Company Law

Presentation
Kinds of Companies
 INTRODUCTION
•“A company is an incorporated association, which is an artificial
person created by law , having a separate legal entity, with a
perpetual succession and a common seal.”

•When we think of different types of companies we normally think

of public and private companies , which are the most common
types of companies . But the Companies Act, 2013 has introduced
new categories of companies which have lesser compliance
requirements and enjoy greater flexibility. These include, Small
Company, Dormant Company, One Person Company, and Associate
Company. This has been done to encourage entrepreneurship and
corporatization of business.

•The Companies Act,2013 classifies companies on the basis of

number of shareholders , controlling interest , type of liability ,
purpose, market access , size and functionality amongst others.
Types of Companies to be discussed in
today’s presentation :

Chartered Statutory Registered Private

Company Company Company Company

Public Small One person

Company Company Company
 • Companies which were incorporated under a special
charter granted by the King or Queen of England were
known as Chartered Companies. The nature of business,
and the powers of the company were defined by the
charter which incorporated it.

• Example of these types of companies are Bank of

CHARTERED England (1694) and British Broadcasting Corporation

(1922).

COMPANY The Chartered Bank of India, Australia and China

founded by the Royal Charter of Queen Victoria
in1853, and the Standard Bank of British South
Africa, founded by John Paterson in 1862, which
entered into friendly merger in 1969 ,and was
called Standard and Chartered is another
example of a Chartered Company.
 • Those companies which are incorporated by a Special Act of
Parliament or State Legislature are known as Statutory
companies. Such companies are formed to perform a function
which is the nature of a public utility.
• Some of the examples are;

STATUTORY
COMPANY Reserve Bank
of India
Life Insurance
Corporation
Food
Corporation of
of India India

• The statutory company need not to have a Memorandum of

Association as its wires is laid down by its Special Act . A
statutory company is exempt from using the word ‘Ltd.’ in its
name. The audit of such companies is under the supervision
and guidance of the Comptroller and Auditor General of India,
and its annual reports are to be placed before the Parliament.
 Companies formed and registered under the Companies Act
2013 or existing companies are known as registered
companies. Section 3(2) of the Companies Act provides that
a company formed under the Act may be:

(a) Company (b) A company (c) An

limited by limited by unlimited
REGISTERE shares guarantee company

D COMPANY Company limited by shares:

Whenever, we use the word company, we normally mean a
company limited by shares. As per Section 2 (22), Company
limited by shares means a company having the liability of its
members limited by the Memorandum to the amount if any
unpaid on the shares respectively held by them. In other words,
such companies must have a share capital, and here the liability
of each member is restricted to the amount, if any, unpaid on the
share he/she is holding. Such companies are colloquially referred
to as limited liability companies even though the liability of a
company is never limited.
Companies Limited by Guarantee:
As per Section 2 (21) of the Companies Act, a company having liability of its members limited by the
memorandum, to such amounts as the members may respectively undertake to contribute to the assets of
the company in the event of its being wound up, is a company limited by guarantee. A company limited by
guarantee may or may not have a share capital.
Section 4(7) of the Companies Act, 2013 provides that any provision in the memorandum and articles of a
company limited by guarantee and not having share capital, which gives any person the right to
participate in the divisible profits of the company, otherwise than as a member, shall be void. Where the
company has share capital, the liability of its members is not merely limited to the amount guaranteed,
but also to the amount remaining unpaid on the shares held by them.

Unlimited Company:
As per Section 2 (92) of the Companies Act , a company having no limit on liability of its members is an
unlimited company. Thus, in such a company, the liability of each member extends to the whole amount of
the company's debts and liabilities. But the members have the right to claim contributions from others.
Memorandum of Association of such a company must show that the liability of its members is unlimited.
Again, an unlimited company may or may not have share capital. If it does not have a share capital its
Memorandum of Association shall confirm to Table D and if it has share capital, then it will confirm to
Table E.
 • As per Section 2 (68), as amended by the Companies (Amendment)
Act, 2015, a "Private company" means a company having a
"minimum paid up share capital as may be prescribed", and which
by its articles-
(i) restricts the right to transfer its share;

(ii) except in the case of One Person Company, limits the number of

PRIVATE its members to two hundred; provided that where two or more
persons hold one or more shares in a company jointly, they

COMPANY shall, for the purposes of this clause, be treated 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.

(iii) prohibits any invitation to the public to subscribe for any

 Features of Private Company

A private A private The liability of There is a A private

limited limited all members or restriction on the limited
company must company must shareholders of transfer of shares. company cannot
have a have a a private limited The private issue a
minimum of two minimum of two company is limited company prospectus as it
members, while directors, while limited must have an cannot invite
the maximum the maximum authorized share the public to
members limit number of capital of Rs.1 subscribe to its
is 200. directors is 15. lakh. shares.

Few Renowned Private Corporate Houses

 • As per Section 2 (71), as amended by the Companies
(Amendment) Act, 2015, a "Public company" means a
company which:
(a)is not a private company; and
(b) has a minimum paid-up capital as may be prescribed;
Provided that a company which is a subsidiary of a company, not
being a private company, shall be deemed to be public company

PUBLIC for the purposes of this Act, even where such subsidiary
company continues to be a private company its articles.

