PART 04: CORPORATE REGULATIONS AND ADMINISTRATION

 

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 CORPORATE REGULATIONS AND ADMINISTRATION

 

PART 04

 

CLASSIFICATION OF COMPANIES

 

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Classification of Companies by Mode of Incorporation

• Royal Chartered Companies

These companies are formed under a special charter by the monarch or by a special order of a king or a queen. Few examples of royal chartered companies are BBC, East India Company, Bank Of England, etc.
 

• Statutory Companies

These companies are incorporated by a special act passed by the central or state legislature. These companies are intended to carry out some business of national importance. For example, The Reserve Bank of India was formed under RBI act 1934

 

• Registered Or Incorporated Companies

These companies are formed/incorporated under the companies act passed by the government. These companies come into existence only after these are registered under the act and the certificate of incorporation is passed by the Registrar of companies.
 

 

 

Classification Of Companies Based On The Liability Of The Members

 

• Companies Limited By Shares

These companies have a defined share capital and the liability of each member is limited by the memorandum to the extent of the face value of shares subscribed by him

• Companies Limited By Guarantee 

These companies may or may not have a share capital and the liability of each member is limited by the memorandum to the extent of the sum of money s/he had promised to pay in the event of liquidation of the company for payments of debts and liabilities of the company. 

• Unlimited Companies 

There is no formal restriction to the amount of money that the shareholder/member of the company has to pay in the event of the liquidation of an unlimited company

 

 

Classification of Companies Based on the Number of Members

• Private Company 

Section 2(68) of Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. 

• Public Company 

As per the Companies Act, 2013 a public company is

 

- A company that is not a private company
 

- Has a minimum of seven members, no maximum limit is    mentioned
 

- Has a minimum paid-up capital of five lacks, again there is no maximum limit 

 

A private company that is a subsidiary of a public company, will be considered a public company 

• One Person Company

Section 2(62) of Companies Act defines a one-person company as a company that has only one person as to its member.
 

 

 

Companies on the basis of Control or Holding

• Holding and Subsidiary Companies

In some cases, a company’s shares might be held fully or partly by another company.
 

Here, the company owning these shares becomes the holding or parent company.
 

Likewise, the company whose shares the parent company owns becomes its subsidiary company

Holding companies exercise control over their subsidiaries by dictating the composition of their board of directors.
 

Furthermore, parent companies also exercise control by owning more than 50% of their subsidiary companies’ shares.
 

• Associate Companies

Associate companies are those in which other companies have significant influence.
 

This “significant influence” amounts to ownership of at least 20% shares of the associate company

Classification on the basis of Size of company

• Small company

Small Company u/s 2(85) of the Companies Act, 2013 is as follows:
 

Small Company means a company, other than a public company-
 

(i) paid up share capital which shall not be more than ten crore rupees,
 

And
 

(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed one hundred crore rupees

Classification on the basis of Ownership

• Government Companies

Government companies are those in which more than 50% of share capital is held by either the central government, or by one or more state government, or jointly by the central government and one or more state government.
 

• Foreign Companies

Foreign companies are incorporated outside India. They also conduct business in India using a place of business either by themselves or with some other company

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