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CLASSIFICATION
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34
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and
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company company, the and (that theymembers ARTI-IN
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minimum
No- shall! of means shall,
In of th e 35
 (NIT| INTRODICTION
LYpES OCOMPANIES
37
Publle Company Basts
PrivateCompany
pesonLtd. as<last word ofthe name Constitution of Private Company PsblieCompany
Rasis of onc
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companyand
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sonaily present if number
ation of members exceeds 5000.
Differences relating to shall form the quorum.
6
directors
* Minimum 2
Minimum 3 privileges and exemptions to private companies
Number permanent di- 2/3rd are subject to retire- The Central Government has notified that certain
Can have ment by rotation provisions of the Companies
Tenure Act, 2013shall not apply or shall apply with such
rectors.
appointment can To be voted separately. exceptions, modifications and
adaptations to a private Company, as specified by June 5, 2015 notification as
* Enbloc nended notification dated 13/06/2017 (as stands corrected by
by
Resolution appointing all
be done i.e.
through a dated 13/07/2017). Privleges (as given by the Act itself) and corrigendum
the directors exemptions (as
notified by above notiication) enjoyed by private companies relate
singie resolution. to number of
nombers, directors, constitution of various board committees, quorum in
Company can add to Public company cannot general
Disqualification of di- Private disqualifications add to the list of disquali. meeting, managerial remuneration etc. as explained in table on difference between
the list of fications for appointment private company and public company.
for appointment of direc-
rectorS

of directors provided by
tors. provided by Sec.164. Sec. 164.
Everylisted publiccompany
*Appointment of Inde- Private company need not| andotherpublic companies
pendent Director appoint Independent Di-
rector.
meeting certain criterion,
need to have Independent
Directors on its board.
Everylisted publiccompany
"Appointment of woman Private company need not
Director appoint woman Director. and otherpubliccompanies
meeting certain criterion,
needto have woman direc
tor on its board.
Conversion of publiccompany into private company
For the purpose of conversion, Articles of Association (A/A) will have to be altered
for insertion of conditions required to be incorporated in the articles by a private
company.Alterationin the articles can be doneby passingspecial resolution in general
meeting. Because conversion of public company into private company is a serious
matter as it might involve the interest of many small investors so the Sec. 14requires
that such alteration in articles to bevalid needs approval ofthe Central Government
(power of this approval is now delegated to Regional Director by notification
18/12/2018). Final authority of approval or rejection shall be with Regional
Director. Approval of RD is sought through Form RD-1 (Form RD-1 as substituted
will
w.e.f. 2nd August, 2023). If RD finds it incomplete or detective then intimation
removal of defects. Conversion shall not be approved by him in case if
be given for
the company or
any inquiry, inspection or investigation has been initiated against
prosecution is pending against the company under the Act (w.e.f. 25/01/2021).
any
 through thEnterprises
an OPC
entrepreneurship. in The CLASSIFICATION
Company
(1)
ONE 5.
from Name if 4. 3. 2. fol1.lows: Steps
one atnature. concept
exemptions 0PC any PERSON its exiPeristinpgheral FormSpeciAltaelration Conversi on teitName
to through declarations under numberappr(Incorovalp.oration).
The Other
registrarAltered 38
pointExamples:
Pvt. which name, of INC-27, be of
at of
the
resolution taken the conversi
Compani es onperipheral
any ofLtd. O company number changes of
given point time COMPANY
PC
(OPC). Data shalOPCl was only
has
ON through to A/A ofprivate
of
fo r webform
company
key
by members Forarticles m
in

to ofand introduced one THE was Imay filedbe for toconversion

r Amendment process
shal l y
RUN. (Incorporation) No. along
OPC. similarly
time. informatica A webform less deletion
alteration shalmanageri
l a l requi r ement if s
person be person (SEC.
a BASIS changedbethanrequire with company be must was
it INC-27
with
Procedural separate byZ(62)F Registrar changed Rul es,
RUN. increase of of private
of more wiapproval thin
personcannota
the asa and 7 personnel be
ServicesCompanies OF
legal member. "One SIZE accordingly 3 in of in
specifications:
A/A into 2023 Rules, inthan for INTRODUCTION
UNITI:

companypublicaccordingly
a
be respectively;Companies;
nnumberofmembers and complianceconversi200 onperiod of
requirementscannot a entity general orw.e.f. 2014 Regional
member Pvt. Person of
be Ltd. and Act,
23/1/2023
director as
and
15
a
by meeting; company
public
intoas by amended delisting
wi th may days.
Di rector
nominee (OPC), ofprivate 2013 Company" deleting adding to the also
are more whibech
Private' the Companies theby requirea shall
to file d
corresponding by
simplified encourage wor d company
thancompany
Kasturba
of means word
requires listed be
'P rivate' with
more one directors reduction filed
are Form company.
a certain with
for rules
021
wef. he
in

