Types of Companies

01/03/2020 0 By indiafreenotes

Companies can be classified on the basis of:

  1. Incorporation
  2. Liability of members
  3. Number of members
  4. Ownership

1. Incorporation

  • Chartered company
  • Statutory company
  • Registered company


  1. Chartered company

 The company which have formed and incorporated under a special charter granted by the king or queen.

Eg East India company. Bank of England.

  1. Statutory company

These are companies which are created by means of a special Act of Parliament or any state legislature. Eg RBI, Railway

  1. Registered company

Company formed and registered under companies Act 1956 is called Registered companies.

2. Liability of members

  1. Limited company
  2. Company limited by guarantee
  3. Unlimited company

1. Limited company or company limited by share

Majority of registered companies will be company limited by shares. In case of limited companies liability of members will be limited to the amount unpaid on the shares.

  1. Company limited by guarantee

Here liability of each member is limited by the memorandum to such amount as he may guarantee by the memorandum to contribute to the assets of the company in the event of its winding up.

Such  companies are formed for the promotion of art science, culture, sports etc.

  1. Unlimited company

A company not having any limit on the liability of its members is termed as unlimited company.

The members are liable for the debts of the company at the time of winding up.

3. Number of members

  1. Private company
  2. Public company
  3. Private company

1. A private company is a company

  • Which restricts the right to transfer its shares.
  • Limits the number of its members to 50.
  • Prohibits any invitation to public to subscribe its shares.
  1. Public company

A public company means a company which is not a private company

4. Ownership

  1. Government Company
  2. Foreign company
  3. Holding and subsidiary company

1. Government company

A company is said to be Government Company when 51% of the paid up capital is held by the central government or by any state government or partly by central govt or partly by one or more state govt.

  1. Foreign company

A foreign company is a company incorporated outside India and having a place of business in India.

  1. Holding and subsidiary company

A Company which controls another company is known as the holding company and the so controlled company is known as subsidiary company.

One Man Company

This is a company in which one man holds practically the whole of the share capital of the company, and in order to meet the statutory requirement of minimum number of members some dummy members like his wife and son holds one or two shares each.

Distinction between public company & private company.

Private Company

Public Company

1. Minimum no of members is 2 Minimum no of members is 7
2. Maximum no members is 50 No maximum limit
3. Minimum paid up capital is Rs 1 lakh Minimum paid up capital is 5 lakh
4. Name must end with the word ‘Pvt Ltd’ Name must end with the word ‘Ltd’
5. Can commence business immediately after incorporation It shall have to wait until it receive the certificate for commencement of business.
6. It cannot invite public to subscribe its shares and debentures It can invite public to subscribe its shares and debentures
7. Minimum subscription is not required for allotment of shares. Minimum subscription is required for allotment of shares.
8. Need not hold statutory meeting of the members. It has to hold a statutory meeting and file a stat: report.
9. Quorum required for a meeting is 2. Quorum required for a meeting is 5
10. There is restriction of transfer of shares  Shares can be freely transferred.
11. Not required to issue prospectus. Must issue prospectus.
13. Two directors Three directors