Exploring the Different Types of Companies in India: A Complete Guide

Kinds of Company under Companies Act 2013

The companies act provides for different kinds of company. There are three types of company prescribed by the companies Act,2013:

1. One person company
2. Private company
3. Public company

Private company

Section 2(68) of the companies Act says that a private company is a company:

1. Whose minimum paid up share capital is one lakh rupees.
2. Who within its articles has a provision that its shares can be transferred.

These companies cannot publicly invite people to buy their shares.

Advantages of private company:

1. Owners have more control on decision making.
2. They have greater flexibility in terms of operation and management.
3. They have more privacy in the financial matters.
4. They can focus on long term growth strategy since they are privately owned.
5. They can be formed merely by two persons.

Disadvantages:

1. It may be challenging for them to gain capital as they cannot share capital.
2. They may feel limited in expanding their market value.
3. They have limited skilled and specialization.

One person company

Section 2(62) of the companies Act,2013 provides that a one person can make an entire company.

Features of one person company:

1. One person can run the whole company.
2. The maximum number of directors can be 15 but only one person can own it.
3. No minimum capital is required to own a one-person company the person can invest whatever amount he wants and the government can value by this.
4. The amount of compliance of these types of company are very less.

One person company must appoint a nominee in case if that person is unavailable then the nominee could work on his behalf.

Advantages of one person company:

1. It is easier to set a one-person company.
2. It provides limited liability protection to its owner.
3. They have less legal rules and formalities.
4. They might enjoy tax benefits.
5. It is a separate legal entity.

Small company

Small company is new type of private company. A private company is based on its size and paid-up share capital and turnover. Section 2(85) provides for the small company.

Public company

Section 2(71) provides for that a public company means a company which is not:

1. Private company
2. Has a minimum paid up share capital of five lakh rupees

A public company may be formed by any lawful purpose by seven or more persons which is registered under the act.

In the case of Western Maharashtra  Development Corpn. Ltd.  V. Bajaj Auto  Ltd [2010] 154 Com Cases 593 (Bom). The court held that the companies Act.2013 clearly make a distinction between the private and public company on the basis of its transferability of share.

“The provision contained in the law for the free transferability of shares in a public company is founded on the principle that members of the public must have the freedom to purchase and, every shareholder the freedom to transfer.”[1]

OTHER TYPES OF COMPANY

GOVERNMENT COMPANIES

Section 2(45) provides for government company which has fifty one percent of its paid-up share capital is owned by the government.

FOREIGN COMPANY

Sectio 2(42) provides for the foreign company which is a company which is incorporated outside India.

Subsidiary company

Limited company

Unlimited company.

[1] Western Maharashtra  Development Corpn. Ltd.  V. Bajaj Auto  Ltd [2010] 154 Com Cases 593 (Bom).