Types of Companies in India | Registration

Here you can find the Types of Companies in India and Company Registration by Companies act. The Companies Act, 2013 provides for a variety of companies of which can be promoted and registered under the Act.

Types of Companies in India

There are three types of company in India. These companies may be:

  • Limited by shares;
  • Limited by guarantee; or
  • Unlimited companies.

These are the Types of Companies in India.

Types of Companies in India. Companies may also be classified as:

Company Limited by Shares

A company limited by shares may be defined as a “registered company” whether public or private company having the liability of its members limited by its memorandum to the amount, if any, unpaid on the shares respectively held by them.

In other words, a member of a company limited by shares is required to pay only the nominal amount of shares held by him and nothing more. If the shares are fully paid-up he has nothing more to pay.

Company Limited by Guarantee

A company limited by guarantee is a registered company having the liability of its members limited by its memorandum to such an amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up.

A special feature of this type of company is that the liability of members to pay their guarantee amount arises only when the company goes into liquidation and not when it is a going concern. Clubs, trade associations and societies for promoting different objects are at times incorporated as companies limited by Guarantee to take the advantages of incorporation without running the risk of heavy liabilities.

Unlimited Company

An unlimited company is a company not having any limit on the liability of its members. Thus, the maximum liability of the members of such a company, in the event of its being wound up, might stretch up to the full extent of their properties to meet the obligations of the company by contributing to its assets.

However, the members of an unlimited company are not liable directly to the creditors of the company, as in the case of partners of a firm. The liability of the members is only towards the company and in the event of its being wound up only the liquidator can ask the members to contribute to the assets of the company which will be used in discharging the debts of the company.

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A company registered as an unlimited company may subsequently convert itself as a limited company, subject to the condition that any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the unlimited company before such conversion are not affected by such changed registration.

Classification of Companies in India

Types of Companies in India. Companies may also be classified as:

  1. Private Companies;
  2. Public Companies;
  3. One Person Company
  4. Company with charitable objects, etc. under Section 8 of the Companies Act, 2013;
  5. Small Company
  6. Government companies;
  7. Foreign companies;
  8. Holding companies; and
  9. Subsidiary companies.
  10. Producer Companies.
What is the difference between a public company and a private company?

Minimum number: The minimum number of persons required to form a public company is 7. It is 2 in case of a private company.
Maximum number: There is no restriction on maximum number of members in a public company, whereas the maximum number cannot exceed 200 in a private company.
Number of directors: A public company must have at least 3 directors, whereas a private company must have at least 2 directors.
Restriction on invitation to subscribe for shares: A public company invites the general public to subscribe for the shares in, or the debentures of the company. A private company by its Articles prohibits any such invitation to the public.
Transferability of shares: In a public company, the shares are freely transferable. In a private company the right to transfer shares is restricted by the Articles.
Special privileges: A private company enjoys some special privileges. A public company enjoys no such privileges.

Private Company [Section 2(68)]

By virtue of Section 2(68) of Companies Act, 2013 “private company” means a company having a minimum paid up share capital as may be prescribed, and which by its articles, –

  • restricts the right to transfer its shares;
  • except in case of One Person Company, limits the number of its members to two hundred

Maximum number of members that a private company can have is 200. There should be at least two persons to form a private company. A private company can therefore be registered with a minimum of 2 members and cannot have more than 200 members (excluding employee and ex-employee members).

It cannot invite the public to subscribe for its shares or debentures nor can its shares be freely transferred. The words “Private Limited” must be added at the end of its name by a private limited company.

The Companies (Amendment) Act, 2015, had removed the requirement of minimum paid up capital for private companies. This means that a company can be incorporated with such capital as may be decided by the promoters while incorporating the company.

Public Company [Section 2(71)]

“Public company” means a company which –

  • is not a private company;
  • 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;

It is clarified the status of a private company which is a subsidiary of a public company by providing specifically in the proviso that such company shall be deemed to be public company irrespective of its status as private company in its articles.

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The Companies (Amendment) Act, 2015, had removed the requirement of minimum paid up capital for public companies. This means that a company can be incorporated with such capital as may be decided by the promoters while incorporating the company.

One Person Company (OPC)

With the implementation of the Companies Act, 2013, a single person could constitute a Company, under the One Person Company (OPC) concept. The introduction of OPC in the legal system is a move that would encourage corporatisation of micro businesses and entrepreneurship.

As per section 2(62) of the Companies Act, 2013, “One Person Company” means a company which has only one person as a member.

The memorandum of One Person Company is required to indicate the name of the other person, with his prior written consent in the prescribed form, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company and the written consent of such person shall be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles.

Company with charitable objects

Section 8 of the Companies Act, 2013 provides that where it is proved to the satisfaction of the Central Government that a person or an association of persons proposed to be registered as a limited company –

  • 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;
  • intends to apply its profits, if any, or other income in promoting its objects; and
  • intends to prohibit the payment of any dividend to its members,

The Central Government may, by licence issued in such prescribed manner and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company 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

Small Company

Small company is a new form of private company under the Companies Act, 2013. A classification of a private company into a small company is based on its size i.e. paid up capital and turnover. In other words, such companies are small sized private companies.

Government Companies

Section 2(45) of the Companies Act, 2013 defines “Government Company” as any company in which not less than fifty one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.

Where the Central Government is a member of a Government company, the Central Government shall cause an annual report on the working and affairs of that company to be prepared within three months of its annual general meeting, and laid before both Houses of Parliament together with a copy of the audit report and comments upon or supplement to the audit report, made by the Comptroller and Auditor-General of India.

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Foreign Companies

As per section 2(42) of the Companies Act, 2013 “foreign company” means any company or body corporate incorporated outside India which –

  • has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
  • conducts any business activity in India in any other manner.

Holding company

As per Section 2(46) of the Companies Act, 2013, holding company, in relation to one or more other companies, means a company of which such companies are subsidiary companies.

Subsidiary company

Section 2(87) of the Companies Act, 2013 provides that 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—

  • controls the composition of the Board of Directors; or
  • (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, shall not have layers of subsidiaries beyond the prescribed limit.

Producer Company

Section 465(1) of the Companies Act, 2013 provides that the Companies Act, 1956 and the Registration of Companies (Sikkim) Act, 1961 (hereafter in this section referred to as the repealed enactments) shall stand repealed.

However, proviso to section 465(1) provides that the provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies.

In view of the above provision, Producer Companies are still governed by the Companies Act, 1956. Companies (Amendment) Act, 2002 had added a new Part IXA to the main Companies Act, 1956 consisting of 46 new Sections from 581A to 581ZT relating to Producer Companies.

According to the provisions as prescribed under Section 581A(l) of the Companies Act, 1956, a producer company is a body corporate having objects or activities specified in Section 581B and which is registered as such under the provisions of the Act.

The membership of producer companies is open to such people who themselves are the
primary producers, which is an activity by which some agricultural produce is produced by such primary producers.

What are the 3 types of companies?

  • Limited by shares, Limited by guarantee, and Unlimited companies
  • are the 3 types of companies in India

    So finally these are the types of companies in India.