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TYPES OF COMPANIES

TYPES OF COMPANIES

Company is an artificial person created by the law for some common purpose where the capital is divisible into parts known as shares with perpetual succession and common seal. The various types of companies are as follows:

TYPES OF COMPANIES
TYPES OF COMPANIES

ON THE BASIS OF FORMATION

On the basis of formation, the companies are of following types:

CHARTERED COMPANIES: These are the companies which are formed by a special charter which govern the powers and nature of the company. These companies were formed in the England by the grant of the charter such as East India Company and Bank of England.

STATUTORY COMPANIES: The companies which are formed under a special act of parliament or legislature of state are known as Statutory Companies. The working of these companies are governed as per the Act under which these form. Example: Reserve Bank of India (Governed by RBI Act, 1934), Life Insurance Corporation (LIC), Unit Trust of India (UTI) etc.

REGISTERED COMPANIES: These are those companies which are registered under the Companies Act, 2013 or under any previous Act. These companies come into existence when they get registered under Companies Act in force and acquire the Certificate of Incorporation and Certificate of Commencement.

ON THE BASIS OF LIABILITY

On the basis of the liability, the companies can be divided into three categories:

LIMITED BY SHARES: These are the companies in which the liability of members is strictly limited to the extent of the nominal value of shares held by each of them. If the member has paid the full amount of shares, he will not be liable to pay any amount further. If a member has partly paid shares, he can be forced to pay the remaining amount during the existence of the company as well as during the winding up. Such companies are further divided as Public Company, Private Company or One Person Company.

LIMITED BY GUARANTEE: In case of such companies, the liability of the members is limited up to the extent of the guarantee given by them in the event of winding up of the company. The liability of its members will arise only in the event of winding up of the company.

UNLIMITED COMPANY: Unlimited company is a company where there is no limit on the liability of its members. It means, when a company suffers loss and the company’s property is not sufficient to pay off its debts, the private property of its members will be used to meet the claims of the creditors. As the risk involved in such companies is too high, these are not found in India even though permitted by the Companies Act.

ON THE BASIS OF PUBLIC INVESTMENT

On the basis of the public investment, the companies can be Public or Private:

PUBLIC COMPANY: A public company is the company which can issue its shares to the public and can be formed with the minimum of 7 members. These companies are required to use the word ‘Limited’ with their names. These companies can start their business after getting the Certificate of Incorporation and Certificate of Commencement from the Registrar of the Companies.

PRIVATE COMPANY: A private company is a company which cannot issue its share capital to the public and can be formed with the minimum of two members. These companies are required to use the word ‘Private Limited’ with their names. These companies can start their business after getting the Certificate of Incorporation from the Registrar of the Companies.

OTHER COMPANIES

The following are the other companies:

ONE PERSON COMPANY: One Person Company means a company which has only one member. The Companies Act 2013 has introduced this type of Company in India. Only a natural person who is an Indian citizen and resident of India can be the member of this company and the minimum paid up capital of this company must be ₹1,00,000.

SMALL COMPANY: Small Company is a company other than public company:

a) Whose paid up capital is from 25 lakhs to 5 crore and turnover ranges from 5-75 crores in case of manufacturing concern.

b) Whose paid up capital is from 10 lakhs to 2 crore and turnover ranges from 5-75 crores in case of services organization.

DORMANT COMPANY: Dormant Company is the company which comes into existence under the act in the force but has not started its business. These companies remain inactive for some duration and formed presently to be operative in the future.

HOLDING COMPANY: A Holding Company is a corporation that owns enough voting stock in one or more other companies to exercise control over them. A corporation that exists solely for this purpose is called pure holding company.

SUBSIDIARY COMPANY: A subsidiary or sister company is a company that is completely or partly owned and partly or wholly controlled by another company that owns more than half of the subsidiary’s stock. The subsidiary can be company, corporation or limited liability company.

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