4. 3.
to
Sole
alteration Suchconsent thecompany by
2 Provisions
RegardingOPC (in
be Itshallmanner any
Change Withdrawal by
memorandum and atanddeath with of 1.
articles.
Nomination
Member change company him
member time giving the
the One case
of (i.e. be as time his
orPerson of
of new change of wTitten hisprior OPC
the in the the the Nomination:
may notice
of Resident, MemberOne
Ceasing
for nominee.
shall change,
new duty of incapacity
incorporation written by (Companies
memorandum. th e bethe Consent: of consent Company the
Resident
reason intimate
name nomination) of
prescribed. withdrawal. residency
to any, ifthe name Subscriber
consent
to
days CH.

be member of MinorNot a ofIndian Natural

Citizen Person 3:TYPES
such
a
of
the in ofThe Such contract
such shall to India (Incorporation) Figure3.1
Member: th e such of 120 limit and
as person Registrar bythe of member other
+
the who
mention OF
person or or COMPANIES
death indicating name One other person
One become shall,Member days)*
has
otherwise
Nominee
One
Where
or shall any of person One of
Person Person shall inthe been
Rules,
ncapacity the may
the thename
be ofOPC:The
not such Company in
other Person Company member event reduced
the the by withdraw filed 2014)
bechange giving of
sole memorandum person with ofthe
deemed Company ofthe from
memberto to notice along subscriber'the memorandum
the other
contract, and intimate
nominated his 182
Registrar
company person,
towritten in may consent with
ceases be such 39
his an and the at its s
 INITI:INTRODUCTION
CH 3:TYPES OP COMPANIES 41
another

nomineeshall
become
memberand
nominate
person withi, (5) Amount of Penalty: Penalties are
pliance of any of the halved under-Sec. 446Bfor non-com-
minimumnumber
of
directors in a maximum of 2 provisions of this Act applicable to OPC subject to
15 days.
AccondingtoSec.
149(1)(a),the lakhrupees
in case of an officer in case of a Company and one lakh rupees
who is in default
5. such Co. as thecase may be or any other person in respect of
0s one (w.e.f.22/01/2021)
converted into Sec. 8COmpany (6) Signing of Annual Return: In case of
Notes: incorporatedas or nual return shall be OPC: and Smal| Company, the an-
cannotbe
OPClicensed is no Company signed by the Company Secretary or where there
() (ie. company). Secretary, bythe director of the company while in case
carryout
Non-banking Financiainvestmentactivitie: of other companies, annual return shall be siøned by a
OPCcannot
(i) regardingConversion:
Provisions
the Company
Secretary or where there is no Companydirector and
Secretary, by
Conversion of One Person Companyintoa Public company or a Private Company Secretary in practice.
(7) Abridged form of Annual
inserted by the Return: The Second proviscnto Sec. 92(1)
company:
companyshall alter
its
memorandum and
articleseffec Companies (Amendment)
'abridged form of Annual Return' for OPC and Small Act, 2017 providing for
(1) The One resolutionin accordance with.Sec.122(3)
Person ofthe Act g togive into force through Company has come
(through Form MGT commencement
changes incidental notification dated 05/03/2021
passinga
tothe conversion
andto make
necessary
convertedinto a Private or Public
thereto. 7A).
(2)SMALL COMPANY [SEC. 2(85)] "Small Company" means a company, other
(2) AOne Person
company may be
company registered under Sec. 8 of the Com.
Act, after
pany, otherthan a membersand directors to than a public company having
increasingthe minimum
seven members
number of
and two or three directors, as the case twoandor
may be, () paid-up share capital of which does not exceed rupees 4
crores or
maintainingthe minimum paid-up capitalassperthe requirementssofthe higher amount as may be prescribed which shall not be more thansuch
ten
Act for such class of company (presentlythere is nosuch requirement crore rupees, and

of minimum paid-up capital) and by making due compliance of Ser (in turnover of which as per profit and loss account for the
immediately
of the Act for conversion. precedingfinancialyear does not exceed rupees 40 crores or such higher
conver amountas may be prescribed which shall not be more than one hundred
(3) The company shall file an application in e-Form No. INC-6 forits crore rupees.
sion along with fees as provided in the Companies (Registration officee
and fees) Rules, 2014 with altered e-MOA and e-A0A.* Figure 3.2
(4) On being satisfied that the requirements stated herein have been com.
plied with, the Registrar after examining the latest financialstatement Small Company (other
shall approve the form and issue the Certificate.* than a public company)
Exemptions to OPC
(1) Holding of AGM:As per Sec. 96(1) 0PC is exempt from holding Annual
General Meeting (AGMJ). Paid-up Capital AND Turnover
(2) Preparation of CashFlow Statement: 0PCneed not prepare Cash Flow
Statement.
(3) Rotation of Auditor and Audit Firm: OPC is not Not exceeding Higher Amount Not or
Higher Amount
auditor and audit firm. required to rotate 4crore* prescribed (not exceeding prescribed (not
exceeding? 10 crore) 40 crore*
exceeding? 100 crore)
(4) Board Meeting: PC can conduct board
agap of not less than 90 days meeting every half year with
between twO meetings.
As amended by the
*We.f. 15/09/2022 as amended by the Companies (Specification of Definitions
Companies (Incorporation) Amendment Rules, 2023 w.e.f. 23/1/2023. Details) Amendment Rules, 2022.
 IINITI:INTROPMCTION

