up.
In a company limited by guarantee and not having share capital the initial funds are arranged
through bank loans, or if such company is in form of CLUB then the monies received as monthly
subscription charges etc.
On the basis of
Registration
On the basis of
Liability
Private
Company
Public
Company
A
company
limited by
shares
A company
limited by
guarantee
An
unlimite
d
compan
y
As per Sec. 2(22), in case of a company
limited by shares, the liability of a member is
limited to the extent of amount unpaid on the
shares held by him.
For example- Mr. A holds 1000 shares of
Rs.10 each (called and paid Rs.7 per share) of
ABC limited. Mr. A is liable to pay balance
Rs.3000 only, even if ABC limited has
outstanding liabilities of Rs. 30 Crores.
In case of company limited by guarantee,
the liability of a member is limited to the
extent of amount guaranteed to be paid by
him in the event of Winding up. {Sec. 2(21)}
Having share
capital
Not having
share capital
One Person
Company
GOVERNMENT COMPANY, means any company in which not less than
51% of paid-up share capital is held by the Central Government, or by
State Government(s), or partly by the CG and partly by SG(s), and
includes a company which is a subsidiary of a Government company as
thus defined.
Q. ABC Ltd. is a company incorporated under the Companies Act, 2013. The paid-up share
capital of the company is held as under :
— Government of India 20%
— Government of Andhra Pradesh 20%
— Government of Tamil Nadu 10%
— Government of Maharashtra 10%
Explaining the provisions of the Companies Act, 2013, state whether the said company be
called a 'Government company' and also state whether the employees of a Government
company can claim their salaries from the Government of India.
Ans. As per section 2(45) of Companies Act, 2013, GOVERNMENT COMPANY, means any company
in which not less than 51% of paid-up share capital is held by the Central Government, or by
State Government(s), or partly by the CG and partly by SG(s), and includes a company which is a
subsidiary of a Government company as thus defined
In the given case, 60% of the share capital is held by Governments, so ABC Ltd. is a Government
company.
In Andhra Pradesh Road Transport Corporation v. ITO AIR 1964 SC 1486, the Andhra Pradesh
State Road Transport Corporation claimed exemption from taxation by invoking Articles 289 of
the Constitution of India according to which the property and income of the State are
exempted from the Union taxation. The Supreme Court, while rejecting the Corporation’s claim,
held that though it was wholly controlled by the State Government, it had a separate entity and
its income was not the income of the State Government.
The Court observed that the companies which are incorporated under the Companies Act, have a
corporate personality of their own, distinct from that of the Government of India. The land and
buildings are vested in and owned by the companies, the Government of India only owns the
share capital.
So Government Company is an entity apart from Government, so Government cannot be liable for
the acts of the company.
GOVERNMENT
COMPANY
{SECTION-
2(45)}
HOLDING COMPANY in relation to one or more other companies, means a company of which
such companies are subsidiary companies;
“SUBSIDIARY COMPANY” OR “SUBSIDIARY”, in relation to any other company (that is to say
the holding company), means a company in which the holding company—
i. controls the composition of the Board of Directors; or
ii. exercises or controls more than one-half of the total share capital either at its own or
together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have
layers of subsidiaries beyond such numbers as may be prescribed.
Explanation.—For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if
the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary
company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by
another company if that other company by exercise of some power exercisable by it at
its discretion can appoint or remove all or a majority of the directors;
(c) the expression “company” includes any body-corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
The Companies (Specification of Definitions details) Rules, 2014
As per 2(1)(r) “Total Share Capital”, for the purposes of sub- sections (6) and (87) of section 2,
means aggregate of the:-
a) paid-up equity share capital and
b) convertible preference share capital
“HOLDING
COMPANY” {SEC–
2(46)}
“SUBSIDIARY
COMPANY” {SEC–
2(87)}
Subsidiary company not to hold shares in its holding company (Section 19)
(1) No company shall, either by itself or through its nominees, hold any shares in its holding
company and no holding company shall allot or transfer its shares to any of its subsidiary
companies and any such allotment or transfer of shares of a company to its subsidiary
company shall be void:
Provided that nothing in this sub-section shall apply to a case—
(a) where the subsidiary company holds such shares as the legal representative of a
deceased member of the holding company; or
(b) where the subsidiary company holds such shares as a trustee; or
(c) where the subsidiary company is a shareholder even before it became a subsidiary
company of the holding company:
Provided further that the subsidiary company referred to in the preceding proviso shall have
a right to vote at a meeting of the holding company only in respect of the shares held by it as
a legal representative or as a trustee, as referred to in clause (a) or clause (b) of the said
proviso.
