KINDS OF KINDS OF COMPANIESCOMPANIES

The Companies Act of 1956

Classification of companies:On the basis of incorporation

Companies

Incorporated

Unincorporated

CharteredCompanies

StatutoryCompanies

RegisteredCompanies

Classification of companies:Classification of companies: Incorporated companies:

Which is formed for the purpose of carrying a business

Which is incorporated under companies

act of 1956

Classification of companies:Classification of companies: Unincorporated companies: These are to all intents and purposes large

Partnerships Transferable shares Liability of the members is unlimited These companies continue even after the death

or insolvency of the members Maximum number of members 10 in case of

banking business & 20 in case of any other business

Classification of companies:Classification of companies:On the basis of incorporationOn the basis of incorporation Chartered companies: Incorporated under a special charter granted by king

or queen

Statutory companies: Created by special act of legislature

Registered companies: Formed and registered under companies act 1956 or

were registered under any of the earlier companies acts

Companies Before &

afterCompany Act 1956

Limited Company by Share

Limited CompanyBy Guarantee

Unlimited Company

Private LimitedCompany

Public LimitedCompany

Classification of companies:On the basis of liability & members

Classification of companies:Classification of companies:On the basis of liability On the basis of liability Companies limited by shares: Liability of members of a company is limited

by memorandum to the amount ,if any, unpaid on the shares.

Companies limited by guarantee: Liability of members of a company is limited

by memorandum to a fixed amounts which the members contribute at the time of wound up

Unlimited companies: A company without limited liability

Classification of companies:Classification of companies:On the basis of MemberOn the basis of MemberPrivate limited company:a)Restricts the right to transfer its shares b)Limits the number of its members to fiftyc) Prohibits any invitation to the public to subscribe for any

shares in , debentures of , the companyPublic company:a) Does not restrict the right to transfer its shares, if any;b) Does not limit the number of its membersc) Invites public to subscribe for any shares in ,

debentures of , the company

Distinction between a public and Distinction between a public and private companyprivate company

Basis Public company Private company

Minimum number 7 2

Maximum number Unlimited 50

Number of directors At least 3 At least 2

Appointment of directors

Must file consent with registrar

N/A

Invitation to subscribe for shares

Invites public Restricted

Transferability of shares

Free transfer Restricted

Foreign companyForeign companyIt means any company

incorporated outside India Which:a) after 1st April, 1956,established a

place of business within India, or b) before 1st April,1956 established

a place of business in India and continued to have an established place of business within India on the 1st April

Classification of companies:Classification of companies:On the basis of ControlOn the basis of Control

Holding companies: A company is deemed to be

holding company if but only if, that other company

is its subsidiary

Classification of companies:Classification of companies:On the basis of ControlOn the basis of Control

Subsidiary companies: Company is deemed to be

subsidiary of another company in the following:

1.If the composition of board of directors of the company is controlled by another company

2.Holding of majority of shares3.Subsidiary of another subsidiary

Classification of companies:Classification of companies:On the basis of OwnershipOn the basis of OwnershipGovernment company: A company in which 51 % of the paid

up share capital is held by central government and/or by any state government or governments ,or partly by central government and partly by one or more state governments

Non government company: controlled and operated by private

capital

Public financial institutionPublic financial institutionAccording to sec 4-A of companies

( Amendment ) act 1974, each of the financial institutions shall be regarded as a public financial institution, namely:

i. The industrial credit and investment corporation of India

ii. The industrial financial corporation of Indiaiii.The industrial development bank of Indiaiv.The life insurance corporation of Indiav. The unit trust of India

Public financial institutionPublic financial institutionSec 4-A(2) authorize the central

government to specify by notification in official gazette , any other institution to be public financial institution , but no institution shall be so specified unless:

i. It has been established or constituted by or under any central act or

ii. Not less than 51% of paid up share capital of such a institution is held or controlled by the central government

Associations not for Associations not for profits(sec25)profits(sec25)The name of the limited company must

end with the word “limited” , in the case of public company and with the word “private limited” in the case of private company

Sec 25, however, permits the registration , under a license granted by the central government , of an association not for profits with limited liability without using the word “limited” or the words Private limited to its name.

Associations not for Associations not for profits(sec25)profits(sec25)The central government may grant such

license to an association where it is proved to the satisfaction of the government that is :

a) Is about to be formed as limited company for promoting commerce , science, religion, charity, or any other useful object; and

b) Intends to apply its profits , if any, or other income in promoting its objects and to prohibit the payment of any dividend to its members

Section 43-A companySection 43-A companyPrivate company which has become public company

by virtue of sec 43-A but not treated as public company in all respects it is a special type of public company

Features of such a company: a) it can retain the features of a private company , viz.,

restriction on the transfer of shares ,limitation on the number of members to fifty etc

b)Number of members may be below sevenc) The minimum number of directors does not applyd)Profit and loss account of the company is not open for

the public