A company is a legal entity formed by a group of individuals to engage in obtaining a common goal and operate. A company is a legal entity that separately from its legal owners of the company. The companies act 2013, replaced the companies act 1956 makes comprehensive provision to govern listed and unlisted companies in India.
Different Types of Companies
Companies can be classified into different types based on the incorporation of the liability of the members of that company, and several members.
1.Companies based on Liabilities
2.Companies based on members
3.Companies based on Control
4.Other Types of Companies
The shareholders of some companies might not pay the entire value of their shares in one time. In these companies, the liabilities of members is limited to the extent of the amount not paid by them on their shares.
In some companies, the memorandum of association mentions amounts of money that some members guarantee to pay. In case of winding up, they will be liable only to pay only the amount so guaranteed.
Unlimited companies have no limits on their members’ liabilities. Hence, the company can use all personal assets of shareholders to meet its debts while winding up.
These kinds of companies have only one member as their sole shareholder.
Private companies are those whose articles of association restrict free transferability of shares. In terms of members, private companies need to have a minimum of 2 and a maximum of 200
The public companies allow their members to freely transfer their shares to others. The company needs to have a minimum of 7 members, but the maximum number of members they can have is unlimited.
The 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.
Associate companies are those in which other companies have significant influence. This “significant influence” means the ownership of at least 20% shares.
The other company’s control can exist in terms of the associate company’s business decisions under an agreement.
Government companies are those in which they have 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 the state government.
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.
Certain companies have charitable purposes as their objectives. These companies are called Section 8 companies because they are registered under Section 8 of Companies Act, 2013.
