Types / Classification of companies

1. On the basis of Incorporation

1. Chartered Companies
A Chartered Company is one which is incorporated under a Special Charter Granted by the
King or Queen of England in the exercise of prerogative powers. The Chartered Companies
are governed by the provisions of the Special Charter, under which they are formed.It may
be noted that after independence, the Chartered Companies are rarely found in India.
2. Statutory Companies or Corporations
A Statutory Company is one which is incorporated by a Special Act of the Legislaure.It may
be noted that an Act is specially passed to create a statutory company
The Statutory Companies are also known as corporations.
3. Registered Companies
A registered company is one which is formed and registered under the Companies Act, 1956
or under the Companies Act, 2013. It also includes an existing company, which was formed
and registered under the earlier Companies Acts It may be noted that a registered company
comes into existence when it is registered under the Companies Act, and a Certificate of
Incorporation is granted to it by the Registrar of Companies. The registered companies are
of two kinds, namely:
i Limited companies ii. Unlimited companies
i. Limited Companies: A limited company is one in which the liability of the members is
limited ve., the members are liable upto a limited amount, and beyond that limit they cannot
be asked to contribute anything towards the payment of company's liabilities.
The limited companies may be of two kinds, namely
(a) companies limited by shares, and
(b) companies limited by guarantee.
a. Companies limited by shares : A company limited by shares is one in which the liability of
the members is limited to the extent of nominal value of shares held by them.
b. Companies limited by guarantee : A company limited by guarantee is one in which the
liability of the members is limited to such amount as he undertakes to contribute to the
assets of the company in the event of its being wound up.
ii.Unlimited Companies :An unlimited company is one in which the liability of a member is
unlimited i.e, the members are also personally liable for the payment of companies' liabilities.
4. Foreign Company
A foreign company' is a company which is incorporated outside India under the law of that
other country and has established a place of busines india
IIOn the basis of control
1. Holding companies
2. Subsidiary companies
1. Holding Company
A holding company is one which holds control over another company. Companies Act,
2013, provides that a holding company in relation to one or more the companies means a
company of which such companies are subsidiary companies.
2. Subsidiary Company
A subsidiary company is one which is controlled by a holding company The Companies Act,
2013 states that a company is deemed to be a subsidiary of another company in the
following three cases:
i. Company controlling composition of board of directors
ii. Holding of majority of shares:
iii. Subsidiary of another subsidiary:
III. On the basis of Ownership
1. Government Company
2. Non Government Company
1. Government Company
'Government Company' means any company in which not less than 51 per cent of the paid
up capital is held by the Central Government or by any state Government or partly by the
Central Government or partly by one or more State Governments. A subsidiary of a
Government Company is also treated as a Government Company. The Auditor of a
Government Company shall be appointed or re-appointed by the Controller and Auditor
General of India (C & AG). The C & AG of India has the power to direct the manner in which
the accounts are to be audited and to give instructions to the auditor in regard to any matter
relating the performance his functions.
2. Non-Government Company
A company which is not a government company is called as non government company
IV. On the basis of the number of members / size
1. Private company
2. Public company
1. Private Company
According to the Act, private companies are those companies whose Articles of
Association restrict the transferability of shares and prevent the public at large from
subscribing to them. The following restrictions are imposed on private companies:
1. Restricts the right to transfer its shares, if any
.2. Except in case of One Person Company, limits the maximum number of its members to
200.
Provided that where two or more persons hold one or more shares in a company jointly
they shall, for the purpose of this clause, be treated as a single member.
Provided further that-
a. persons who are in the employment of the company; and
b. persons who, having been formerly in the employment of the company, where members
of the company while in that employment and have continued to be members after the
employment ceased shall not be included in the number of members.
3. Prohibits any invitation to the public to subscribe for any securities of the company
4. Prohibits any invitation or acceptance of deposits from person other than its members,
directors or their relatives.
2. Public Company
Public company means a company which -
a. is not a private company.
b. 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 purpose of this Act, even where such
subsidiary company continues to be a private company in its Articles. A public company is
the company, the Articles of Association of which do not contain the restrictions to make it a
private company.
Special Privileges or Advantages of a Private Company
1.Its formation is easy: A private company can be easily formed as it requires require only
two minimum members. This also helps in smooth functioning of the company.
