POST GRADUATE PROGRAMME – I

PGP-I
1

LEGAL ASPECTS OF BUSINESS

(LAB)

Prof. Parul Gupta

PhD (Faculty of Law-JMI, New Delhi), LL.M., PGDBM
Management Development Institute (MDI)
Gurugram

Dr. Parul Gupta

 SESSION 6
2

Types of Companies
 Classification of Companies on the basis of ;
 incorporation,
 liability,
 number of members,
 control and ownership,

 One person company

 Associations not for profit

Dr. Parul Gupta

 I. CLASSIFICATION ON THE BASIS
OF3 INCORPORATION
1. Chartered Companies
2. Statutory Companies
 owned by the State.
 created by a special law of Parliament or State Legislature
 immune from parliamentary scrutiny
 Freedom in regard to personnel
 A body corporate
 Distinct relation with the Government
 Independent finances
 Commercial audit
 Operation on business principles
3. Registered Companies
Dr. Parul Gupta
 II. CLASSIFICATION ON THE BASIS
LIABILITY
4

1. Companies with Limited

Liability
 Companies limited by Shares
 Companies limited By guarantee

2. Companies Having Unlimited

Liability
Dr. Parul Gupta
 III. CLASSIFICATION ON THE BASIS OF
NUMBER OF MEMBERS OR SIZE
5

1. Public Company (Section 3 (1) (a) )

Public Company means a company which;
i. is not a private company;
has a minimum Paid-Up Share Capital of Five Lakh Rupees or
such higher paid-up capital, as may be prescribed. I
Now Removed
i. Formed by seven or more persons by subscribing their
name to memorandum
ii. Issue of shares and debentures - articles do not contain the
restrictions provided in Sections 2(68) of the Act.
Free transferability of shares: Section 58(2)
Case: Western Maharashtra Development Corpn.
Dr. Parul Gupta
Ltd. V. Bajaj Auto Ltd, 2010
 III. CLASSIFICATION ON THE BASIS OF
NUMBER OF MEMBERS OR SIZE
6

2. Private Company
A private company is a company having a minimum paid-up
share capital of one lakh rupees or such higher 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; and
 where two or more persons hold one or more shares
 persons who are in the employment of the company; and
 persons who, having been formerly in the employment of the
company, have continued to be members after the employment
ceased,
III. prohibits any invitation to the public to subscribe for any
securities of the company;
Dr. Parul Gupta
 CLASSIFICATION OF PRIVATE COMPANY INTO
ONE PERSON COMPANY AND SMALL COMPANY
7

1. One Person Company (Section 2(62))

a company which has only one person as a member. As per
section 152 (1), in case of a One Person Company an
individual being its member shall be deemed to be its first
director until a director or directors are duly appointed by
the member in accordance with the provisions of that
section.
 Difference between a Sole Proprietorship
and an OPC

 Position of OPC in India under the

Companies Act, 2013
Dr. Parul Gupta
 ONE PERSON COMPANY
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Directions provided by Rule 3 of Companies (Incorporation)

Rules, 2014 to form a One Person Company
 Only a natural person who is an Indian citizen and resident in India;
 No person can incorporate more than a One Person Company or
become nominee in more than one such company.
 No minor
 cannot be incorporated or converted into a company under section
8 of the Act.
 cannot carry out Non-Banking Financial Investment activities
including investment in securities of any body corporate.
 can not convert voluntarily into any kind of company unless two
years have expired from the date of incorporation of One Person
Company, except threshold limit (paid up share capital) is increased
beyond fifty lakh rupees or its average annual turnover during the
relevant period exceeds two crore rupees.

Dr. Parul Gupta

 CLASSIFICATION OF PRIVATE COMPANY INTO
ONE PERSON COMPANY AND SMALL COMPANY
9

2. Small Company (section 2(85) )

‘‘small company’’ means a company, other than a public
company,
 paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which
shall not be more than five crore rupees; or
 turnover of which as per its last profit and loss account does
not exceed two crore rupees or such higher amount as may be
prescribed which shall not be more than twenty crore rupees;

Provided that nothing in this definition shall apply to;

 a holding company or a subsidiary company;
 a company registered under section 8; or
 a company or body corporate governed by any special Act;
Dr. Parul Gupta
 IV CLASSIFICATION ON THE BASIS OF
CONTROL
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1. Holding Company (Section 2 (46))

holding company, in relation to one or more other companies,
means a company of which such companies are subsidiary
companies.

2. Subsidiary Company (Section 2 (87))

subsidiary company or subsidiary, in relation to any other
company (that is to say the holding company), means a
company 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 share
capital either at its own or together with one or more of its
subsidiary companies.

Dr. Parul Gupta

 IV CLASSIFICATION ON THE BASIS OF
CONTROL
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Associate Company (Section 2(6))

“Associate company”, in relation to another
company, means a company in which that
other company has a significant influence
(control of at least twenty percent of total
share capital, or of business decisions under
an agreement), but which is not a subsidiary
company of the company having such
influence and includes a joint venture
company.

Dr. Parul Gupta

 V. CLASSIFICATION ON THE BASIS
OF OWNERSHIP
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1. Government Companies (section 2(45))

any company of which not less than 51% of the
paid up capital is held by the Central
Government of by State Government or
Government singly or jointly is known as a
Government Company. It includes a
company subsidiary to a government
company.

Dr. Parul Gupta

 GOVERNMENT COMPANY
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 Status and functioning of a Government

Company
Case: Hindustan Steel Works Construction Co.
Ltd. v. State of Kerala,

 Legal position of the employees of a

Government Company
Case: A.K. Bindal v. Union of India

Dr. Parul Gupta

 V. CLASSIFICATION ON THE BASIS
OF OWNERSHIP
14

2. Foreign Company (Section 2(42))

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

Dr. Parul Gupta

 ASSOCIATIONS NOT FOR PROFIT
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 Section 8(1a, 1b, 1c) of The Companies Act,

2013,
“A company can be established for “promotion
of commerce, art, science, sports, education,
research, social welfare, religion, charity,
protection of environment or any such other
object”, provided it
i. “intends to apply its profits, if any, or other income
in promoting its objects” and
ii. “intends to prohibit the payment of any dividend to
its members.”

Dr. Parul Gupta

 NEXT SESSION - 7
16

Memorandum of Association and Ultra

Vires Acts
 Nature of the document,
 Content of the document,
 Alteration of the document,
 Doctrine of ultra vires

Dr. Parul Gupta

 17

Dr. Parul Gupta