Types of Companies Under the Companies Act 2013: Comprehensive Guide
India's
Companies Act 2013
regulates the formation, operations, and dissolution of companies. This article comprehensively explores the various types of companies under this Act, providing a detailed understanding of their classification based on ownership, liability, control, and incorporation.
Classification Based on Ownership
The Companies Act 2013 categorizes companies based on the number of members and limitations on the transfer of shares. Two main categories exist:
Private Company: A private company has a minimum of two members and a maximum of 200 members. Shareholders have limited rights to transfer shares, and the company cannot invite the public to subscribe to its securities. Public Company: A public company has a minimum of seven members with no upper limit and can invite the public to subscribe to its securities. Shares are freely transferable.Classification Based on Liability
Liability-based classification determines the nature of a company’s members' responsibility for the company's debts. There are three categories:
Limited Company: ?Limited by Shares: Members' liability is limited to the unpaid amount on their shares. ?Limited by Guarantee: Members' liability is limited to the amount agreed to contribute to the company’s assets during winding up. Unlimited Company: Members have unlimited liability, meaning they can be held responsible for the company's debts beyond their investment.Classification Based on Control
Control-based classification includes:
Holding Company: A company that holds more than 50% of the shares in another company, known as a subsidiary. Subsidiary Company: A company that is controlled by a holding company through shareholding.Classification Based on Incorporation
Incorporation-based classification is divided into:
Statutory Companies: These are constituted by a special Act of Parliament or State Legislature. Examples include the Reserve Bank of India and the Life Insurance Corporation of India. These companies are not governed by the Companies Act 2013. Registered Companies: Companies incorporated under the Companies Act 2013 or any previous company law with a Companies Registration Office (ROC) fall under this category.Specialized Forms of Companies
The Companies Act 2013 also includes specialized forms of companies:
One Person Company (OPC): A company with only one member who benefits from the limited liability provided. Nidhi Company: A company formed for the purpose of promoting thrift and savings among its members. Section 8 Company: A non-profit organization formed for promoting commerce, arts, science, sports, education, research, social welfare, etc. Profits are used to promote these objectives.Other Forms of Companies
Several other forms of companies are recognized under the Act:
Associations Not for Profit: Companies licensed under Section 8 of the Companies Act 2013. Government Companies: Companies in which the government holds at least 51% of the paid-up share capital. Foreign Companies: Companies incorporated outside India but have a place of business in India. Holding and Subsidiary Companies: Companies that hold shares in other companies (holding) and those controlled by others (subsidiary). Associate Companies: Companies where both companies hold shares in each other. Investment Companies: Companies engaged in the business of buying and selling shares, securities, or other investments. Producer Companies: Companies formed by producers for pooling of resources and marketing goods.Each type of company is subject to specific regulations and requirements defined under the Companies Act 2013. These regulations govern the formation, operations, and dissolution of the respective companies, ensuring compliance and accountability.
In conclusion, the Companies Act 2013 provides a robust framework for classifying, forming, and operating different types of companies. This comprehensive guide aims to help businesses understand the nuances of these classifications and navigate the legal landscape effectively.