CH. 3:TYPES OF COMPANIES

42 43
Abridged form of
It needsto
be noted
that
subsidiarv
company; (6)
ed by the
Annual Return: The Second
compann or a
(a)a holding registered underSection
8;or of Annual
Companies
Return' for (Amendment) Act, 2017
proviso to Sec. 92{ij inserl-

Company providing
specialAAct cannot be OPC and Small for 'abridged form
byany a commencement has come intoforce through
( a
compan
comnpan or body
corporate
governed
smal Exemption from notification dated 05/03/2021 (through Form MGT 7A).
a (7) the Demat: Rule 9B
& recently added
(
compan.
Figure3.3
to Companies
issue ofssecurities(Prospectus
(w.e.f. 27th October 2023)
Allotment of Securities) Rules, regarding
in
applicableto dematerialized form by
'Small Company. private
companies is not
Exceptions
CLASSIFICATION ON
THE BASIS OF
TERMS OF VOTING
POWER EXTENT OF CONTROL IN
Body Corporate governed
1. Associate Company
Holding or
Subsidiary
Sec. 8
Company
by Special Act
means a
Company, m
[Sec.2(6jj:"Associate
influence,but whichcompany
is not a
in which that Company" in relation to another
other companyhas asignificant
Small Company is a
private influence and
includes jointsubsidiary company of the
company having such
can be said that
a
Thus to conclude it regarding paid-up share capital and turnover as laid
company which a
For the purpose of this clause venture company.
Corpordownate
satisfies the criteria Section 8 Company or Body ) the
by Sec. 2(85) and
holdingorsubsidiary or. expression
per cent of totai"significant influence"
voting power, or contromeans
as Small Company. control of at least
ofor particisaticn in twenty
treated
governed bySpecial Act are not
decisions under an agreement; husiicss
Exemptions to Small Companies (i) the expression "joint
(1) Preparation of Cash
Fiow Statement: Small Company need not prepare parties that have jointventure"
control of
means ajoint
arrangement
the arrangement whereby the
Cash Flow Statement. assets of the have rights to the net
(2) Rotation of Auditor and Audit Firm: Small Company is not required to arrangement.
Holding Company and:
rotate auditor and audit firm. Subsidiary Company
Holding Company |Sec. 2(46)]:
(3) Board Meeting: Small Company can conduct boardImeetingevery halfi year means a company of which such In relation to one or more other companies,
with agap of not less than 90 days between two meetings. ing company simply companies are subsidiary companies. Hold
means a company which has
subsidiary companies. a subsidiary
(4) Amount of Penalty: Penalties are halved under Sec. 446B for non-comnl: company or
ance of any of the provisions of this Act applicable to Small Company subiect Subsidiary
in relation toCompany [Sec. 2(87)):
to a maximum of 2 lakh rupees in case of a company and one lakh rupees in any other company (that"Subsidiary
is to say theCompany"
or "Subsidiary",
case of an officer who is in default or any other person inrespect of
such Co acompany in which the
holding company: holding company), means
as the case may be (w.e.f. 22/01/2021)*
() controls the
(5) Signing of Annual Return: In case of OPC and Small composition of the Board of Directors (BoD); or
return shall be signed by the Company Secretary orCompany, the annual (Meaning of controlling the
composition of BoD: The
where there is no
Company Secretary, by the director of the company while of a company's Boardof compositionby
Directors shall be deemed to be controlled
ompanies, annual return shall be signed bya director andinthe
case of other another company if that otier company by
Secretary where there is no Company Secretary, by
or Companv ercisable by it at its discretion can appoint exercise of sume power ex
or remove all or a majority
in practice. Company Secretary of the directors; Note: It
needs to be understood that this
by virtue of voting power but it may
may also arise in isolation as follow
This lesser penalty provision
in loan agreement [as
happened in M. Velayudhan v. Registrar condition
also. under Sec. 446B is applicable to Companies (1978)].Therefore, it been of
Producer Company and Start-up
Company condition by law for determining thehasstatus incorporated
of holding and
as a separate
subsidiary)
 Rules, banking
orbeyondLayers 4

government a
2017] (
company two. of (}
subsidiaries: holding
company
2oipany
(refer This (the (then (Figure3exenri
4) its ses
at

company. or company on
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a company even Company
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figure
non-banking
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shal! CompanvLtd.)(B Holding orcontrorols
Holding
3.6). (The
C
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if D Subsidiar together
Subsidiary is (Figure deemed
Ltd. Together
50%
Companies
not
becomes becomes control Subsidiary
Company
Company
Holding and INTRODUCTION
more
UNIT I
companies
Figre36 financial Figure3.5 3.5). CompanyLtd. Dof
applicable
CompanyCompanyCompany voting hold Ltd.(A
) Figure3.4 with
than
company
financial
subsidiary*(condition
applicable
tonot Not subsidiary is to one
subsidiary
of be
company
a
banking more (Restrictions
company to shall (C (BLtd.)
(A another
subsidiary a
power more
than
Company
Ltd.(C
)
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one-halfmorofeorthe
or than anot ofLtd.) Ltd.) of in
a
company holding Company
government two
or have subsidiary Company of
its total
or company
layers on an
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insurance
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non-banking
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a

sdiaryidiarcorporat The applnot y. Note:

