The Companies Act, 2013 classifies companies (Types of Companies) based on various parameters such as incorporation, liability, ownership, and control. Understanding these types is essential for determining legal compliance, structure, and operation of the business entity.
Contents
1. On the Basis of Incorporation of Types of Companiesa. Statutory Companiesb. Registered Companies2. On the Basis of Liabilitya. Company Limited by Shares [Section 2(22)]b. Company Limited by Guarantee [Section 2(21)]c. Unlimited Company [Section 2(92)]3. On the Basis of Number of Membersa. Private Company [Section 2(68)]b. Public Company [Section 2(71)]c. One Person Company (OPC) [Section 2(62)]4. On the Basis of Controla. Holding Company [Section 2(46)]b. Subsidiary Company [Section 2(87)]5. On the Basis of Ownershipa. Government Company [Section 2(45)]b. Foreign Company [Section 2(42)]6. On the Basis of Purposea. Charitable or Non-Profit Company [Section 8 Company]7. Dormant Company [Section 455]Conclusion – Types of Companies
1. On the Basis of Incorporation of Types of Companies
a. Statutory Companies
- Created by a special Act of Parliament or State Legislature.
- Governed by the statute that created them (not necessarily the Companies Act).
- Example: Reserve Bank of India (RBI), Life Insurance Corporation (LIC).
b. Registered Companies
- Incorporated under the Companies Act.
- Most companies fall under this category.
- Have a separate legal identity and limited liability.
2. On the Basis of Liability
a. Company Limited by Shares [Section 2(22)]
- Liability of members is limited to the unpaid amount on shares held.
- Most common form of company.
- Ideal for profit-driven businesses.
b. Company Limited by Guarantee [Section 2(21)]
- Members agree to contribute a fixed amount in case of winding up.
- Usually formed for non-profit purposes.
- Example: Educational institutions, clubs, charitable organizations.
c. Unlimited Company [Section 2(92)]
- No limit on liability of members.
- Personal assets may be used to repay debts.
- Rare in practice.
3. On the Basis of Number of Members
a. Private Company [Section 2(68)]
- Restricts transfer of shares.
- Limits members to 200.
- Cannot invite the public to subscribe to shares.
- Uses “Private Limited” in its name.
- Example: ABC Technologies Pvt. Ltd.
b. Public Company [Section 2(71)]
- No restriction on transfer of shares.
- Can invite the public to subscribe.
- Minimum 7 members; no maximum.
- Uses “Limited” in its name.
- Example: Tata Motors Ltd.
c. One Person Company (OPC) [Section 2(62)]
- A company with only one member.
- Introduced in Companies Act, 2013.
- Enjoys benefits of a private company with single ownership.
- Cannot carry out non-banking financial investment activities.
4. On the Basis of Control
a. Holding Company [Section 2(46)]
- A company that has control over another company (subsidiary).
- Control may be through majority shareholding or control over the board of directors.
b. Subsidiary Company [Section 2(87)]
- Controlled by a holding company.
- The holding company can:
- Control the composition of the board, or
- Hold more than 50% of the total share capital.
5. On the Basis of Ownership
a. Government Company [Section 2(45)]
- Minimum 51% of the paid-up capital held by the Central or State Government, or both.
- Example: Bharat Petroleum Corporation Ltd. (BPCL).
b. Foreign Company [Section 2(42)]
- Incorporated outside India.
- Has a place of business in India (physical or electronic).
- Example: Microsoft Corporation (India branch).
6. On the Basis of Purpose
a. Charitable or Non-Profit Company [Section 8 Company]
- Formed for promoting commerce, education, religion, charity, etc.
- Profits, if any, are reinvested in the business.
- No dividend is paid to members.
- Requires prior approval from the Central Government.
7. Dormant Company [Section 455]
- A company formed for a future project or to hold an asset/intellectual property.
- No significant accounting transactions.
- Must apply to the Registrar for dormant status.
Conclusion – Types of Companies
Understanding the different types of companies helps in choosing the right structure based on the objectives, liability, compliance requirements, and scale of operation. The Companies Act, 2013 provides detailed provisions to regulate and govern each type.