COMPANY  In other words, a private company which is a subsidiary of a

public company shall be deemed to be a public company,
regardless of its status as private company.
 Thus, a Public Limited Company under Company Act 2013 is
an organization that has restricted obligation and offers to the
overall population. It’s stock can be obtained by anybody,
either secretly through (IPO) first sale of stock or by means of
exchanges on the securities exchange.
 Features of Public Company

A private limited A minimum of 3 The liability of A public limited a public limited

company must directors are all shareholders company is company issues
have a minimum required and of a Public required to prospectus to the
of seven there is no limited have a public and there is
members, while restriction on company is minimum paid- a requirement
there is no limit the maximum limited up capital of Rs under the Act for
on the maximum number of 5 lakh or such a public limited
number of directors. higher amount companies to issue
members. as prescribed a prospectus.
under the act.
Few Renowned Public Limited Companies
 • A small company is a private company. However, to qualify as a
small company, a private company must meet the criteria given
under section 2(85) of the Companies Act, 2013. Section 2(85) of
the Companies Act, 2013 defines **small company" as a company,
other than a public company:
• (i) paid-up share capital of which does not exceed 4 crores or such
higher amount as may be prescribed, which shall not be more than
10 crores; and
• (ii) turnover of which as per its last profit and loss account for the
SMALL immediately preceding financial year does not exceed 40 crores, or
such higher amount as may be prescribed, which shall not be more
than 100 crores.
COMPANY
However, the following
companies are not i) a holding company or a
subsidiary company
treated as a small ii) a company
company: registered under section 8
iii) a company
or body corporate governed by
any special Act.
The Companies Act has granted some
Advantages to Small Companies such as:
A small company is not
required to prepare statement
of cash flows[Section 2(40)].
Where other companies
require providing details of
remuneration to directors and
key managerial personnel,
small companies are required
to provide details of only
aggregate amount of
remuneration drawn by
directors in its Annual Return.
A small company is not
required to rotate auditor and
audit firm every 5 years, in
accordance with Section
139(2).
A small company which is also
a private company under
section 2(68), will enjoy all the
privileges of a private
company.
Board's Report of a small
company is prepared on the
standalone financial statement
of the company and is in an
abridged form [Section (134)]
A small company shall only
conduct one meeting of the
Board of Directors every half
year (i.e., hold only 2 Board
Meetings in a year as opposed
to 4 for others) and the gap
between two meetings should
not be less than 90 days.
[Section 173(5)]
Section 446B, as amended by the
Companies Act, 2020, provides that if
small company fails to comply with the
provisions, such company and officer in
default shall be liable to a penalty which
shall not be more than half of the
penalty specified in these sections,
subject to a maximum of 2 lakhs in case
of a company and 1 lakh in case of an
officer in default.
An Auditor of small companies
is not required to report on the
adequacy of the internal
financial controls and its
operating effectiveness in the
auditor's report.
Annual return of a small
company is signed by the
company secretary. In case
there is no company secretary,
it is signed by a director.
Central Government has also
prescribed an abridged form of
annual return for small
companies. [Section 92(1)]
 • The Companies Act, 2013 has introduced a concept of One
Person Company (OPC) in consonance with the global trends.
• As per Section 2(62), "One Person Company" means a company
which has only one person as a member.
• Rules 3(1) & 3(2) of the Companies (Incorporation) Second
Amendment Rules, 2021 specify that only a natural person who
is citizen of India, whether resident in India or otherwise, is
ONE PERSON entitled to form OPC and become nominee. A person is allowed
to form only one OPC.

COMPANY Salient
*An OPC is incorporated as a private limited
company, where there is only one member and
features prohibition to invite public to subscribe to its
of an OPC securities.
*An OPC can be formed only as a private
company.
*An OPC can be formed either as A Company
limited by guarantee or A Company limited by
shares
*An OPC limited by shares It shall have no minimum paid-up capital requirement.
shall comply with following It shall restrict the right to transfer its shares
requirements: It shall prohibit any invitations to public to subscribe for the securities of the company.

*The word One Person Company shall be mentioned in brackets below the name of such
company, wherever its name is printed, affixed or engraved [Section 12].
*It shall have memorandum as per Table A of Schedule 1
OPC cannot be formed to carry out Non-Banking Financial Investment activities
*Rule 3 of Companies
Rules, 2014 provides An OPC cannot be incorporated nor converted into section 8 company.
that No minor shall become member or nominee of OPC.

*Rule 4 of the companies Rules, 2014 provides that a natural person who is citizen of
India, whether resident or not, shall be eligible to become nominee of one OPC.
*Rule 7A of companies rules,2014 provides that if OPC or any officer of such company
contravenes the rules with respect to OPC, then OPC or any other officer shall be
punishable with a fine up to ₹5000, and a further fine of ₹500 for every day of default.

*As per section 149(1)(a), OPC may have one person Board of Directors.
Not required to prepare Statement of Cash flow and rotate the auditors
*An OPC enjoys the OPC is exempt from holding the Annual general Meeting
following Required to have atleast one meeting of the BOD in each half of calendar year and the gap between
exemptions: two meetings should not be less than 90 days. {not for OPC which has one director on board}