3. 2.
asFor 5/6/2015. For
issued Subsidiary
Note:
1. subsidiary
India partly
AMSwwwwwww**o0oooobAe.
of "Government
aand orby fifty- cOMPANY.
Government
any one 25/6/2014).datedcompanyfoification
r a company ted subsidiary
3. 2.
Nete: Where Where ofa
in
the

Where
thsihsareSubs
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i!
y baonydy e. subbeysoidndiaries
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by
th e for deceased de its two
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purposes company one centofCompany
Bharat
Government [Sec. ON
purpose
given
the The the shaii company "Company
the holding
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Company
Indian
Wholly
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Company purpose
in shares
company subsidiary
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subsidiary
of or THE 'fiduciary asowned
a another by member ccipeay. either
power'
governmentcompanies, Heavy more the of not company per
of of determining Circular of held law
this such paid-up BASIS tofthe to tor subsidiary
dated Electricals State ormeans determining
company companycompany of not by CH.
whereclause, capacity by company the itseif hold th e Of 3:TPES
Government
a
Governments, 2(45)] dated companyholding a apply acquiring its
2/3/2020) company Governments, share OF holding shares purpose
shares suffix or country
the"paid-up GOVERNMENT any relationship in (e.g. isholds hoids to not OF
Ltd., a'fiduciary
27/12 the througn COMPANIES
Ltd' capitalis comparty. a säch case: a in to
with company holding-subsidiary in
shareholder
or company;
such cf foreign then
is Madras or /2013). Capaciy its he
also is company. power Sec.
differential required andpartly chares shares its
Holding 2(46) Indian counted
Share held of company
a Refineries associate
capacity nominees
government includes Similarly, exercisable or
by by in oftrustee) even as as and rule tor
Capital" as Examples: SHAREHOLDING the twhich
he trustee; a the Company
voting per Central
Central
a company' shall before
legal shall Sec.subsidiaries
2(87) having
counting
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Ltd.
company relauonShip the two
shall notification not shall by representative
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not
it it or not (Sec. layers
be Government,
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construed
have Authoritywhich counted held anotherbe 19) shall 45
dated than clar- cuun any
been by of
is a
 46
which of Inshall
However, (c) (b)
Pr(a)ovisi.ions Mazdoor 5. 4.
India the
the case fill Comptroller ny who one shall, a Incorporation in
and "Filling
CAG
meeting.
general alshalDil recton
Provisions governEmplmentoyeesGovernment
aatierolerinement
r
accounts
shall it
Auditor-General
within in Government
whose hundred "Appointment
60
meeting ors
its "Appointment
of case, shall in days
appoifaint lure, ofand Regarding Union
of
appoint
Government
company,the of
accountsCasual hold respect of registrattheofioncompany,Regarding Gover serv ants
nment Compa
of
next the and eighty
office company,
thennotif
who such (3) Aunitor State nyv.
the the CAG
30
Auditor-General of of Appointment shall company on of
Government
Company
s (DnebnatCompani
AuditorGover hv Bihar). INTRODUCTION
Vacancy" financial aiditor thFir st ofis
of are til daysSubsequent cf
days.
companyauditor does
India subject the from BoD in Auditor
First holinformation
d
Figure3.7 within company
Ccncral
the frst es dif erent UNIT |
not year,
the days30
next
offi c e
shai l
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Audi
t o r
tor ofment
are and [Sec.139(8)(ii)]
within conclusion Comptroller
the of ( CÁG) Mining
requireddirect
fil
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of
to
commencement appoint Auditor" Auditor til sixty appoi
th
by
e
nt of (Sec.
and shall
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139(7)]: employeesGoveInment
Comptrollerand
vacancy,
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not if the
days
board, Allied
India be
by of in wi th in on
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to days. bean th[Sec.139(5)]: e
auditor
anand conclusion at wihis thin
appointed Company Machinery of
auditor
filled Auditor-General
annual an faihe
be
auditor the :
In MembersEGM in members lure, the (Heavy
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extraordinary of
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The
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of
appointed
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In
the
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fthethirty
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ion) Engineering
company days. from hc of t
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auditor General compa
by case annual gener Boardh Co a
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In
ion Meaning we.l. The Producercompany This 56
eFIsCCL fhoer Action
The

