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Types of Companies: 1. Classification On The Basis of Incorporation

There are several ways to classify companies based on their incorporation, liability, number of members, control, and ownership. Companies can be statutory or registered. Statutory companies are created by special acts like LIC while registered companies are formed under the Companies Act. Based on liability, companies are either limited or unlimited. Limited companies restrict shareholder liability while unlimited companies do not. A company is private if it has 50 or fewer members and prohibits public investment. A public company must have at least 7 members and can raise capital from the public. Other classifications include holding vs subsidiary based on control, and government vs foreign companies based on ownership.

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321 views7 pages

Types of Companies: 1. Classification On The Basis of Incorporation

There are several ways to classify companies based on their incorporation, liability, number of members, control, and ownership. Companies can be statutory or registered. Statutory companies are created by special acts like LIC while registered companies are formed under the Companies Act. Based on liability, companies are either limited or unlimited. Limited companies restrict shareholder liability while unlimited companies do not. A company is private if it has 50 or fewer members and prohibits public investment. A public company must have at least 7 members and can raise capital from the public. Other classifications include holding vs subsidiary based on control, and government vs foreign companies based on ownership.

Uploaded by

Binit Gadia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Types of Companies

1. Classification on the basis of Incorporation


Statutory Companies Crated By special Act RBI
LIC and Industrial Finance Companies Init Trust of
India, State bank of India
Concerned with public utilities railways and
enterprises of national importance
Registered Companies
These are companies formed and registered under
the Companies Act 1956 regulated by Companies Act
Classification of the Basis of Liability

1. Companies with limited liability
Companies limited by Shares
Companies Limited By guarantee

2. Unlimited Companies
III. Classification on the Basis of Number of
members
1. Private Company
Restricts right to transfer the shares
limits the no of members to 50
Prohibits invitation to public for any shares
Prohibits from acceptance of deposit
2. Public Company
- Min capital 5 lakh and min no of members 7
- private company subsidiary of public
company


Differences between private and public company
Sl.
No
Private Public
1 Min 2 members Min 7 members
2 Max 50 members No limit
3 Min paid up capital 1 lakh Min paid up capital 5 lakh
4 At least 2 directors At least 3 directors
5 Can't raise capital Can raise capital by inviting public
subscription or by private placement
6 Raises deposits only from
members and their relatives
May raise deposits from public as well
7 Consent of director need not
filed
Consent of director needs to be filed along
with registration documents
8 No restriction on managerial
remuneration
Restriction on total managerial
remuneration
9 Shares not transferable except
provisions of the article
Shares are freely transferable and may be
even quoted on a stock exchange
10 Word Private Ltd is mandatory The word Public Ltd is mandatory
Conversion of Private Company to Public
Company

1 Conversion by default Sec 43
2. Conversion by choice - Pvt company can alter AOA
in line with public company AOA. It ceases to be
Private company on the date of alteretaion.
Classification on the basis of Control

1. Holding Company
2. Subsidiary Company ( Sec 4 )

On the basis of ownership
Government company - Sec 617
Where at least 51% paid up share capital
holding by Govt. Central or state Govt
Foreign Company Sec 591
Company incorporated outside India but
having place of business in India

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