(2) The reference in this section to the shares of a holding company which is a company limited by
guarantee or an unlimited company, not having a share capital, shall be construed as a reference to
the interest of its members, whatever be the form of interest.
Q. A body corporate cannot become a member of a company which is its holding company and any
allotment or transfer of shares in a company to its subsidiary shall be void”. Explain the statement
and comment on the exception to the said general rules. (Dec, 06 – 4 marks)
Ans. Write Section 19
Q. Vayu Ltd. holds more than 50% of nominal value of the equity capital of Stream Ltd. In these
circumstances, Stream Ltd. wants to become a member of Vayu Ltd. Can Stream Ltd. do so? Discuss
the rights of the said subsidiary in such a case.
Ans. Write Section 2(87) and 19.
Q. Reliable Ltd. holds 75% of the paid-up share capital in Trust Ltd. Board of directors of Trust Ltd.
decides and resolves to hold 10% of the paid-up share capital in Reliable Ltd. The Board's proposal
was also approved by Trust Ltd. in its general meeting. However, certain members of Trust Ltd.
objected to the decision on the ground that both the Board's proposal and the resolution of the
general meeting are in violation of the provisions of the Companies Act, 2013. Examine. (Dec, 15- 4
marks)
Ans. Decision is void, write section 19.
ASSOCIATE COMPANY, 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 20% of total share capital, or of business decisions under an agreement;
‘‘SMALL COMPANY’’ means a company, other than a public company,—
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; and
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;
“ASSOCIATE
COMPANY” {SEC– 2(6)}
“SMALL COMPANY”
{SEC– 2(85)}
Documents to be filed by Foreign Companies with ROC Every foreign company shall, within 30 days of the establishment of its place of business in
India, deliver to the Registrar for registration [Section 380(1)] – a. a certified copy of the charter, statute or memorandum and articles of the company or
other instrument constituting or defining the constitution of the company and if the
instrument is not in English language, a certified translation thereof in the English language;
b. the full address of the registered or principal office of the company;
c. a list of the directors and secretary of the company with particulars;
d. the names and addresses of one or more persons resident in India authorised to accept on
behalf of the company service of process and any notices or other documents required to be
served on the company;
e. the full address of the office of the company in India which is deemed to be its principal
place of business in India;
f. particulars of opening and closing of a place of business in Indian on earlier occasions;
g. declaration that none of the directors of the company or authorised representative in India
has ever been convicted or debarred from formation of companies and management in India
or abroad; or
h. other prescribed particulars
In addition to above, a list of directors and Secratary of company, needs to be delivered to the
Registrar (Rule 3) of Companies (Registration of Foreign Companies) Rules, 2014.
The Foreign Company shall, within a period of 30 day of establishment of its place of business in
India, file Form FC – 1 of the Companies (Registration of Foreign Companies) Rules 2014 and the
application shall also be supported with an attested copy of approval from Reserve Bank of India
under Foreign Exchange Management Act or Regulations and also from other Regulators, if any.
Along with the Companies Act, 2013 provision of Foreign Exchange Management Act 1999 and
regulations made thereunder shall also be applicable
FOREIGN COMPANIES
{SEC- 2(42)}
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.
Q. Referring to the provisions of the Companies Act, 2013, state as to when shall a company
incorporated outside India be considered as a 'foreign company' within the meaning of the
Companies Act, 2013. Also examining the provisions of the Act, state whether in the following
cases, the company shall be considered as a 'foreign Company' :
(i) A company incorporated outside India has a representative in India, who on behalf
of the company merely receives orders from the customers.
