The Companies Act, 2013 provides for the type of companies in India that can be promoted and registered under the Act. There are different types of companies in India which are classified on following basis:-
(1) Basic type
(2) Based on liability
(3) Based on incorporation
(4) Other form of companies
Basic Type of Companies in India
Following are different types of companies in India classified on basis of basic structure:-
Private Companies
Private companies are one of the most prominent basic type of companies in India, which are very popular in India. For small to medium level enterprising, private companies are used by people.
As per Section 2(68) of the Companies Act, 2013, “private company” means a types of companies in India, having a minimum paid-up share capital as may be prescribed, and which by its articles:–
(i) restricts the right to transfer its shares;
(ii) except in case of One Person company, limits the number of its members to two hundred:
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that –
(a) persons who are in the employment of the company; and
(b) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
(iii) prohibits any invitation to the public to subscribe for any securities of the company.
The aforesaid definition of private limited company specifies the restrictions, limitations and prohibitions, which must be expressly provided in the articles of association of a private limited company.
It must be noted that it is only the number of members that is limited to two hundred. A private company may issue debentures to any number of persons, the only condition being that an invitation to the public to subscribe for debentures is prohibited.
As per proviso to Section 14 (1) of the Act, if a company being types of pvt ltd company in India, alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, such company shall, as from the date of such alteration, cease to be a private company.
The words ‘Private Limited’ must be added at the end of its name by a private limited company.
As per section 3(1), a private company are types of companies in India, which may be formed for any lawful purpose by two or more persons, by subscribing their names to a memorandum and complying with the requirements of this Act in respect of registration.
Section 149(1) further lays down that a private company shall have a minimum number of two directors. The only two members may also be the two directors of the private company.
Public company
Where large amount of funds are required for any enterprise, public companies are prominent basic types of enterprises in India, which are used for gathering large amount of funds for big enterprising.
By virtue of Section 2(71), a public company are types of limited company in India, whic means a company which:
(a) is not a private company; and
(b) has a minimum paid-up share capital, as may be prescribed
However, a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles.
As per section 3(1)(a), a public company may be formed for any lawful purpose by seven or more persons, by subscribing their names or his name to a memorandum and complying with the requirements of this act in respect of registration.
A public company may be said to be an association consisting of not less than 7 members, which is registered under the Act.
In principle, any member of the public who is willing to pay the price may acquire shares in or debentures of it. The securities of a public company may be quoted on a Stock Exchange. The number of members is not limited to two hundred.
As per section 58(2), the securities or other interest of any member in a public company shall be freely transferable.
However, any contract or arrangement between two or more persons in respect of transfer of securities shall be enforceable as a contract.
The concept of free transferability of shares in public and private companies is very succinctly discussed in the case of Western Maharashtra Development Corpn. Ltd. v. Bajaj Auto Ltd. [2010] 154 Com Cases 593 (Bom). It was held that the Companies Act, makes a clear distinction in regard to the transferability of shares relating to
private and public companies.
By definition, a “private company” is a types of companies in India, which restricts the right to transfer its shares. In the case of a public company, the Act provides that the shares or debentures and any interest therein, of a company, shall be freely transferable.
The provision contained in the law for the free transferability of shares in a public company is founded on the principle that members of the public must have the freedom to purchase and, every shareholder should have the freedom to transfer.
The incorporation of a company in the public, as distinguished from the private, realm leads to specific consequences and the imposition of obligations envisaged in law.
Those who promote and manage public companies assume those obligations. Corresponding to those obligations there are some rights, which the law recognizes as inherent in the members of the public who subscribe to shares of the company.
One Person company (OPC)
“One person company (OPC)” are one of types of private limited companies in India used mostly by single individual, professionals, skilled person.
The Companies Act, 2013 provides for a new types of pvt ltd company in India, in the form of One Person company (OPC), the introduction of OPC in the legal system is a move that would encourage corporatization of micro businesses and entrepreneurships.
In India, in the year 2005, the JJ Irani Expert Committee recommended the formation of OPC. It had suggested that such types of limited companies in India, may be provided with a simpler legal regime through exemptions so that the small entrepreneur is not compelled to devote considerable time, energy and resources on complex legal compliances.
OPC is a one shareholder kinds of companies in India, where legal and financial liability is limited to the company only.
Type of Companies in India on Basis of Incorporation
Following are different types of companies in India classified on basis of incorporation:-
Statutory Companies
“Statutory companies” are kinds of companies in India constituted by a Special Act of Parliament or State Legislature. The provisions of the Companies Act, 2013 do not apply to them. Examples of these types of companies are Reserve Bank of India, Life Insurance corporation of India, etc.
Registered Companies
“Registered companies” are type of companies in India, which are incorporated under the Companies Act, 2013 or under any previous company law and registered with the Registrar of Companies, fall under this category.
Type of Companies on Basis of Liability
Following are different types of companies in India classified on basis of liability:-
Unlimited Companies
“Unlimited companies” are type of companies in India, where the liability of members of the company is unlimited.
Section 2(92) of the Companies Act, 2013 provides that unlimited company means a company not having any limit on the liability of its members, such companies may or may not have share capital. They may be either a public company or a private company. The members is liable to the company and to any other person.
Companies Limited by Guarantee
Companies Limited by Guarantee are type of companies in India, which u/s section 2(21) of the Companies Act, 2013 provides that a company that has the liability of its members limited to such 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, is known as a company limited by guarantee.
The members of a guarantee company are, in effect, placed in the position of guarantors of the company’s debts up to the agreed amount. The members is liable to the company and to any other person.
Companies Limited by Shares
Companies limited by shares are type of companies in India that has the liability of its members limited by the liability clause in the memorandum to the amount, if any, unpaid on the shares respectively held by them is termed as a company limited by shares.
