What are the different types of Company

Different types of companies 

The companies can be classified under six basis, on the basis of Formation, on the basis of liability, on the basis of Transferability of shares, on the basis of Ownership, on the basis of Nationality and other companies

Classification of companies on the basis of Formation

A company can be classified into three types under the basis of Formation.

(1) Chartered company  : Those companies which are incorporated under a special charter by the kind of sovereign such as East India Company. Such companies are rarely formed now a day as trading company.

(2) Statutory company  :  These companies are formed by a special Act, of the legislatures or parliament, e,g. the Reserve Bank of India, the Industrial Finance Corporation, etc.

(3) Registered companies  : Such companies which are incorporated under the companies Act, 2013 or were registered under the previous companies Act.

Classification of companies on the basis of Liability

Under this classification of companies, companies can be classified into three types as follows

(1) Limited Liability companies  :  In case of such companies, the liability of each member is limited to the extent of face value of shares held by him. Suppose A takes a share of rs-10, he remain liable to the extent of that amount. As soon as the amount is paid, he is no more liable. It is mandatory for such companies to suffix the word 'Limited' at the end of their names.

1. Companies Limited by shares : The liability of members of such company is limited by the face value of the shares held by them. If a member has paid the total value of the shares held by him, he cannot be asked to pay any more amount in case the company suffers a loss. such companies are said to be limited by shares because the liability of each shareholder is limited to the amount that is unpaid for the share held by him.

1. Companies Limited by guarantee : In this type of companies, the liability of each member is limited to such amount as the member may undertake to contribute to the assets of the company in the event of it's being wound up. It is recorded in the memorandum of association of the company at the time of it's incorporation that it's members undertake upon themselves, in case the company is wound up during the tenure of their membership or within a period of one year after cease to be its members, and its assets are not adequate to clear its liabilities, the pre-defined liability to contribute to the payments of the company's debts.

(2) Unlimited Liability companies  :  A company with unlimited liability is one wherein the liability of members is not limited. The member of such a company are personally liable for the debts of the company. In other words, The liability of the members of an unlimited  liability company is not limited to their shares in the company- it extend beyond that and encompasses the personal assets of it's members. The liability of the member is valid for a period of one year after the company is wound up or any members disassociate from the company. There is a provision for the formation of such company in the company law, but a company with limited liability is more often the rule because the liability of its members is limited to the shares they hold in the company, Unlimited companies are, therefore, not very popular.

Classification of companies on the basis of Transferability of shares

Under this classification companies are divided into two types :-

(1) Private company  : Section 2 (68) of the companies (Amendment) Act, 2015 defines a 'private company'  as a company which has a minimum paid up capital as may be prescribed and by it's articles:

1. restricts the right of it's members to transfer shares (if it has any)
2. except in case of one person company limits, the number of it's members to two hundred (200) which does not include:
1. members who are the employees and members of the company.
2. members who, while they were employees of the company, where also it's members, and continue to it's members after leaving it's employment.
3. Prohibits any invitation to the public to subscribe for any securities of the company.

The minimum number of member in a private company is two and the maximum is 200. It is mandatory for such company to use the word 'private' at the end of its name.

(2) Public company  : According to section 2 (71) of the companies (Amendment) Act, 2015 a  'public company' mean:

1.  A company which is not a private company.
2. Has a minimum paid up capital as may be prescribed

A company which is subsidiary of a company, not being a private company, shall be deemed to be a Public Company for the purpose of this Act even where such subsidiary continues to be a private company in it's articles.

This a public company may be said to be an association consisting of not a private company within the meaning of the Act. The share and debenture of a public company may be listed on a Stock Exchange and are offered to public for sale.

Classification of companies on the basis of Ownership

(1) Government company  : According to section 2(45) of The Company Act, 2013, a Government company means any Company in which not less than 51 per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments and include a company which a subsidiary of a Government company.

(2) Holding Company  :  According to section 2(46)  of the companies Act, 2013,  "A company shall be deemed to be the holding company of another if, but only if, that other company is it's subsidiary." This definitions does not specifically clarify what is a holding company-- it is clarified by the description of a subsidiary company. It, therefore, becomes important to know what is subsidiary company

(3) Subsidiary Company  : According to section 2(46) of the Companies Act, 2013,  "A Company shall be deemed to be a subsidiary of another if, but only if:

• that other (Company) Control the composition of it's Board of Directors; or
• that other hold more than fifty percent of the nominal value of it's equity shares capital or more than fifty percent of the total voting power of the company; or
• the company is a subsidiary of another company which is itself a subsidiary of some other company.

Classification of companies on the basis of Nationality

Companies can be classified into two types on the basis of Nationality  

(a) Inland Company  : an inland Company is one that is incorporated in India under the companies Act and is operating under the provision of the Act. But some inland Companies, though incorporated under the Companies Act, are governed by a separate Act for control and Management---like banking, insurance, charitable Companies,etc.