(ii) A company incorporated outside India holds its Board meetings and general meetings
in India.
Ans. As per Section 2(42) of the Companies Act, 2013, 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.
(i) A company incorporated outside India has a representative in India, who on behalf
of the company merely receives orders from the customers, in such a case, it was held that
it was not a “place of business”. (P.J Johnson v. Astrofiel Armadorn)
(i) Conducting meetings of shareholders or even directors has been held to be “place of
business”.
Q. To consider a body corporate as a foreign company, a place of business in India is to be
established. State the activities that do not constitute carrying of business in India. (June, 15
– 4 marks)
Ans. Following activities are held not constituting carrying on of business in India.
a) Carrying small transactions.
b) Conducting meeting of shareholders or even directors.
c) Operating bank accounts.
d) Transferring of shares or other securities.
e) Operating through independent contractors.
f) Procuring orders.
g) Creating or financing of debts, charges etc. on property.
h) Securing or collecting debts or enforcing claims to property of any kind.
Q. William & Company, a company incorporated in U.K., decides to set-up its corporate office in
Mumbai. Accordingly, the Board of directors of the company passes a resolution.
The Board seeks your advice on the procedure to be adopted to carry out the proposal of the
company. Advise the Board about the procedure to be followed and forms and documents the
company is required to file with the Registrar of Companies. (Dec, 15(F) – 5 marks)
Hint: Write procedure related to filing of documents with ROC
Q. Whether director of a foreign company is required to have DIN?
Ans. No. However, he has to provide his PAN to ROC and if he doesn’t have PAN then a
declaration in the prescribed Performa is to be attached to the Form No. INC delivered to ROC
informing the particulars required.
Q. A group of persons wants to form a company for a future project and acquire the status of a
'dormant company'. The group seeks your advice about the procedure and the conditions to be
complied with. State the privileges and exemptions available to such a company under the
provisions of the Companies Act, 2013.
Ans. Where a company is formed and registered under this 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 company may make an application to the Registrar in such manner as may be prescribed for
obtaining the status of a dormant company.
DORMANT
COMPANY {SEC–
455(1)}
Where a company is formed and registered under this 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 company may make an application to the Registrar in such manner as may be prescribed
for obtaining the status of a dormant company.
Explanation.—For the purposes of this section,—
(i) “inactive company” means a company which has not been carrying on any business or
operation, or has not made any significant accounting transaction during the last two
financial years, or has not filed financial statements and annual returns during the last 2
financial years;
(ii) Whether single or in aggregate, such company shall comply with the provisions of the
Companies Act as though it were a company incorporated in India.
(iii) Further, the provisions of Section 159, 209,209A and certain Sections relating to
audit and investigations are also applicable to the Indian operations of such a company.
Procedure & Conditions
Application – Such company make an application to Registrar for obtaining status of a Dormant
Company.
Registration Certificate - As per section 455(2), the Registrar on consideration of the
application shall allow the status of a dormant company to the applicant and issue a certificate in
form MSC-1.
Register by ROC - Section 455(3) provides that the Registrar shall maintain a register of
dormant companies in such form as may be prescribed.
Register of Defaulter Companies as Dormant Companies - According to section 455(4), in
case of a company which has not filed financial statements or annual returns for two financial
years consecutively, the Registrar shall issue a notice to that company and enter the name of such
company in the register maintained for dormant companies.
Minimum Directors - A dormant company shall have a minimum of three directors in case of
public company and two in case of private company and one in case of One Person Company.
Return - The dormant company shall have to file a Return of Dormant company annually, inter
alia, indicating financial portions duly by chartered accountant in practice alongwith prescribed
annual fee within thirty days from the end of each financial year.
Striking off the name - The Registrar shall strike off the name of a dormant company from the
register of dormant companies, which has failed to comply with the requirements of this section.
[Section 455(6)]
Privileges of a Dormant Company.