relatable land
generation,
)
Members;itsof
(e)
development others;
(d) () (b) matters,
(namely:
a) -The tance,company
mutualassis11/02/202 Companies
Companies concept Exampl
ASSOCHAM.
time Sprredinpuniundershahle
was and
renderingtechnical and
providing mainlyfacilities):ing
manufacture, vinting, of the
and
processing The goods
this keting objects
of
production, Producer Company 378B of in
pic(kedSecond) default
anProducer
the
water to
clause
Producer d of that Sec directnrs
primary
to
education its canning selor
ling, the of 1).
actiCompani
ve The es (Amendment) up
Producer shall the 447 with
transmission and Members; sale either services Company registered
harvesting, Producer by ine and
resources,
all
services, or
including
and Company
by export
means
Company
amembers,
concept c Amendment the he
liableaffairs casein25000 tever
produce; other
the
onsupplypackaging itself for body
as Companies Company
Company (Sec.Producer [Sec.limited 2013 Act,
Act,
for theof
NTPODMt
1INIT TION
their and activities their of
procurement,
'primary ofProducer of of
ficet
consultancy mutual of
preserving,
ormay
378B) corporat378A()|
e 2020 Act, actcompanv
ion Fravd lakh.25
(.e. use,
distribution machinery, through
of carrybenefit; y through Act, 2002 was of
providing
for assistance
produce Companyhaving shall return, inserted under the
conservation
other any produce'
on
relate
2013 by Company introduced Sec. were
the
services,
equipment
drying,
of
grading Sec.
patronage 378A new from insertion company
astructure);
power,
of
promotion
principles institution;
its of
specifiedthin
e the
of
al
to
a obj
under ects
based
is
Chapttoer the offor conducted
447.
and training, distilling, activities pooling,
Members; or specified who
ommunications
revitalisation Members any ractivitiesthis or and
on Sec. Secs. the erstwhile fraudulently, in
is
of to or
handling, the of
Act. patronage th378ZUe n XXIA 581A first
the
research consumables
its (ie. default
interests Memberg brewino orfollowing
principlesProducer on Act
to
process. import (notified ebonus. 'as shall
S812T 58by ,every
and m it
of is th¡ h
of

Formation by-products(i)
egistration, complied
for with in
thereto, Producer
2.
If a its and or (a)
the objects more Any
1.
in
(w) (iv)
toany any any industries;
such
()
ofany consumers;
or or
or
other Prim'ParyriMemanaryingMembers Every
producere-vegethortatioculn,tuprre,oduce
(0 2.
(k) () (0(h) (9)
measures
activity of product manner;
financing other
ciples to inany he insurance
Registrar
Producer
Producerinstitutions, ten
sub-clauses product
theproducts; primary Produce Producer specified
of' any
or promot
welfare ing
decided
of er.oth
he of aforesaid of of for clauses
shall, Company specified Producer or which resulting persons floriculture, farmers, other
resulting carrying in mutuality activity, techniques
institutions, more activity bee
Company of hy t of
issuewithin
respect is (i) or under financial clauses
procurement, (a) the producers
satisfied individuals, is raising
in intended activities
to engaged arising Produce' out to CHI
a under
section from trom or andancilary () Board: or
Certificatethirty of Company (iv ) Sec. (a) facilities
pisciculture,
service and any shall
services to mutual or of or rPES
registration that thisdesirous or an any from () other
improve ancillary to or 378A)) of mutuality their
days 378B or of in farming deal
Sec. its processing, or
(c) each increase anything OF
all Act. thandloom,
he whicagriculture
h which assistance incidental
activities
for COMPANIES
of of the primarily
objects to primary
may of a and the activity above viticulture, 378A()) its the
corporationrequirements
the and forming them of
combination
the
promotes
plantation means Members.
include
heneft
and
receipt form its quality ancillary activities, specified to mutual
prnduce
matters being production
Registration handicraft (including h marketing amongstwhich any
witextending
an a that the of
Producer forestry, the of
ofincorporated of a thereof. thereto; rproducts), in may the F assistance:
Members
underprecedent
the
of
producer,
ten mayincluding interest produce
this or
the
promoteprin-t
activitieshe
documents this or of and husbandry,
animal of
this
Act. Company more anything assist or
or products,
forest Section. creditother Members
activities as
and Act 378C)
(Sec.
or cottage
other of
the or Activeitsof may
Company individuals (b) from facilities referred
incidental have referred promote farmers in
required having any any 57
been any
two
as
 UNITI:INTRODUCTION CH. 3:TYPES OF COMPANIES 59
liability ofits Members application
S8
formed shallhavethe
unpaidonthe
shares
imite 2. Every shall be
specialaccompani ed ofby: not less than
3 A
br the
memorandum
be
so
Producer Company theamount,ifany,
to
termeda company
limited by shares.
promoters all costs
respective, (a) a copy of the
members of
inter-Stateresolution,
producer Company underco-operat
this Act:ive
two-third of total