(b) Foreign Companies  :  According to section 2 (46) of Companies Act, 2013, foreign Company means any company or body corporate incorporated outside India which:

• has a place  of business in India wether by itself or through an agent, physically or through electronic mode: and
• conduct any business activity in India in any other manner.

Foreign Companies are of two classes, namely:

(a) Companies incorporated outside India which establishes a place of business in india; and

(b) Companies incorporated outside India, which had established a place of business in India before that day and continue to have en established place of business in India.

Others Companies

(1) Multinational Company : The Companies, enterprises or corporations that manage production or deliver services in more than one country are called Multinational companies, enterprises or corporations, as the case may be. They can also be referred as international Companies or corporations.

(2)  Defunct company  : A defunct Company is that has ceased to be Operative and is no more doing any business. The Registration of Companies, under the power conferred on him under Section 248 of the Companies Act, 2013, reserves the right to delete the name of such Company from the register of Companies.

(3) Unregistered Companies or Illegal Association  : Any association that violates the provision of section 464 of the Companies Act 2013,  is deemed to be an illegal association. Section 464 of the Indian Companies Act, 2013, clearly states that no company, association or partnership consisting of more than ten persons shall be  formed for the purpose of carrying on the business of banking and that no Company, association or partnership consisting of more than twenty person shall be formed for the purpose of carrying out any other business. In other words, if there are more than ten partners in a banking association, or more than twenty partners in an association carrying on any other business, such as association of partners shall deemed to be illegal because it does not fulfill the conditions laid down in the Partnership Act.

(4) Investment Companies  :  The definitions of investment Company is contained in Explanation (a) to Section 185 of the Companies Act, 2013. It is "a company whose principal business is the acquisition of shares, stock, debenture or other securities." The department of company affairs has clarified the position of an investment Company further and observed that whether a company is an investment company or not, is a question of fact which has to be decided in relation to the actual business transacted by the company. The word used in section 185 are  "whose principal business is the acquisition of shares". This implies that the company concerned is expected to hold shares etc. acquired by it for a reasonable time. In substance, if debenture, etc. It should be treated as an investment company.

(5) Finance Companies (Financial institution)  : a "Finance Company" means a non banking company, which is a financial institution, within the meaning of of Section 45 (1) (c) of the Reserve Bank of India Act, 1934.  According to this sections a financial institution is a non banking institution which carries on any of the following activities as it's business or part of it's business:

• Financing, whether by way of making loans or advances or otherwise, or any activity other than its own:
• acquisition of shares, stocks, bonds, debenture, or securities issued by a Government or a local authority or other marketable securities of similar nature.
• letting or delivery of  any goods to a hirer under purchase agreement as defined in section 2 (c) of the Hire Purchase Act, 1972;
• carrying on any class of insurance business;
• managing, conducting or supervising agency of chit or lotteries etc. under the law for the time being in force
• collecting money in lump sum or otherwise, by way of subscription or by sale if units or other instruments or awarding prizes, gifts, whether in cash or kind or disbursing money in any other firm to person from whom money is collected or to any other person.

(6) FERA Companies  :  The companies operating in India under the Foreign Exchange Regulation Act, 1973 are technically called FERA Companies. Broadly speaking, they fall under the following categories:

1. Indian companies having no Foreign interest or having less than 40 per cent foreign interest;
2. Indian Companies having more than 40 percent nonresident interest. such companies were earlier known as  "foreign controlled Companies" and
3. Foreign incorporated Companies which are registered in India merely for business operations.

The central government may impose certain restrictions on FERA Companies under Section 26 of the Foreign Exchange Regulation Act, 1973.

(7) Companies with charitable object  : Section 4 of the Companies Act,2013 requires every limited company to suffix the word 'Limited' after it's it's. Section 8 of the Act, however, empowers the Central Government to allow Companies to dispense with the word 'Limited'. The central government may grant such license if it is proved to it's satisfaction that:

1. It is intended to form a company for promoting Commerce, Art's, science, religion, charity or any other useful object.
2. The company prohibits payment of any dividend to it's members but intended to apply it's profit or other income in the promotion of it's objects.

(8) One person Company  :  "One person Company" is a new concept introduced by the Companies Act 2013. As the name suggest, a one person Company is formed with only one person as it's members. since such Companies have only one member, these companies enjoy certain privileges or exemptions as compared to other companies.

(9) Small company  :  A small company is a company that is privately owned, with a small number of employees and relatively low volume of sales. The legal definitions of small company varies by country. In india, this new concept has been introduced in the new Companies Act,2013. It means a company other than a public Company which has:

• a minimum paid-up share capital rs-50lakh and a maximum of rs-5 crore; or
• Minimum turnover (as per its last profit and loss account) of rs-2 crore and maximum of rs-20 crore.