Introduction to Companies
&
Kinds of Companies
‘Company’
Meaning
• A company means an association of persons formed to
carry on some business for profit or to promote art,
science, education or some charitable purpose.
• A company may or may not be incorporated. An
incorporated company or a ‘corporation’ is a single person
distinct from the individuals constituting it. Therefore,
unlike a partnership, a company is a corporate body and a
legal person having status and personality distinct and
separate from that of the members constituting it.
• A company is capable of rights and duties of its own and
endowed with the potential of perpetual succession and
has a limited liability.
Definition
• Section 2(20) of the Companies Act, 2013 provides that
“company means a company incorporated under this
Act or under any previous company law.”
• Another definition of company has been given by Chief
Justice Marshall of USA, “a corporation is an artificial
being invisible, intangible and existing only in the
contemplation of the law. Being a mere creature of law,
it possesses only those properties which the charter of
its creation confers upon it either expressly or as
incidental to its very existence.”
Characteristics
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Incorporated Association
Separate Legal Entity
Limited Liability
Separate Property
Perpetual Succession
Transferability of Shares
Common Seal
Capacity to Sue and Be Sued
Kinds of Companies
Types of Companies Under Companies
Act, 1956
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Public company limited by shares
Public company limited by Guarantee & having share capital.
Public company limited by Guarantee & having no share capital
Public Unlimited company having share capital
Public Unlimited company having no share capital
Private Company limited by shares
Private company limited by guarantee & having share capital
Private company limited by guarantee & having no share capital
Private unlimited company and having share capital
Private unlimited company and having no share capital
Types of Companies Under Companies
Act, 2013
In addition to the 10 types that could be formed
under the 1956 Act as per Col. (3), following 5
new types of Cos. can be formed under 2013 Act:
• One Person Company (OPC) limited by shares.
• OPC limited by guarantee & having share capital
• OPC limited by guarantee & having no share
capital.
• OPC Unlimited Company having share capital.
• OPC Unlimited Company having no share capital.
Classification of Companies
COMPANIES
UNINCORPORATED
INCORPORATED
Chartered
Companies
Companies
Limited by
Shares
Statutory
Companies
Companies Limited by
Guarantee
Registered
Companies
Unlimited
Limited
Companies
Incorporated Company
• An incorporated company or a ‘corporation’ is a
single person distinct from the individuals
constituting it. It is a legal person having status
and personality distinct and separate from that of
the members constituting it.
• A company comes into existence on incorporation
or registration under the Companies Act.
• A joint stock company may be incorporated under
the Act either as a private or a public company.
Unincorporated Company
• An unincorporated company, such as a
partnership, is a mere collection of
aggregation of individuals
• An unincorporated company is not distinct
from the members constituting it.
Chartered Companies
• The ‘Crown’ in the exercise of the royal prerogative has
power to create a corporation by the grant of a charter
to persons assenting to be incorporated. They are
known as chartered companies.
• The powers and the nature of such companies are
defined by the charter which incorporates it.
• After the country attained independence, these type of
companies do not exist in India. Moreover, the
provisions of Companies Act, 2013 do not apply to such
companies.
• Example- Bank of England (1694), East India Company
(1600).
Statutory Companies
• A company may be incorporated by means of special Act of
the Parliament or any State Legislature. Such companies
are called statutory companies.
• Such companies are generally formed to carry out some
special public undertaking, for example, railway,
waterworks, gas, electric generation etc.
• Statutory companies are governed by the Acts creating
them. They are not required to have any memorandum or
articles of association. Changes in their structure are only
possible by amendments in the Acts creating them.
• A statutory company though owned by the government has
a separate legal entity. It cannot be regarded as a
department of the government.
Registered Companies
• Companies registered under the Companies Act, 2013,
or the earlier Companies Acts are called registered
companies.
• Such companies come into existence when they are
registered under the Companies Act and a certificate of
incorporation is granted to them by the registrar.
• A company registered under the Act may be
 A company limited by shares
 A company limited by guarantee
 An unlimited company
Private Company
• Private Company [Sec.(68)]. A private company is
a very suitable form for carrying on the business
of family and small concerns as the minimum
number of members required is only two.
• [Sec.2(68)] of the Companies Act, 2013 deals with
the definition of a private company that provides
that every private company should have a
minimum paid-up capital of One Lakh Rupees.
Definition of Private Company
The definition of private company is quoted u/s 2(68) of the
Companies Act, 2013. it means a company which has a minimum
paid-up capital of one lakh rupees or such higher paid-up capital as
may be prescribed, and by its articles:i.