theassociate
held by them and reimburse to its Society, for its incorporation as a
may companysubject to
4. The Producer
Companv
Co
with the promotion
and
registration
meetingofthe
ofthe
Members. apprOva (b) a statement
() names
showi
and
ng-
addresses or the OCcupation of the
at its first
general private limited company: On Chief Executive, directors and
company shallaways be abecome abody corporate as if Teg
it is a co-operative; and
if any,
by whatever name called, of such
5. Producer Company shall containedinthis
istrationthe Producer to whichthe provisions
company number of Members
thereof , Part appy,
and the
(i) list of
members of such inter-State
privatelimited
Pro co-operative society;
ducer Company
limit tothe
without, however, anv under any circumstance, whatsoever,
shall not,
become a public
limited company under this
Act.
become (c)
astatementindicatingthatobjectsinter-State
in anyone or more of the the
(d) a declaration by specifiedco-operativesociety
in
Sec. 378B;
is engaged
be deemed to DIFFERENCEBETWEEN
PRODUCER two ormore directors of the inter-State
TABLE3.2
COMPANYAND PRIVATE
COMPANY co-operative
ani
society certifying that particulars are correct.
Private Company 3. When inter-State
words co-operative society i
is registered as aProducer Company,
Basis
Producer Company
Usually based on profit
the "Producer Company Limited" shall form part of its name.
Based on principles of
Mutu- motive 4. On compliance withthe
Principles
al Assistance and
patronage
co-operative
hirty days of the receiptrequirements the Registrar shall, within aperiod of
of application, certify that the inter-State Co-oper
bonus. (based on ative Society is registered and thereby
principles) incorporated as a Producer Company.
Minimum-2 and1in case of OPr Examples: Khujner Agriculture PC, Samarth Kisan PC,
2 Directors
Minimum -5
Maximum - 15 Umang Mahila PC.
Maximum - 15
within 9 months fre Figure 3.11
3 Related to First AGM within 90 days from First AGM
the closure of financial year
AGM the date of Incorporation Formation of Producer Company
Quorum -1/4 of the total number| Quorum -Zmembers personallv
of members [Sec. 378ZA(9)] present.
Notice - 14 days' notice [Sec. Notice-21 days' notice
378ZA(7)] Application for Registration by Application for
4 Number of Minimum required for formation| Minimum-OPC - 1 other () 10or more individual producers Registration by Inter
members (a) 10 producer individuals or Private Companies - 2 or State co-operative
(ii) any two or more producer society to become
(b)two producer institution, or Maximum - Private Companies
(c) combination of10 individuals other than OPC 200.
institutions Producer Company
or
and producer institutions (iü) a combination of ten or more
Maximum - No limit
5
individuals and producer institutions
Type of Only equity shares in proportion Equity shares or preference
Shares to patronage shares
6 Conversion It cannot be converted into public| It can be
converted into public Benefits to Members (Sec. 378E)
Company company
1. Receipt of Value for the Produce: Subject to provisions made in articles, ev
Option to Inter-State Co-operative Societies to ery Member shallinitially receive only such value for the produce or products
Companies (Sec. 378|) become Producer
pooled and supplied as the Board of Producer Company may determine, and
1. Anyinter-State co-operative the withheld price may be disbursed later in cash or in kind or by allotment
society with objects not confined to one of equity shares, in proportion to the produce supplied to the Producer Com
make an application to the Registrar for registration as Producer Statemay
Company.
 60
The exchange.
termed
be Thus
equity

shares
(c) (b)
toPublic (Issueand Private
on (i) (in
(a) shalprovi
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Compani
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CLASSI
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ted ON
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3. 2.
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conclude, private beAs company
as non-convertible
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both placement
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companies into
inserted
(speci fi c at i o n to :
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SEBI
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ON
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THE meeting. patofronage
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of
Contribution:
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Stock Regulations,
means not
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Shares)
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companies,
their Sec. nitions as its BASI
defi of S busi ness 3782J. allo t e d deci ded to
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SEBI listed 252)brings listed securities the OFshares, of return.Every extbyent
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-
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and u s bonus
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India.
in non-convertible stock and on equity following listed Producer
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company but Securities), the any,
are exchange
2008; Listingshares private
2013;
Second
to on | Act, as
remaining
making after in shall, such
All shares Sec.
STATUS Company,
maeither
y inreferred
Member s ,
other listed companies classes of recognisedany 2013 accordance on and
manner
which ofplacement
orissued inserting
2(52)
Amendment be
inNon-Convertible
2008; listed the
companies overseas.
terms
debt on
by
decided in into
oi share
has orrecognised a proportion Sec.37
on
securities Company with wi subje
listed
of privata basis by 3784, capta
SEBI
Rules, stock the cash the
shall its in a

Total (B) (A) ) mitLie(bs)dmite(da) which:

Compani
nLi
(cCompanies Of
Number
Starlink Elon
broadband
local (Source activeas
Non-Government
Government
CompaniesCompanies (2) (1)
(1) TotalCompanies
Companies
Total Companies
Unlimited
Musk's numberCompanies(2) Government
Non-Government
MCA, : Companies
Active of
Satellite on
Private Companies
Limited
Publiclimited
Monthly 31st
space of
Communication October,
51,829
operations. Limited by
COMPANIES
CH.3:TYPESOF
X
Information by by
has Shares
2023. One GuaranteeShares
Knowledge
incorporated Point Companies
Person
Pvt. Bulletin
Ltd.
Companies
init's on
Source: India Corporate 15,48,116
15,47,428
wholly 67,760 1,595
on 688
ET
1st (OPCs) 16,23,791
Telecom, Sector,
Nov.owned 16,17,471 16,17,471
were 69,355 11,025
2021to October, 295
Nov. subsidiary
2, 61
2021. start 2023)
 be Thus
equity
termed (c) (b) l so. 2021 The exchange.means Listed
(a) shalprovi
CompaniCLASSI
es FICATION 60
3. 2.
shares Public (Issue Private
to on (i) stockPublic not Compani ng es Members or tomay
conclude,
as
private (i)
non-convertible
terms
(0
be
comiAs
company:
company
a
listed t hei
by r provibe ionprouvissionscontEverribvuteLid.mited suchtopany
sSurpl
Unlisted companies andcompanies non-convertible
both
Redeemableplacement exchange
companies
on considered per into not
part i c way
atipatdiof
sobursed
i n such during
any
listed
Listing categories
placement
SEBI
of inserted
(specification
force to
be which As allotment payment the
Pat r
for as
containedMemberreceive the
onage
condi
Ret urn tions
recognized
companies. basis but general
which of Preference (Issue havewhich listed as considered per ON as onfinanciasal
company Debt basiswhich of proviso w.e.f. has Sec.
pat ronage
in only
Stock Securities)
are
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redeemable
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in
and
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listed have 1/4/2021 of
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company but Securities), on equityfollowing
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(Source active Total (A) Companies