The privileges and exemptions enjoyed by a dormant company or its advantages over other
companies are as follows:
Section Nature of exemptions/privileges
2(40) The financial statement, with respect to a dormant company, may not include
the cash flow statement;
173 (5) It is required to hold at least one meeting of the Board of Directors in each half
of a calendar year and the gap between the two meetings should not be less
than ninety days.
Government Company as ‘State’ under Articles 12 of the constitution of India
Nidhi Companies (Section 406)
“Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating
the habit of thrift and savings amongst its members, receiving deposits from, and lending to,
its members only, for their mutual benefit, and which complies with such rules as are
prescribed by the Central Government for regulation of such class of companies.
According to Rule 4 of Nidhi Rules, 2014; a Nidhi Company shall be a public company and must
have a minimum paid up equity share capital of five lakh rupees. The Nidhi Company shall have
only one object in its memorandum that is of cultivating the habit of thrift and savings amongst
its members, receiving deposits from, and lending to, its members only, for their mutual
benefit. Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as
part of its name. Rule 5 say, every Nidhi shall, within a period of one year from the commencement of these
rules, ensure that it has: a) Not less than two hundred members.
b) Net Owned Funds of ten lakh rupees or more.
c) Unencumbered Term Deposits of not less than ten per cent of the outstanding deposits.
d) Ratio of Net Owned Funds to deposits of not more than 1:20.
The process of incorporation of a nidhi company is same as of incorporation of a public company
limited by share.
SUPREME COURT IN R.D. SHETTI VS. INTERNATIONAL AIRPORT, held that
following instances should be considered to decide whether a corporation is come under the
definition of State given under Article 12 of the Constitution or not.
Whether corporation has monopolistic status or not;
Whether corporation is carrying on its functions of the public interest, or of sovereign
(government) character.
Whether the financial support is provided to such corporation by the CG or State Govt.
Whether it was a government department at the time of initial establishment.
The deep & pervasive control of the CG or SG on the day to day basis.
Basis of difference
Company Partnership firm
i. Formation A company is created by
registration under the
Companies Act.
A partnership is created by
agreement which may be expressed
or implied from the conduct of the
partners and is subject to the
Indian Contract Act and the Indian
Partnership Act.
ii. Status At Law A company is an artificial legal
person with perpetual
succession. Thus a company may
property, make contracts and
sue and be sued. It is an entity
distinct from its members.
A partnership is not a separate
legal though it may sue and be sued
in the firm’s name. Thus the
partners own the property of the
firm and are liable for the
contracts of the firm jointly as
well as severally. But a LLP is a
Separate Legal Entity
iii. Transfer Of
Shares Shares in a company are freely
transferable unless the
company’s constitution
otherwise provides;
restrictions may, of course,
appear in the articles of a
private company.
A partner can transfer his shares
in the firm, but the assignee does
not thereby become a partner and
is merely entitled to the assigning
partner’s share of the profits.
iv. Number Of
Members/
Partners
Private Company:
Minimum – 2
Maximum – 200
Public Company:
Minimum – 7
Maximum – no limit
Section 464 deals with maximum
number of partners in a firm. It
cannot exceed the numbers
prescribed by Rules. But in no case
such numbers will exceed 100. At
present , limit prescribed is 50.
v. Management Members of a company are not
entitled to take part in the
management of the company
unless they become directors.
All Partners are entitled to
participate in the management of
the firm unless the deed provides
otherwise.
vi. Liability Of
Members The liability of a member of a
company may be limited by
shares or by guarantee, as the
case may be.
The liability of a partner is
unlimited. But in case of LLP, it is
limited to extent of liability
undertaken.
DIFFERENCE BETWEEN COMPANY
AND PARTNERSHIP
vii. Agency A member of a company is not
an agent of the company or
that of other members, and he
cannot bind a company by his
acts.
Each partner is an agent of the
firm and his partners, and may bind
the firm by his acts.
viii. Powers The affairs of accompany are
closely controlled by the
Companies Act, 2013 and the
company can only operate within
the objects laid down in the
memorandum of association,
though these can be altered to
some extent by
special resolution.