2. It can immediately start its business: A private company can start its busines immediately
after its incorporation (formation). It is not required to obtain a certifica for commencement of
business as is required in case of a public company.
3. It is exempted from the issue of prospectus: We know that a private company h prohibited
from inviting offers from general public for the purchase of its shares tr debentures.
4. It is exempted from the requirement of minimum subscription for allotment of shares: The
minimum subscription is the amount which must have been collected by a company before
any allotment of shares is made.
5. It can issue further shares to outsiders: In certain cases of new allotment, the shares must
be offered to the existing equity shareholders. But a private company is free to allot shares
to any person i.e. to outsiders also.
6. It is exempted from holding statutory meeting: A private company is not required to hold a
statutory meeting. Moreover, it is also not required to file a statutory report with the Registrar
of Companies.
7. It is exempted from keeping an index of members: A private company is not required to
keep an index of members.
8. It need not have more than two directors: A private company is not required to have more
than two directors. However, this is also the minimum requirement for a private company. It
means that a private company must have at least two directors.
9. No Independent Directors: It need not appoint any Independent Director to its board.
10. Report: A private limited company need not prepare a report on Annual Generaleting
V. New Generation Companies
1. One Man Company
2. Small Company
3. Dormant Company
4. NIDHI 5. Associate Company
1. One Person Company
One Person Company (OPC) is a new category company introduced by the Companies Act,
2013. OPC is a one shareholder corporate entity.The term OPC may be defined as "a
company in which one person holds substantial number of shares and has controlling power
over the company" This category enables a sole proprietorship to convert himself into one
person company and to derive all benefits of incorporation under the Companies Act, 2013.
Characteristics and legal requirements of OPC
1.Only a natural person who is an Indian citizen and resident in India
2. No person shall be eligible to incorporate more than a One Person Company
3.OPC has only one director and one member.
4.No minor shall become member or nominee
5.The director appoints another individual as nominee director.
6.OPC has only one director and one member.
7. On the demise of the original director, the nominee director will manage the affairs of the
company till the date of transmission of share.
8.The Memorandum of Association of OPC shall indicate the name of the other person as
nominee
9.The written consent of such nominees shall also be filed with the Registrar at the time of
incorporation along with its Memorandum and Articles of Association.
10.The provisions relating to the holding the Annual General Meeting is not mandatory for
OPC.
11.In case of OPC, any business which is required to be transacted at an Annual General
Meeting must be done by means of ordinary or special resolution.
12.All the business to be transacted at the general meeting should be entered in the minutes
books.
13. The financial statements shall be approved by one director, for submission to the Auditor
for his report thereon.
14.A OPC has to conduct at least one meeting of the Board of Directors in each half of a
calender year and the gap between the two such meeting is not less than 90 days.
15.The requirement with regard to quorum of the meeting of the Board shall not apply One
Person Company.
16 Annual returns that are filed by One Person Company have to be signed by the company
secretary, and where there is no company secretary, by the Director of the company
17 As regards the name of the OPC, Act provides that the words "One Person Company"
shall be mentioned in brackets below the name of such company, wherever its name is
printed, affixed or engraved
18. OPC cannot be incorporated or converted into a company under Sec. 8 of Companies
Act, 2013 which deals with the formation of the company with charitable objects.
2. Small Company
Small company has been defined as a company other than a public company having-
a. paid up share capital which does not exceed 50 lakh or such higher amount as may be
prescribed not exceeding 5 crore or
b. turnover of which as per its last profit and loss account does not exceed 2 crore or such
higher amount as may be prescribed not exceeding 20 crores.
3. Dormant Company
Where a company is formed and registered under the Act for 'future project' or to hold an
asset or intellectual property and has no significant accounting transaction', such a company
may make an application to the Registrar for obtaining the status of dormant company. It can
be a new company that has not commenced business.
It is required to bold at least one meeting of the Board of Directors in each calendar year and
the gap between the two meetings should not be less that 90 days
4. NIDHI Nidhi means a company which has been incorporated with the object of cultivating
the habit of thrift and savings amongst its members, receiving deposits from, and lend to its
members only, for their mutual benefit.
5. Associate Company A company is considered to be an associate company of the other
company, if the other company has significant influence over such company (not being a
subsidiary company) or is a joint venture company. Significant influence means control of at
least 20% of the share capital of a company or of business decisions under an agreement.