DD: Company Law IV - Classification

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Companies can be classified by the manner in which they are limited into:

  • Shares: A registered company, whether public or private, having the liability of its members limited by memorandum to the amount, if any, unpaid on the shares respectively held by them.
  • Guarantee: A registered company having the liability of its members limited by its memorandum to such an amount as the members may respectively undertake by the memorandum to contribute to the assets of the company in the event of its being wound up. Liability here arises only upon winding up, and not while the company is a going concern.
  • Unlimited: A company not having any limit on the liability of its members. Maximum liability in such cases can be to the full extent of their properties, to meet the obligations of the company by contributing to its assets. The members are not directly liable to creditors of the firm, unlike in a partnership, but to the company itself. A company registered as such may always convert itself into a limited company, subject to the proviso that previous obligations are not affected by such change. 
They can also be classified as follows:

  • Private: S. 2(68), Indian Companies Act, 2013 Company having minimum paid up share capital as prescribed, and which restricts the right to transfer its shares, and limits the number of members to 200. Such company should also prohibit public invitations to subscribe for any securities of the company.
  • Public: S. 2(71), Indian Companies Act, 2013 Any company that isn't a private company and has a minimum paid up share capital as prescribed. A private company that is the subsidiary of a public company is also a private company.
  • One Person Company: S. 2(62), Indian Companies Act, 2013 Introduced for the first time in the 2013 Act, this move is supposed to encourage corporatisation of micro businesses and entrepreneurs. An OPC is a company that has only one person as a member. 
  • Charitable Object: S. 8, Indian Companies Act, 2013 A registered company that has as its object the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, etc. Its profits and other income are to be used in promotion of its object, and there is no payment of any dividend to members. 
  • Small Company: Introduced under the 2013 Act, such companies are classified based on their size (paid up capital and turnover). Such companies may enjoy certain privileges not available to private or public companies. S. 2(85), Companies Act, 2013
  • Government: S. 2(45), Companies Act, 2013 Any company in which not less than 51% of the paid up share capital is held by the Central Government, or 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 company of such a Government company.
  • Foreign: S. 2(42), Companies Act, 2013 - Any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner. 
  • Holding: S. 2(46), Companies Act, 2013 - a company of which other companies are subsidiary companies.
  • Subsidiary: S. 2(87), Companies Act, 2013 - A company in which the holding company controls the composition of Board of Directors, or exercises or controls more than one half of the total share capital either at its own or together with one or more of its subsidiary companies.
    S. 2(27), Companies Act, 2013 - definition of control - include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholding agreements or voting agreements or in any other manner. 
  • Producer: S. 465(1), Companies Act, 2013 - Body corporate having objects or activities specified in S. 581B and which is registered as such under the provisions of the Act. 

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