Restricts the right to transfer its shares;
ii. Limits the numbers of its members to two hundred (excluding
members who are or were in the employment of the company) ;
(maximum number has been increased from 50 to 200 as per
Companies Act, 2013).
iii. Prohibits any invitation to the public to subscribe for any shares
or debentures of the company; and
iv. Prohibits any invitation or acceptance of deposits from persons
other than its members, directors or their relatives.
Public Company
According to the Section 2(71) of the Companies Act, 2013, A
public company means a company which• Is not a private company
• Has a minimum paid-up capital of five lakh rupees or such
higher paid-up capital, as maybe prescribed
• Is a private company which is a subsidiary of a public
company
• There must be at least seven persons to form a public
company
• Any member of the public may acquire shares in a public
company on payment of the share money. Only the shares
of a public company are capable of being dealt in on a stock
exchange.
Government Companies
Section 2(45) of the Companies Act defines a government
company to mean any company in which not less than 51%
of the paid-up share capital is held byi. The Central Government ; or
ii. Any State Government or Governments ; or
iii. Partly by the Central Government and partly by one or
more State Governments, central government, or by any
state government or governments, or partly by the
central government and partly by one or more state
governments. Shares held by municipal and other local
authorities or public corporations are not to be taken into
consideration. A subsidiary of a government company is
also of a government company.
Foreign Companies [SEC.2(42)]
• It means a company incorporated outside India and having a place
of business in India.
• According to section 2(42) of Companies Act 2013, a foreign
company is one incorporated outside India (a) which establishes a
place of business within India after the commencement of this Act.,
or (b) which had a place of business within India before the
commencement of this Act and continues to have the same at the
commencement of this Act. The Companies (Amendment) Act,
1974, provides that where not less than 50% of the share capital is
held by Indian citizens and/or companies Incorporated in India it
shall have to comply with such of the provisions of the Act as may
be prescribed as if it were a company incorporated in India.
• A company having all foreign shareholders may be incorporated in
India and in that case the company will be an Indian company.
One Person Company
• Section 2(62) of the Companies Act, 2013 defines that
“One Person Company” means a company which has
only one person as a member.
• One person company is required to identify in its name
in bracket as “One Person Company” after its name.
• One Person Company formed under section 3 may be
eithera) A company limited by shares ; or
b) A company limited by guarantee ; or
c) An unlimited company.
Illegal Associations (SEC. 464)
Sec. 464 provides that no company, association
or partnership consisting of more than 10
persons in case of banking business or more
than 20 persons in the case of any other
business which has for its objects the
acquisition of gain can be legally formed
unless it is registered under the Companies
Act or is formed in pursuance of some other
Indian law. If they are not so registered they
would be considered as illegal associations.
Associations Not For Profit
Section 4 requires that the name of a public company must end with
word ‘limited’ and in the case of a private company with the words
‘private limited’. Section 8, however, provides that the Central
Government may by license direct that any association be
registered as a company with limited liability without using the
words ‘limited’ or the words ‘private limited’.
The Central Government shall grant a license only if it is satisfied thati.
The association about to be formed as limited company aims at
the promotion of commerce, art, science, religion, charity or any
other useful object, and
ii. It intends to apply its profits, if any, in promoting its objects, and
iii. It prohibits the payment of any dividend to its members.
Public Financial Institutions
The Companies Act provides that each of the following
institutions shall be deemed to be public financial
institutions for the purpose of this Act, namely:
i. The Industrial Credit and Investment Corporation of
India Limited ;
ii. The Industrial Development Bank of India ;
iii. The Life Insurance Corporation of India ;
iv. The Unit Trust of India
v. The Infrastructure Development Finance Company
Limited, a company formed and registered under this
Act.
Group
• It means a group of two or more individuals, associations, firms or
bodies corporate or any combination thereof, which exercises or is
in a position to exercise or has the object of exercising control over
any body corporate, firm or trust.
• Two important features of the definition of ‘Group’ may be noted.
i.
A group may consist of not only natural persons like individuals
and legal persons such as companies and other bodies corporate
but it may also include unincorporated bodies such as
associations and firms.
ii. It must exercise control or be in a position to exercise control or
must have for its object the exercise of control over any body
corporate or firm or trust. The essential element in the definition
is the exercising or being in a position to exercise control. In order
to exercise control holding of shares is not always necessary.
Thank You..