Kinds of Companies
Kinds of Companies
Note- Chartered Company and Statutory Company are always public companies.
The classification of companies is done from the study facility point of view. This classification is appended
● On the basis of liability:
●On the basis of association:
●On the basis of mutuality:
●On the basis of others:
There are mainly three types of incorporated companies –
(1) Companies made by Gazette-Such type of companies are called Chartered Companies. This is the most old type of incorporation of companies, when the trade companies of England were used to be amalgamated. This was the specialty of these companies that the members thereof were not responsible for debts of the companies. The rights of these companies were very much universal. For example,East India Company and Bank of England were such type of incorporated companies.
(2) Companies formed by the Parliamentary Special Acts – Such type of companies are called as Statutory Companies. Generally, those companies are formed by this system which are established for doing business of national importance. The rights of these companies are defined in that particular Act under which there companies are established. Such type of companies are provided with some special rights which are not held by the amalgamated companies under the Companies Act. Thus formed companies are the companies having limited liability, but it is not essential to suffix the word ‘Limited’ to these companies. In India, various types of companies are established by this system, e.g., Reserve Bank of India, State Bank of India, Industrial Finance Corporation, Damodar Valley Corporation, etc..
(3) Company formed under Companies Act-Such type of companies are called as registered companies. Now a day most of the companies are made in the same system.
e companies are made under Companies Act although separate Acts are made for these companies, e.g., for Banking Companies, Banking Regulating Act, 1949, etc.
(A) Registered Companies according to Liability of Members:
(1) Unlimited Company- According to Section 21(2)(c) of Indian Companies Act, such companies, wherein the liabilities of members are not limited, are called unlimited companies. These days the number of unlimited companies is very less. Share capital of limited company is not compulsory. If the members of unlimited company want, they can get their company converted into accountable company, but for this they shall have to get a special proposal passed and information to this effect will have to be submitted to the Registrar of Company.
(2) Limited Company- For the debt charges of which, the liabilities of its members’ are limited based upon a prior assessment, that is called the limited company. Generally, the word ‘limited’ is suffixed to the name of such company.
For fulfillment of the liabilities of the members time-limit is there. There are two types of limited companies –
(a) Share Limited Company, and
(b) Guarantee Limited Company.
(a) Company limited by shares – This company is that type of company liability of members of which is limited in the ratio of their shares. Using of the word ‘limited’ in the name of such type of companies is essential so that it can be known to the general public that the company is a limited one. Share capital of these companies is most essential because the limit of liabilities is assessed upon the cost of shares of the members. The employers normally think it more suitable to use their capital after purchasing shares of the companies, because in case of liquidation of the company, their liability is limited upto the unpaid portion or part of the purchased shares only.
(b) Company limited by Guarantee- This is the speciality of such companies that the liability of the members of these companies is limited upto the amount assessed in his limitation, which accepted to pay to the company on its liquidation. Such companies are not set up from earning profit point of view, but are meant for fulfillment of useful objects pertaining to art, donation, business, science and religion etc. In such type of companies share capital may or may not exist.
(B) Companies formed according to the Organization
(1) Public Company- There is no absolute explanation of the public company under the Indian Companies Act and according to Section 3(1)(iv), the company which is not private company is public company. In other words, those are the public companies which-
a.can invite the public for sale of their shares or debentures,
b.have seven minimum members.
c.can transfer their shares independently.
(2) Private Company- According to the Companies Act, private companies are those companies, which by their
a.have the members upto the limit of 50
b.have restriction on transfer of their shares.
c.do not invite the public for purchase of their shares and debentures.
(C) Companies formed on the basis of Mutuality:
(1) Subsidiary Company- A company will be treated as subordinate to other company in the following circumstances according to Section 4(1) of the Indian Companies Act –
a.that a company controls the establishment of board of directors of other company.
b.that an other company holds right upon more than 50% of marked cost of the ordinary share capital of that company.
c.that it is subordinate to such a company which is itself assisting that other company.
(2) Holding Company – According to Companies Act, a company shall be treated as formulating of other company only when this other company is providing assistance to it.
As a matter of fact when there is one or more than one helping company for the formulating company then only there is existence of formulating company. Each holding has the following rights under Section 212 and company got 214 of Companies Act-
●To present the position details report of auditor and conveners of its helping company alongwith its annual report and the details of interests of holding company providing assistance to that company.
● To nominate representatives for the purpose of inspection of the helping company’s accounts.
●To submit application to the Central Government for the purpose of inspection for investigation of the helping company.
(D) Companies formed on the basis of Others:
(1) Government Company-According to Section 617 of the Indian Companies Act that company is called as Government Company in which minimum 15% conferred share capital is held by the Central or the State Government or jointly by both the Governments. Those companies which are assisting a Government Company are called as Government Companies.
(2) Foreign Company- According to Section 591 of the Indian Companies Act, such type of companies which are incorporated in some other country other than India but doing business at any place in India, are called as foreign companies. Therefore, it is compulsory to each foreign company functioning in India that it must write the name of that country alongwith its name in which it has been amalgamated. This name must be mentioned in English, and local, both the languages. Other than the it must mention this also that the company is limited or unlimited. Each foreign company shall submit complete information regarding it to the Registrar duly mentioned with full details of true copy of bill of rights, location and address of the registered office. Each foreign company shall have to submit the names and addresses of those individuals also to the Registrar who can delivery of notice issued in India on behalf of that company. According to Section 234(8) Company Registrar has got this right to ask any foreign company functioning in his jurisdiction for necessary information or explanation.
According to Section 594 each foreign company shall have to submit to Registrar yearly the documents of profitloss annual balance sheet; It shall be relating to the business of company in India. According to Section 591(2) of the Companies (Amendment) Act, 1974, such foreign companies,which are foreign companies for name sake only and in fact