Unlimited
Companies ) mi(tLibe) sdmite(ad)swhich:
(LicComopani
oCompani of
Number of
local Elon
Starlink
operations.
broadband (B) Companies
Non-Government
Non-Government
Companies(2) Companies (2) Limited
(1) Government
Companies
Total (1)Public
Total
Musk's as Government
number
on Companies
Satellite MCA, :
Companies
Limited
Private limited Active
Monthly 31st
space of
Communication October,
2023.
51,829 Companies
COMPANIES
CH.3:TYPESOF
X
Information by
has Shares by by
One Guarantee Shares
Knowledge
incorporated Point
Person
Pvt. Bulletin
Ltd.
Companies
init's on
Source: India Corporate 15,48,116
15,47,428
subsidiary
wholly
owned 67,760 1,595
on 688
ET
1st (OPCs)
Telecom, Sector, 16,28,791
Nov. 16,17,471 16,17,47 1
were 69,355 11,025
2021 October, 295
Nov.
2, to 61
2021. start 2023)
 [Hint: Q
Q11.
OUESTIONS 62
PRACTICAL
PROBLEM
Q1. 12. 10. Q Q9. Q8. Q7. Q6. Q5. Q4. DefineQ3.
Government Q2.DefineQ1.
'Private
Yes](i) (ii) Companies What Write formed.DefineB.Com. for Define What What 2013? What
2023)(H) Define Explain company Write
No, () (iin) (ii) () XYZ (e) () (c) company
Dormant (b) Small(a)
Ltd. th e
Holding Can Pvt. ABC What is a conversion
short a a
are do dothe Producer Associate OPC notes
ABC Ltd. Pvt. holds foreign a Producer
(DU, private private the you
Act? mean
you by and
is meaning on:
&Subsidiary, Pvt. buy has their 60% noteB.Com. features mean its Company.
company? If company company company
more been
Ltd.relationship? so, onCompany company of by
conversion
of toicensed 2022) Foreign of
provisions
Company.
Explain
continue holding the 'L a Producer
what private of
shares
voting licencedCompanies
Holding
Ac
(DU, (DU,
Is (B.Com. and and and How
extent? it INTRODUCTION
UNIT I:
B.Com. B.Com. (DU.
to of 5 Company. explain companydistinguish
necessary state Company? company
regarding
Company.
and is
hold XYZ % power
of (H)
company? B.Com, private
the Subsidiary
Company
equity
stake Ltd. in 2022, the
provisions
into .State 2019)
provisions (H),
now? ABC for it How 2023) 2022) company
already capital objects from
Pvt.
it 2023 a
to public is
a
of Ltd. comply Modified] for producer different it company.
under
government
regarding
different
held company.
XYZ as which
by Ltd. on with the under
it company. from company
publicfrom
in since 31st the Producer Companies
company (DU, the
March, provisions private foreign
2017. B.Com.
company
XYZ 2022. Act, company:
Can
Ltd? of 2016 2013
ABC the is
 C H A PT E R

FORMATION OFCOMPANY

companiessotherthan statutory companies comeiinto existence only through

Allthe in formation
the
processof f registration under the Companies Act. Various stages
of companyare:
1. Promotion
2. Incorporation
2Declaration for Commencement of Business in case of a company having
ashare capital: Acompany having a share capital shallnot commence any
business or exercise any borrowing powers unless the conditions stipulated
under Sec. 10A are fulfilled,

PROMOTION
Persons who initiate formation of a company are known as promoters. It needs
to be noted that person acting only in professionalcapacity e.g. solicitor, bankers,
accountantetc. are not regarded as promoters.
Promoters do everything from inception of idea of forming the company and take
allsteps required for it as entering into agreements with bankers and drafting the
memorandum and articles etc.
Meaning of Promoter: As per Sec. 2(69) Promoter means a person
1. who has been named as such in a prospectus or is identified by the company
in the annual return referred to in Sec. 92; or
2. who has control over the affairs of the company, directly or indirectly whether
as a shareholder, director or otherwise; or
3. in accordance with whose advice, directions or instructions the Board of
directors of the company is accustomed to act.

