Types of Companies: Enache Alexandra Cătănescu Eveline

Types of Companies
Enache Alexandra
Cătănescu Eveline
Structure
 Introduction
 First Part:
 Definition
 Classification
 Second Part:
 Characteristics
 Problems
 Examples
 Conclusion
References
Introduction
Company may be defined as group of persons associated
together to achieve some common objective. A company
formed and registered under the Companies Act has certain
special features, which reveal the nature of a company.
These characteristics are also called he advantages of a
company because as compared with other business
organizations, these are in fact, beneficial for a company.
Companies can be classified into five categories according
to the mode of incorporation on the basis of number of
members, on the basis of control, on the basis of ownership
and on the basis of nationality of the company.
Definition
 Lord Justice Lindley “a company is meant an association of

many persons who contribute money’s worth to a common
stock and employ it in some trade or business, and who share
the profit and loss”.
 Lord Haney “a company is an incorporated association, which

is an artificial person created by law, having a separate entity,
with a perpetual succession and a common seal”.
Classification
Liability of Numbers of
Incorporation members
members
1.Chartered companies 1.Companies limited by 1.Private companies

2. Statutory companies shares 2.Public companies
3. Registered companies 2.Companies limited by
guarantee
3. Unlimited companies
• Chartered companies:These are incorporated
under a special charter by a monarch. The East India
Company and The Bank of England are examples of
chartered incorporated in England. The powers and
nature of business of a chartered company are defined
by the charter which incorporates.
• Statutory Companies: These companies are
incorporated by a Special Act passed by the Central or
State legislature.
• Registered or incorporated companies:Such
companies come into existence only when they are
registered under the Act and a certificate of
incorporation has been issued by the Registrar of
Companies. This is the most popular mode of
incorporating a company.
• Company limited by shares : It means a company
whose memorandum of association limited the
liabilities of its members to the amount unpaid, if any ,
on the shares held by them in the capital of the
company.
• Company limited by Guarantee :In a company limited
by guarantee ,there are no shares - hence there are no
shareholders. Instead, the company will have
'members‘.
• Unlimited company : It is a company which is
registered without limited the liability of the members
to the extent of the value of the shares held by them.
An unlimited company is one which does not limit the
liability of its members.
Private/Public Companies
Some of the most famous companies in the world are private
companies:
The World's Largest Public
Companies
Conversion of a Private
company into a public company
Conversion of a Private company into a public company
 Conversion by default : When Private company makes a

default in complying with any of the provisions of section 3(1)
(III) of the Act, the company ceases to be entitled to the
privileges and exemptions available to it. Then the whole act
would apply to it as if it were a public company.
 Conversion by choice : A private company can be converted

into a public company by a special resolution altering the
articles so as to remove all or any restriction imposed on
private companies.
Characteristics
Separate Legal Entity:

 A company is a separate legal entity from its members who constitute it. It can hold,
purchase and sell properties and enter into contracts in its own name. It is an
artificial legal person who can sue aid be sued. Companies are owned by
shareholders and they elect the Board of Directors, who run the company. The board
in turn selects the management.
Limited Liability:
 The liability of the shareholders of a company is limited to the nominal value of the
shares held by them. In the event of liquidation the maximum loss of a shareholder
is equal to the nominal value of the shares held by him. The creditors have no claim
on the personal assets of the shareholders in the event of liquidation.
Transferability of Shares
 The shares of a joint stock company are freely transferable. It does not require any
permission from the company or consent of other shareholders. The shares of listed
companies can be sold or purchased on the stock exchange and ownership
transferred without any difficulty. However, in case of a private limited company,
the transfer of shares is subject to the restrictions given in the company's articles.
Documents of a Company
 Memorandum of Association(MoA):The MoA
is a document which contains the Fundamental Rules
regarding the constitution and activities of the company.
 Article of Association (AoA):The AoA contains
regulations regarding all matter concerning the internal
affairs of the company.
 Prospectus of Association: Prospectus means any
document described or issued as a prospectus inviting
deposits from public or inviting offer from public for the
subscription or purchase of any shares , or debentures of
the company.
Problem
• In a private limited Company it is discovered that there are, in fact, 54
members. On an enquiry, it is ascertained that 6 of such members have
been employees of the Company in the recent past and that they acquired
their shares while they were still employees of the Company. Is it necessary
to convert the Company into a public limited Company . A Company to be
registered as a private Company must restrict its membership to 50 only.
But, however, in counting this number of 50 members, employee members
and ex-employee members (i.e., those who become members while in the
employment of the Company but now having retired still continue to retain
membership) are to be excluded. Thus, in the given case, the Company
shall continue to be a private Company. There is no need for conversion.
SELFASSESSMENT QUESTIONS
1.Define ‘Company’. What are its essential characteristics ?
2. Explain the special privileges of a private company as compared to a

public company.
3. Write notes on :
a) Chartered Companies
b) Registered Companies
4. Classify company form of organization on the basis of liability of

members.
CONCLUSION
Company values are the core beliefs that a company structures itself
around. Whether it is how to treat customers and other employees or
what they strive for and how employees want to feel when they work
there. The importance of company values can be seen in a number of
different ways. Here are some tips for creating your own company
values and making sure they are effective:
 Create values that are easily understood
 Research values from different companies
 Be a leader and set the example
 Balance
 Innovation
 Safety
REFERENCES
• Kuchhal, M.C. & Vivek Kuchhal. 2014. Business
Legislation for Management, 4th Edition. New Delhi:
Vikas Publishing House.
• https://www.investopedia.com/terms/c/company.asp
• https://marketbusinessnews.com/financial-glossary/
THANK YOU FOR YOUR
ATTENTION !

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Types of Companies

 Lord Justice Lindley “a company is meant an association of

 Lord Haney “a company is an incorporated association, which

1.Chartered companies 1.Companies limited by 1.Private companies

 Conversion by default : When Private company makes a

 Conversion by choice : A private company can be converted

Separate Legal Entity:

2. Explain the special privileges of a private company as compared to a

4. Classify company form of organization on the basis of liability of

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