Types of Companies

Introduction: 

Sec. 2(20) of the Companies Act, 2013 defines a company as a company incorporated under this  Act or any previous company law. Thus, the company based on different subjects, no. of  members and liabilities is classified under the Act. 

Different Types of Companies: 

1. On the basis of Liabilities: 

The companies under the Act are classified into three categories on the basis of liability,  where companies are limited by shares and guarantee or sometimes, no limitation is found on  the company. 

a) Companies Limited by Shares: 

Sec. 2(22) provides the company limited by shares where if some amount is unpaid, the  company members may pay such unpaid share respectively. 

b) Companies Limited by Guarantee 

Sec. 2(21) of the Companies Act, 2013 provides where members of a company are limited by  guarantee in case of winding up of the company. Such members are limited to only such amount  which they have guaranteed before.  

c) Unlimited Companies 

Sec. 2(92) provides a provision for the unlimited company. In such companies, members don’t  have any liability. Thus, a company can use all personal assets of shareholders to meet  its debts while winding up. Their liabilities will extend to the company’s entire debt.

2. On the basis of no. of members: 

a) One Person Companies (OPC) 

Sec. 2(62) of the Companies Act, 2013 provides the provision for such kinds of companies,  which have only one member as their sole shareholder. Even as such companies don’t require  any minimum share capital. 

b) Private Companies 

Sec. 2(68) of the Companies Act, 2002 contains the provision for the definition of private  companies, in case of such companies, free transferability of shares is restricted as per the AOA.  A minimum of 2 and a maximum of 200 members are permitted.  

c) Public Companies 

Further, 2(71) provides a provision regarding a public company, where freely transfer of shares  is also permitted. Secondly, A minimum of 7 members and maximum unlimited members are  permitted in case of such kind of companies. 

3. On the basis of Holding: 

In terms of control, the following types of companies are provided: 

a) Holding and Subsidiary Companies 

In some cases, a company’s shares might be held fully or partly by another company. Here, the  company owning more than 50% shares along with the control over the board of directors,  becomes the holding or parent company. Likewise, the company whose shares the parent  company owns becomes its subsidiary company. Sec. 2(46) & 2(87) provides the provision for  the holding and subsidiary companies respectively.

b) Associate Companies 

Sec. 2(6) provides the provision related to such companies which are regulated by the other  companies or have significant influence of the other company but such influence exists under  the agreement like joint venture agreement. 

4. In terms of Access to Capital: 

When it is considered that the access a company has to capital, companies may be either listed  or unlisted. 

a) Listed companies: Sec. 2(52) of the Companies Act, 2013 provides the provision for the  listed companies, such company’s securities are listed on stock exchanges. Since such securities  are transferrable, thus only public companies can be a listed company. 

b) Unlisted companies: Unlisted companies, on the other hand, do not list their securities on  stock exchanges. Both, public, as well as private companies, can come under this category. 

Other Types of Companies 

a) Government Companies 

Sec. 2(45) of the Companies Act, 2013 contains the provision related to government companies,  which defines government companies as “companies in which more than 50% of share capital  is held by either the central government, or by one or more state government, or jointly by the  central government and one or more state government.”

b) Foreign Companies 

Sec. 2(42) of the Companies Act, 2013 provides the provisions for the foreign companies, these  companies are incorporated outside India but a head office of business may also set up in India  from where they can conduct business in India. 

c) Charitable Companies: 

Some companies have the promotion of arts, science, culture, religion, education, sports, trade,  commerce, etc. charitable objectives, which are under Sec. 8 of the Company’s Act, 2013,  named as charitable companies. Such companies do not earn profits as well as do not pay any  dividend to their members. 

d) Dormant Companies 

These companies are generally formed for future projects. They do not have significant  accounting transactions and also do not carry out all compliances of regular companies. 

Conclusion:  

Thus, the companies are classified based on the number of members, an object area, types of  shares, etc. But the common point is that all companies have to abide with the Companies Act,  at is in time in force, and also with MoA and AoA along with the other subjected rules and  ordinances.  

Payal Agrawal 

S. S. Jain Subodh Law College, Rajasthan University, Jaipur