Types of Companies vis-à-vis Companies Act, 2013

On the Basis of Liability

Company limited by Shares

Company limited by Guarantee

Unlimited Company

Meaning

In the event of winding up, liability of members of the company is limited by the unpaid capital of the shares i.e., outstanding amount on the shares, in accordance with memorandum.

In the event of winding up, liability of members of the company is limited by an amount, not by shares, in accordance with the memorandum.

Liability is not limited. Therefore, in the event of winding up, even personal assets of the members could perhaps be counted to set off the liability of the company.

Relevant Provisions

Section 2(21)

Section 2(20)

Section 2(92)

On the Basis of Members

One Person Company (“OPC”)

Private Company

Public Company

Composition

One person

Two or more persons

Seven or more persons

No. of Members 

One member

Up to 200 members

Note 1: If two or more persons jointly hold shares in OPC, they shall be considered as a single member.

Note 2:  Present & former employees shall not be counted as members for the aforesaid limit.

No upper limit

No. of Directors

Min. one director

Note 3: An individual member is deemed to be a director until other directors are appointed.

Min. two directors

Min. three directors

Note 4: Max. 15 Directors- The limit can be exceeded provided a special resolution is passed.

Note 5: There shall be a mandatory ‘One Woman Director’ in such companies as provided in ‘Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014’.

Shares Transferability

Shares are not freely transferrable

Note 6: Section 3(1)(c) of the Act accords OPC with the status of private company, therefore, the transferability of its shares shall be governed by the provisions applicable to private company under the Act.

Shares are not freely transferrable, only amongst a restrictive group of shareholders.

Shares are freely transferrable among a large group of shareholders.

Note 7: A subsidiary of a public company, which is a private company as per its Articles of Association, shall be deemed to be public company for the purposes of the Act.

Verbatim

The name ends with ‘Private Limited ’

The name ends with ‘Private Limited ’

The name ends with ‘Limited ’

Note 8: The aforementioned conditions do not apply to section 8 companies.

Relevant Provisions

Section 3(1)(c), 149, 152(1), 2(62), 4(1)(a)

Section 3(1)(b), 149, 2(68), 4(1)(a)

Section 3(1)(a), 149, 2(71), 4(1)(a)

On the Basis of Control

Holding Company

Subsidiary Company

Associate Company

Meaning

Holding Company* is a parent company that owns one or more companies called subsidiary/ (ies).

Subsidiary is a company in which Holding Company either:

a) Controls the composition of board of directors.

b) exercises or controls more than 50% of the total voting power either at its own or together with one or more of its subsidiary companies

Note 10: Herein, there’s a limit of up to 2 layers of subsidiaries of a holding company under the ‘Rule 2 of Companies (Restriction on Number of Layers) Rules, 2017’.

Exemptions:

· Banking Company, NBFC, Insurance Company & Government Company are exempted under Rule 2.

· Wholly Owned Subsidiary is exempted under Rule 2.

Note 11: Furthermore, section 186(1) of the Act restricts a company from making investment through more than 2 layers of the investment companies.

A company in which the other company has a significant influence, but not a subsidiary company and also includes joint venture company.

Parameters/

Types

There are three ways in which a company can become a Holding Company of another company, namely:

· By holding more than 50% of the total issued equity capital of the company.

· By holding more than 50% of the total voting rights in the company.

· By holding the right to appoint majority of directors in the company.

There are two types of subsidiary company, namely:

· Wholly owned Subsidiary – It is company where 100% shares are owned by the holding company directly.

· Deemed Subsidiary – It is a company under the control of holding company but indirectly through another subsidiary of holding company.

The parameters to assess the nature of the associate company are as follows:

· The other company has at least 20% of the voting rights or control of or participation in business decisions under an agreement to determine the significant influence.

· There shall be a joint arrangement whereby the parties that have joint control of the arrangement and have rights to the net assets of the arrangement.

Relevant Provisions

Section 2(46)

Section 2(87), 186(1)

Section 2(6)

On the Basis of Listing

Listed Company

Unlisted Company

Meaning

Any company which has any of its securities listed on any recognised stock exchange.

Note 12: Such class of companies, which have listed or intend to list such class of securities, as may be prescribed by the rules made under the Act in consultation with Securities Exchange Board of India (“SEBI”), shall not be considered as listed companies.

Any company which has no securities listed on any recognised stock exchange.

Regulator

SEBI & Registrar of Companies

Registrar of Companies

Governing Laws

SEBI Act, 1992 and SEBI Listing Regulations

 Companies Act, 2013 and rules framed thereunder

Market Liquidity

Shares are publicly traded on any recognised stock exchange.

Shares are not publicly traded on any stock exchange.

Relevant Provisions

Section 2(52)

The Act does not define unlisted company explicitly. In general parlance and practice, any company that falls outside the scope of section 2(52) is an ‘Unlisted Company’.

On the Basis of Ownership

Government Company

Foreign Company

Non-Profit Company

Nidhi Company

Meaning

A company wherein 51% of the total paid up share capital is held by the central government or state government or partly by both is called ‘Government Company’.

It also includes a subsidiary company of such Government Company for the purpose of its definition.

Any company or body corporate incorporated outside India that:

· has a place of business in India whether by itself or through an agent, physically or through electronic mode.

· conducts any business activity in India in any other manner.

Herein, person or association of persons proposed to register under the section as limited company and fulfils the following criteria for the satisfaction of the central government to be accorded the status of section 8 company under the Act:

· promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object

· intends to apply its profits towards promoting its objectives

· intends to prohibit the payment of dividends to its members

A company that is declared by the central government through notification in the official gazette of India is known as Nidhi/ Mutual Benefit Society.

The central government may direct through gazette notification that

· any provision of the Act shall not apply to such company

· provisions may apply after revisions, exemptions, amendments, etc.

Relevant Provisions

Section 2(45)

Section 2(42)

Section 8

Section 406

On the Basis of Size

Small Company

Meaning

A company other than public company, which:

· Paid-up share capital is between INR 50 lakh rupees to 10 crore rupees

· Turnover is between INR 2 crore rupees to 100 crore rupees.

Note 12: The aforementioned conditions shall not be applicable to:

· Holding/ Subsidiary Company

· Section 8 Company

· Company/ Body Corporate governed by any special act

Relevant Provision

Section 2(85)

Miscellaneous

Dormant Company

Inactive Company

Meaning

Dormant Company means a company that is formed and registered under the Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction^.

Inactive Company means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years.

Application

To obtain the status of ‘Dormant Company’, a company shall follow the below mentioned procedure:

· A special resolution shall be passed in the general meeting; or

· A notice shall be sent to all shareholders to secure the consent of shareholders holding at least three-fourths of the company’s share value.

· Thereafter, Form MSC-1 shall be filed with registrar along with prescribed fees for approval.

· Subsequently, registrar will issue a certificate through Form MSC-2, thereby allowing the status of a Dormant Company to the applicant.

Note 13: The applicant company shall be eligible to apply for the aforesaid status only if it satisfies the eligibility criteria prescribed under The Companies (Miscellaneous) Rules, 2014.

Relevant Provision

Section 455 of the Act; Rule 3, 4 of The Companies (Miscellaneous) Rules, 2014