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Types of Company

There are several types of companies based on various criteria such as membership, liability, control, special status, and others. Companies can be one person, private, or public depending on the number of members. Based on liability, they can be companies limited by shares, guarantee, or unlimited. Special types include government, foreign, Section 8, and public financial institutions. In terms of control, a company can be a holding, subsidiary, or associate based on share ownership and board composition.

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494 views

Types of Company

There are several types of companies based on various criteria such as membership, liability, control, special status, and others. Companies can be one person, private, or public depending on the number of members. Based on liability, they can be companies limited by shares, guarantee, or unlimited. Special types include government, foreign, Section 8, and public financial institutions. In terms of control, a company can be a holding, subsidiary, or associate based on share ownership and board composition.

Uploaded by

shibashish Panda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Types of Companies

Definition: A company is that form of business organization, which is created by law.


It refers to an association of persons, created to undertake business activities, having
a separate legal existence, perpetual succession and a common seal.

It is a legal entity incorporated under the Companies Act, 2013 or any other previous
acts, prevalent in the country.

Types of Company

1. On the basis of members


1. One person Company: OPC or one person company is a new category of company
introduced to encourage startups and young entrepreneurs wherein a single
person can incorporate the entity. It also promotes the concept of corporatization of
the business. It should be noted that it is not the same as a sole proprietorship firm,
in a way that OPC has separate legal existence with limited liability.
2. Private Company: A private company is one in which two or more persons get the
company registered under the Companies Act. The securities of such a company are
not listed on a recognised stock exchange, and they cannot invite the public to
subscribe for the shares/debentures. The members of a private company are
restricted from transferring the shares. The maximum number of members in a private
company is 200.
3. Public Company: A company which is formed by a minimum number of seven
members with a lawful object is termed as a public company. Its securities are listed
on a recognized stock exchange, and its shares are freely transferable. Further, there
is no limit on the maximum number of members in such a company. The subsidiary
of the public company is also considered as a public company.
2. On the basis of liability
1. Company limited by shares: Company limited by shares is one in
which memorandum of association of the company specifies that the liabilities of the
shareholders are limited to the amount unpaid on shares which they own. Hence,
the shareholders are liable only to the extent of the amount that is not paid on their
holdings.
2. Company limited by guarantee: A company in which the liability of members is
limited to a definite sum stated in the memorandum of association of the company.
Meaning that the liability of the members is confined by the MoA to a stipulated
sum, as they have guaranteed to contribute to the company’s assets, in the event of
winding up of the company.
3. Unlimited Company: An unlimited company is a company whose liability does not
have any limit. In this type of company, the liability of the member ends when he/she
ceases to be a member of that company.
3. Special companies
1. Government Company: The company whose at least 51% paid up share capital is
owned by Central Government/State Government, or partly by central and partly by
the state government. Further, it also covers a company whose holding company is a
government company.
2. Foreign Company: Any company registered outside the country that has a
business place in India or by way of an agent traditionally or electronically and
undertakes business operations in the country in any manner.
3. Section 8 Company: A company formed for a charitable object, i.e. to encourage
commerce, science, sports, art, research, education, social welfare, environment
protection religion, etc. comes under the category of Section 8 company. These
companies are given special license by the Central Government. Further, they use
the money earned as profit for the promotion of the object and thus, dividend to
members is not paid.
4. Public Financial Institution: The companies, which are engaged in financial and
investment business and whose 51% or more paid up share capital is held by Central
Government and are established under any act are termed as public financial
institutions. It includes LIC, ICICI, IDFC, IDBI, UTI etc.
4. On the basis of the control
1. Holding Company: A parent company that owns and controls the management and
composition of the Board of Directors of another company (i.e. subsidiary company) is
termed as a holding company.
2. Subsidiary Company: A company whose more than 51% of its total share
capital is owned by another company, i.e. a holding company either itself or together
with its subsidiaries, as well as the holding company also governs the composition of
Board of Directors is called the subsidiary company.
3. Associate Company: A company in which another company possess
a considerable influence over the company, then the latter is called as an associate
company. The term considerable influence implies controls a minimum 20% of total
share capital, or business decisions, as per an agreement.
Apart from the list given above, there are many other companies such as listed
company, unlisted company, dormant company and Nidhi company.

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