Partners may carry on any business
as they please so long as it is not
illegal and make whatever
arrangements they wish with
regard to the running of the firm
from time to time.
ix. Termination Even one member of a company
may apply for the winding up of
the company, and the death,
bankruptcy or insanity of a
member does not mean that the
company must be wound up.
A partnership may be dissolved by
any partner at any time unless the
partnership is entered into for a
fixed period of time. A partnership
is also dissolved by the death or
bankruptcy of a partner.
Basis of difference
Private company Public company
i. Definition Acc. To Sec. 2(68) "Private
company" means a company
which has a minimum paid-up
capital as may be prescribed,
and by is articles, -
a) restricts the right to
transfer its shares, if any ;
b) except in case of one
person company limits the
number of its members to
200;
c) prohibits any invitation to
Acc. To Sec. 2(71) "Public
company" means a company
which -
a. is not a private company ;
b. has a minimum paid-up
capital as may be
prescribed ;
is a private company which is a
subsidiary of a company which
is not a private company.
DIFFERENCE BETWEEN PUBLIC COMPANY AND
PRIVATE COMPANY
the public to subscribe for
any securities of the
company
ii. Transferability of
shares
There are certain restrictions
on the transferability of the
shares of a Private Company .
Shares of a public company are
freely transferable.
iii. Issue of Prospectus A Private Company is prohibited
from inviting the public for
subscription of its shares, i.e. a
Private Company cannot issue
Prospectus
Whereas there is no
restriction on the
transferability of the shares
of a Public company
iv. Number of
Directors
A Private Company must have at
least 2 directors to manage the
affairs of the company
Whereas a Public Company
must have at least 3 directors
v. Shares Warrants A Private Company cannot issue
Share Warrants against its
fully paid shares
Whereas a Public Company may
issue Share Warrants against
its fully paid up shares.
vi. Further issue of
shares
A Private Company need not
offer the further issue of
shares to its existing share –
holders
Whereas a Public Company has
to offer the further issue of
shares to its existing share –
holders as right shares.
Further issue of shares can
only be offer to the general
public with the approval of the
existing share – holders in the
general meeting of the share –
holders only.
vii. Managerial
remuneration
Private companies need not to
follow company law provisions
for the payment of managerial
remuneration
A public company has to comply
the provisions of for the
payment of Managerial
remuneration.
Basis of difference
Guarantee company Company having share capital
i. Meaning A company is called guarantee
company if the MOA of that co.
states that liability of the members
is restricted to the amount that
they have guaranteed to pay in the
A Company shall be called
company limited BY SHARES,
if MOA of that company
states that liability of the
members is restricted to the
DIFFERENCE BETWEEN GUARANTEE COMPANY AND
COMPANY HAVING SHARE CAPITAL
event of winding up. unpaid value of the shares.
ii. Share Capital This company may or may not have
share capital
This company must be a Co.
limited by share capital
iii. liability In case Guarantee Company
having share capital:
Unpaid value of the shares+
amount guaranteed to pay
In case of Guarantee Company
not having share capital:
Amount guaranteed to pay in
the event of winding up.
In this case members are
liable only up to the unpaid
value of the shares.
iv. When does
liability arise?
Only in the event of winding up Can arise any time during the
life time of the company or in
the event of winding up.
Whenever a valid call is made.
v. Requirements as
to articles
AOA has to specify the number of
members with which it is going to
register.
THE AOA of that company is
need not to specify the
NUMBER OF members.
vi. Requirements of
own articles
This company must have its own
articles.
This type of company may
adopt Table A
vii. Minimum Paid up
capital
The requirement of minimum paid up
capital does not apply to a company
limited by guarantee having share
capital.
Earlier there was requirement
of having minimum paid up
capital. But with the
‘Companies (Amendments)
Act, 2015, this requirement is
abolished.
viii. Suitability Suitable in those cases, where
initial capital requirement is not
more, can be arranged from the
other sources like endowment fees,
charges, donations or other
borrowings.
These are suitable in those
cases where initial capital
requirement is high and
sufficient financial resources
cannot be arranged by way of
borrowings.
Basis of difference
Company Limited liability partnership
i. Governing Law Companies Act, 2013 and
various Rules made there under.
