Ponnusamy Karthik

Types of Company - Ponnusamy Karthik

Types of company in company law: A Comprehensive Guide (2024)

Types of Company

A company is a business firm. It is established by a single person or a group of individuals.(Only an Indian citizen and an Indian resident can form 1 person company – it is newly introduced in the Companies Act 2013.)

All companies rely on corporate law of its administration for financial liability and tax purposes.

List Of Types of Company

  • Government Companies
  • Private Company
  • Foreign Companies
  • Associate company
  • Charitable Companies (Section 8)
  • Nidhi Companies
  • Dormant Companies
  • Public Financial Institutions
  • One Person Company or OPC

Government Companies

In Government companies, more than 50% of share capital is held by either

  • The central government, or
  • By one or more state government, or
  • Jointly by the central government and
  • One or more state government.

Private Company

 A private company is an enterprise,

  • Limits the authority to transfer its shares
  • It must have at least 2 people, apart from the case of one person company. (OPC)
  • The maximum number of its shareholders is restricted to 200 (excluding its employees)

A limited company needs a minimum of three Directors. There is no restriction for the number of members (shareholders). The company can have as much  maximum number of members (shareholders) as possible. The present and former employees (who hold shares) are the members of a private company. It has more stringent and extensive compliance requirements.

Private Limited Company is one of the types of company of day-by-day developing nature. It is further divided into three types on the basis of liabilities.

Limited company by shares

It is the most common type of Private Limited Company. Here the company is having the liability of its members limited by the memorandum to the amount if any, unpaid on the shares respectively held by them.

In this type of limited company, the liability of its members is restricted to the level of the nominal value of shares occupied by them. If the shareholders have paid the complete amount of their shares, then there is no liability on their side. (whatever may be the debts of the enterprise.) They need not pay a single rupee from their private property. This type of company is well known type in the market.

Limited company by guarantee

In these types of companies, the company is having the liability of its members limited by the memorandum to a particular amount.  In the event of  the company being wind-up, members may respectively undertake to contribute the particular amount to the assets of the company.

Unlimited company

Here the company is not having any limit on the liability of its members.

Foreign Companies

Foreign companies are the companies which conduct business in India using a place of business either by themselves or with some other company. These types of company can  incorporate outside India.

Associate company

Associate companies are the companies in which the other companies have significant influence. This “significant influence” amounts to ownership of at least 20% – 35% shares of the associate company.

In these types of company, almost 35% of shares are held by another company.

Charitable Companies (Section 8)

These types of company are known for their charitable purposes. They don’t have any  profit motives. The charitable companies also do not earn profits. And  they do not pay any dividend to their members.

These types of company are registered under Section 8 of Companies Act, 2013. They are well known as  Section 8 companies. It is one of the most popular forms of Non- Profit Organisations in India.

Charitable companies main objective is to encourage the promotion of arts, science, culture, religion, education, sports, trade, commerce, etc. For the Section 8 company, the shares are not listed on stock exchanges.  Section 8 company prohibit the payment of any dividend to its members. To register a section 8 company in India an additional license is required. All other formalities are similar to the incorporation of other types of company.

Nidhi Companies

A Nidhi company collects deposits from members and uses them for their own benefits. The  activities of these type of company are oriented towards to promote the habits of thrift and saving amongst its members.

Dormant Companies

Dormant Companies are mainly for future projects. In these types of company significant accounting transactions will not happen. They have to carry out all compliances of regular companies.

Public Financial Institutions

Life Insurance Corporation, Unit Trust of India and other such companies are essentially government companies. These type of company are treated as public financial institutions. They conduct functions of public financing.

One Person Company or OPC

According to Sec.2 (62) of the Companies Act, 2013, ‘OPC company has only 1 person as a shareholder’. The Companies (Incorporation) Rule number 3, 2014 says that

  • Only an Indian citizen and an Indian resident can form 1 person company.
  • There is no need to have any minimum share capital.
  • It’s paid-up share capital is not more than ₹ 50 Lakhs.
  • Its maximum of aggregate annual turnover of 3 years does not cross ₹ 2 Crores.
  • Only one member exists

One Person Company (OPC) is an recent addition to the type of company. It is newly introduced in the Companies Act 2013. There is only one member as their sole shareholder.  It is to support entrepreneurs who, on their own, are capable of starting a venture. This OPC will allow entrepreneurs to create a single person economic entity. These types of company offers limited liability protection to its shareholders, continuity of business, and it is easy to incorporate.

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