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Kinds of Companies: 1. Private Company-S. 3 (1) (Iii)

This document defines and describes 9 different types of companies under Indian law: 1) Private companies have restrictions on share transfers and limited members to 50 people. Public companies do not have these restrictions. 2) A public company is any company that is not a private company. 3) A company limited by shares limits member liability to the value of shares held. 4) A company limited by guarantee limits member liability to a set amount in the event of winding up. 5) An unlimited company makes members unlimitedly liable like partners in a partnership. It then defines government companies, holding/subsidiary relationships, foreign companies registered in India, and unlawful associations.

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Rasesh Shah
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32 views2 pages

Kinds of Companies: 1. Private Company-S. 3 (1) (Iii)

This document defines and describes 9 different types of companies under Indian law: 1) Private companies have restrictions on share transfers and limited members to 50 people. Public companies do not have these restrictions. 2) A public company is any company that is not a private company. 3) A company limited by shares limits member liability to the value of shares held. 4) A company limited by guarantee limits member liability to a set amount in the event of winding up. 5) An unlimited company makes members unlimitedly liable like partners in a partnership. It then defines government companies, holding/subsidiary relationships, foreign companies registered in India, and unlawful associations.

Uploaded by

Rasesh Shah
Copyright
© Attribution Non-Commercial (BY-NC)
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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Kinds of Companies

1. Private Company-S. 3 (1) (iii) A private company means a company a. Which has a minimum paid capital of one lakh rupees or such higher paid up capital as may be prescribed.(Introduced by Amendment Act, 2000) b. By its articles(i) Restricts its right to transfer its shares (ii) Limits the number of members to 50 (iii) Prohibits any invitation to the public to any shares or debentures of the company (iv) Prohibits any invitation or acceptance of deposits from public .(Introduced by Amendment Act, 2000) Private Company to become a public company in certain cases (Deemed to be a public company) In the following situations a private company becomes a public company a. By default in complying with statutory requirements S.43 Where a private company makes a default in complying with any of the requirements of S. 3 (1) (iii), it shall cease to be a private company. And such private company will be treated as a public company. b. By operation of law- S 43A One of the essential requirements of a private company is that it cannot procure public fund. S. 43A mentions the following circumstances when a private company will be termed as a public company(i) Where not less than 25% of the paid up share capital of private company is held by one or more public companies (ii) Where average turnover of a private company is not less than such amount as may be prescribed. (Rs. 25 crore has been prescribed w.e.f. 13.2. 1999) (iii) When not less than 25% of the paid up share capital of a public company is held by a private company, such private company shall become a public company (v) Where a private company accepts deposits from the public, such private company shall become a public company. The concept of Deemed Public Company has been done away with by inserting S. 43A (11) After introducing S. 43A (11) in 2000, even if a private company fulfils the criteria for becoming a public company, it will not automatically become a public company. The procedure mentioned in Section 43A (2) has to be followed before a private company becomes a public company. Where a private company fulfils the criteria for becoming a public company, it shall inform the Registrar of Companies that it has become a public company. The Registrar shall delete the words 1

private and make the necessary alterations in certificate of incorporation issued to the company and in its memorandum of association. (c) By altering its articles (s 44) A private company may become a public company, if it chooses to do so and alters its Articles of Association in that respect. The company shall cease to be a private company on the date of such alteration. Within 30 days of such date, the company shall file with the Registrar a prospectus or statement in lieu of prospectus. 2. Public Company Public company is a company which is not a private company. 3. Company limited by shares The liability of members is limited to the value of shares held by him. If he has already paid part of the value, his liability remains to the extent of the unpaid amount. If shares are fully paid up, the liability of the member is no more there. 4. Company limited by guarantee The memorandum of the company shall state that the liability of its members is limited by guarantee and the extent to which each member undertakes to be liable for payment of the debts and liabilities of the company in the event of winding up. 5. Unlimited company The liability of members is unlimited as that of partners of a partnership firm, but the company being a distinct legal entity from its members, a creditor cannot sue any member in respect of the debt due from the company. If the company fails to satisfy its creditors, members can seek winding up and in that process the members can be required to contribute for the payment of the debts and the winding up expenses. 6. Government Company A Government company means any company in which not less than 50% 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 of a government company. 7. Holding company and subsidiary company A company is deemed to be a subsidiary of another if the controlling company a. Controls the composition of its board of directors b. Exercises more than half of its total voting power c. If it is a subsidiary of the subsidiary company 8. Foreign company Companies incorporated outside India which has a place of business in India 9. Unlawful Association No company, association or partnership consisting of more than 10 persons for the purpose of carrying on a banking business and of more than 20 persons for the purpose of carrying on non-banking business shall be formed unless it is registered as a company. Otherwise, it shall be an unlawful association. And every member of the unlawful association will be personally liable for all liabilities incurred in the business.

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