Section 2(22) of the Companies Act, 2013 provides that “company limited by shares” are types of companies in India, having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.
For example, a shareholder who has paid Rs.75 on a share of face value Rupees 100 can be called upon to pay the balance of Rupees.25 only.
Companies limited by shares are by far the most common and it may be either public or private.
Other Forms of Companies
Following are different types of companies in India, which are other forms of companies:-
Section 8 Companies
“Section 8 companies” are kinds of companies in India in which of a person or an association of persons proposed to be registered under this Act as a limited company and proved to the satisfaction of the Central Government that the company –
(i) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;
(ii) intends to apply its profits, if any, or other income in promoting its objects; and
(iii) intends to prohibit the payment of any dividend to its members, such person or association of persons may be allowed to be registered as a limited company without addition to its name of the word “limited” or “private limited” by the Central Government by issuing a license and by prescribing specified condition.
The association proposed to be registered under section 8 shall not be proposed to be an unlimited company. However the same may be company limited by guarantee or a company limited by shares.
Government Companies
“Government companies” are kinds of companies in India, which as per section 2(45) of the Companies Act, 2013, means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by 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;
Explanation.- For the purposes of this clause, the “paid up share capital” shall be construed as “total voting power”, where shares with differential voting rights have been issued.
Foreign Companies
“Foreign Companies” are kinds of companies in India, which as per section 2(42) of the Companies Act, 2013 menas, means any company or body corporate incorporated outside India which,-
(i) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(ii) conducts any business activity in India in any other manner.
Holding and Subsidiary Companies
As per section 2(46) of the Companies Act, 2013, the “holding company” are kinds of companies in India, in relation to one or more other companies, means a company of which such companies are subsidiary companies and the expression “company” includes any body corporate.
As per section 2(87) of the Companies Act, 2013 “subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a kinds of companies in India, in which the holding company –
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:
Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
Explanation. – For the purposes of this clause, –
(i) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(ii) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;
(iii) the expression “company” includes any body corporate;
(iv) “layer” in relation to a holding company means its subsidiary or subsidiaries.
As per section 2(11) of the Companies Act, 2013, the “body corporate” or “corporation” includes a company incorporated outside India, but does not include –
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf.
Associate Companies/ Joint Venture company
As per section 2(6) of the Companies Act, 2013 the “associate company” are kinds of companies in India, in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.
Explanation. – For the purpose of this clause, –
(i) the expression “significant influence” means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement;
(ii) the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
Investment Companies
The term “investment company” are types of enterprises in India which includes a company whose principal business is the acquisition of shares, debentures or other securities and a company will be deemed to be principally engaged in the business of acquisition of shares, debentures or other securities, if its assets in the form of investment in shares, debentures or other securities constitute not less than fifty percent of its total assets, or if its income derived from investment business constitutes not less than fifty percent as a proportion of its gross income.
Producer Companies
According to Section 378A of the Companies Act, 2013, “Producer company” are categories of companies in India, which means a body corporate having objects or activities specified in section 378B of the Companies Act, 2013 and registered as Producer company under the Companies Act, 2013 or under the Companies Act, 1956.
The Companies Amendment Act, 2020 has introduced a separate Chapter (Section 378A to 378ZU) relating to Producer Companies under the Companies Act, 2013 [Amendment effective from 11th February 2021]
Nidhi Companies
A nidhi company is a types of companies in India in the Indian non-banking finance sector, recognized under section 406 of the Companies Act, 2013 their core business is borrowing and lending money between their members.
They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit company. These companies are regulated under the Nidhi Rules, 2014 issued by the Ministry of Corporate affairs.
Dormant Companies
Dormant Companies are types of companies in India, which includes a company which is formed and registered under the Act for a future project or to hold an asset or intellectual property and which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.
Non-banking Financial Companies
A Non-Banking Financial company (NBFC) is a types of companies in India, registered under the Companies Act, 1956 / 2013 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/ purchase/construction of immovable property.
A non-banking institution which is a kinds of companies in India and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company.
Listed company
“listed company” is kinds of companies in India, which has any of its securities listed on any recognised stock exchange;
“Provided that such kinds of companies in India, which have listed or intend to list such class of securities, as may be prescribed in consultation with the Securities and Exchange Board, shall not be considered as listed companies.
As per Rule 2A of the Companies (Specification of definitions details) Rules, 2014 Companies not to be considered as listed companies.
For the purposes of the proviso to clause (52) of section 2 of the Companies Act, 2013, the following kinds of companies in India shall not be considered as listed companies, namely:-
a) Public companies which have not listed their equity shares on a recognized stock exchange but have listed their –
(i) non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; or
(ii) non-convertible redeemable preference shares issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013; or
(iii) both categories of (i) and (ii) above.
b) Private companies which have listed their non-convertible debt securities on private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008;
c) Public companies which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on a stock exchange in a jurisdiction as specified in Section 23(3) of the Companies Act, 2013.
Small company
The MCA for the Ease of doing Business has revised the definition of Small companies by increasing their threshold limits for paid up capital from “not exceeding Rs. 50 Lakhs” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Crore”.
Thus, the definition of small company under Section 2(85) read with Rule 2(1)(t) of the Companies (Specification of definitions Details) Rules, 2014 with effect from 1 April 2021 is hereunder:
“Small company” are types of companies registered in India, which means a company, other than a public company, —
(i) paid-up share capital of which does not exceed two crores rupees or such higher amount as may be prescribed 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 twenty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:
Provided that nothing in this clause shall apply to—
(A) a holding company or a subsidiary company;
(B) a company registered under Section 8; or
(C) a company or body corporate governed by any special Act.