The Limited Liability
Partnership Act, 2008 and
various Rules made there under.
ii. Time line It will take approx. 15 days to
incorporate ( inclusive of time
taken to obtain DIN)
It will take approx. 20 days to
incorporate ( inclusive of time
taken to obtain DPIN)
iii. Expense of
formation
High Low
iv. Taxation It is a separate taxable entity Now, it is also a separate
taxable entity.
v. Name Suffix ‘Limited’ or ‘Private
Limited’ has to be added to the
name
Suffix ‘LLP’ or Limited Liability
Partnership has to be added to
the name.
vi. Ownership of
Assets
The company has ownership of
assets and members only have
shares in the company
The LLP has ownership of assets
and Partners only have capital
contribution in the LLP
vii. Liability Liability of members is only
limited to the shares held by
Liability of partners is limited
up to their capital contribution
Basis of difference
Company Hindu joint family business
i. Type of
members
It usually consists
heterogeneous members
It always consists homogeneous
members.
ii. In case of a company, the
management is in the hands of
Board of Directors.
In a HUF, the Karta (manager) has
the sole authority to contract debts
for the purpose of the business,
other coparceners cannot do so.
iii. Mode of
becoming the
member
To become a member of a
company, certain procedure is
to be followed.
A person becomes a member of Joint
Hindu family by virtue of birth.
iv. Registration Registration of a company is
compulsory.
Registration of HUF is not
compulsory.
DIFFERENCE BETWEEN COMPANY AND
HINDU JOINT FAMILY BUSINESS
them. however in case a partner acts
with an intension to conduct
fraud, they are personally liable.
viii. Agency
Relationship
The Directors act as agents of
the company
Partners are agents of LLP
ix. Power of Member\
Partner\ Director
Directors have power to
conduct day to day affairs of
the company, Member
practically have no say in the
management
The power of partners/
designated partners to conduct
the day to day affairs is
specified by LLP agreement /
LLP act.
x. Transferability of
interest
Shares of every company
except private company are
freely transferable.
Rights/ interest of partners
are transferable as per the
provisions of LLP agreement
xi. Share Certificate Right/ Interest of the
members in the company is
denoted by share certificate
There are no provisions for
issuing of Share Certificate.
Rights/ Interest of the
Partners in the LLP are
evidenced by Partnership
agreement.
xii. Minimum Capital
requirement
No Requirement of Minimum
Paid up capital.
No such requirement.
xiii. Books of Accounts Books of accounts must be
prepared as specified in the
Companies Act, 2013
Books of accounts must be
prepared as specified in the LLP
Act.
xiv. Manner of Keeping
Books of Accounts
Accrual basis Cash basis or accrual basis.
xv. Audit of Accounts As per the provisions of
companies Act, 2013 accounts
have to be audited annually
As per the provisions of LLP act,
accounts to be audited annually
except for LLP’s having turnover
less than Rs. 40 lacs or Rs. 25
lacs contribution in any financial
year.
xvi. Director
Identification
Number /
Designated
Partner
Identification
Number
Each Director required to have
a Director Identification
Number before being appointed
as a Director of any company
Each Designated partner
required HAVING a DPIN
before being appointed as a
Designated Partner of LLP.
xvii. Minimum Number
of Member
Minimum two for private
Company and minimum seven
for public company as per the
Companies Act, 2013
Minimum two partners
xviii. Maximum number
of Member
Maximum 200 in case of Private
Company and no cap of maximum
number of Member in Public
No cap of maximum number of
its partners
Company as per the Companies
Act, 2013
xix. Designated
partner/ Director/
Managing Partner
Minimum two directors in case
of Private company and minimum
three in case of Public company.
Minimum two designated
partner.
xx. Drawing Drawings are not permitted Drawings are permitted as per
the LLP agreement
xxi. Transfer of Share
/ Partnership
rights in case of
death
In case of death of member,
shares are transmitted to the
legal heirs.
In case of death of partner, the
legal heir has the right to
refund of capital contribution +
share in accumulated profits, if
any. Legal Heirs will not become
partners
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