65
 been"Although
mation, positionjudgment
Lord Board is position.
stock
extended Justice
bound do Lord expected
I nomineesonly. couldsetting
shareholders' February,purchasecompany for from (in
A Case
Law:
position al
3. 2. Legal
1.
66

not Cairns Erlangerv. relationship

whi c h tion not
the PromoterPromoter Promoter capacity. principal th e
1,10,000. 'syndicate'
company
of £ sional A
the
not ofa Directors
do the the person
old promoter on
take
to say They
of
aside
so
that said them as 1872, wapromoted s liquidator West
negotiations
vi z -Q-Vi
he z trustee company. posi tio n
and anLindley the have the
of is
who
familiar and promoters promoters shall
very agenttransaction... who then the inthe
care
purchase
after ratified In Indies,
represented New going Stands of realin as But as
in as the Companv. utmost Trustee: ha s Agent of not UNIT
that owner promoters November, Sombrero to
properly
principles follows: for Lidney
as can sell
their investigating
directors first
by
byof in
made form. senseappointed promot
in
he
e r be II
not of covered ON FORMATI
a is
the
he did on meeting themformerwhich was good-faith. Fiduciary
and sells his hands directors Promoter Promoter agent the
& " property of not
December byemphasized byBy because
extended
company,
Wigpool do it
property who
the ofa discharge
1871 (new Phosphate
were himvirtue hiCompany:
m.
the of companyErlanger
of by AND
exercise to company ratified is It the in this
law the creation shareholdersmatter
who
company the
deposits relating Relationship
of to is Company
this act the company in
actcomplete
s IN CORPORATI ON
of nor company to may 24th, purchase
were Co. by clause
to Iron an it, purchasetheir purchased
for to in best trust Promoter
meetagency aindependent Or e but not and stand 1872. of registered
all (1874-1880)
£ or relationship
various the the is who
trustee
moulding fiduciarypurchase, 55,000 beds description best (trust) for yesense
t
such and promote
Co. throughthe undoubtedly do I nominated
It took
price affairs with merelyD0CUMENTS
acting isi
the judgments. the to of is
say transaction was interest the is come the an
cases. offor Bird v. place. was onand of lease of he company.
trusteeship it that, and duty held filed phosphate
Sept. the is of yet termagent
of paid. re-sold to Company i n to
.This promoter' give the s
beforedescribed and the by of to
It medium of a if form in 'Cinthatommittee
tErlanger:
he of company. be as as
perfectly
is intelligent he
company.. fiduciary a were th
company
e Contract 21st, the e formed existence
Agai n there he profe ina
its does, a manner case it of company
benefit acts
have for joint their 1871) tolime)island ie
the for tho he he i.
he of In of is

Promoters
LjabilityLawnowher
of e
whoissued
Criminal
Liability damage.
lossor any Civil Civil
shallsecurities
3,
whichpromoter
punishable with
fine Ifa the may Related
state corporation
the
any
in
rated Related -discloprRemuner
may
suroper e. Proamottioner of
be independent whom was In agent
orPromoter the
secretly well
in Gluckstein
authorized be lossLiability and
may
prospectusCentral 1s bepromoters
such of by rewarded
prospectus th e
company
not the settled
or
the obt.
includes liable or Criminal
specified
who intormation
tofurnishing the
lncorporation:
to speakS:
disclosure can
disclosed
trustee
tained
that
damage ofa extend Government Matters documents of through
saboutthe Board make Barnes v. when
company
to for is shall company, a by a
any by or (secret promoter
the pay Misleading knowinglyissuedin and
as Liability threewhich to the to be any Articles of profits
is him CH.
statement
issue compensation for be false
profit Directors
required (1900) money cestui from 4:
a Securities and liable or remuneration PORMATION
Mis-statements consequencerelying contravention
(Sec. Statedin declaration
set information
itis
As made
of profits)but
que just it a
of
of lakh shall a 26). for proved per the no case was company
suchwhich Prospectus: for party out action or to trust
on rupees. not
Misleading Prospectus: by company. whole Secret beneedsobtained" it as OF
and such that Sec. him the COMPANY
prospectus misleading
to to
bethe Exchange under filed of made. wa s had
is
untrue in every
thereof
less reports orthe 7(6), promoterin body profits. to heldrelationship
really
accountable
is
issue of for by where dealings, certain
course Disclosure be
Prospectus: person then Prospectus Where than the Sec. company
suppressing
incorporating of Now paid that
prospectus Every prospective tpart existed
shall or provisions of Board on
447. practice
butinhis
misleading, aperson fifty such financial at th e back
be promoter
who prospectus has any can ofprincipal and of to
thousand in question tothe between the it
liable prospectus
consultation any been time be the for
Where has and has of such of shareholders profits
information made all
underevery sustained subscribed ofhas Sec. material got after company. him monies
the issued company, arises
a rupees 26, incorpo efforts to which
Sec.prospectu
promot compansustainec shall the the to and 67
every with
with shail fact in
44 suc but be as
 Whether 6R
r andexamined
be Afterudgments Pre-incorporation
3. 2. company
1.subscribing
requirements
an a a
their
Athe
3.
thatCompany;
by
one company;
2.
ortwo seven
1. per
As
Formation which rational1zing
acceptancewarranted prudence
establ1shed promoters
passing
incorporation Pre-Incorporation
Unlimited
company LimitedLimited
guarantee shares
by by unlimited
company
company Sec.3(1) companv
Private is or these
formed
person,
to more or is provided bv Priieot
say, more communicated of the that the Kelnerv. of
limitedlimited where companycompany A is
terms
themselves
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