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Types of Companies under the Companies Act, 2013

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The Companies Act, 2013 is the cornerstone of corporate law in India, laying down the framework for incorporation, regulation, and governance of companies. To ensure proper compliance and smooth functioning of business entities, the Act classifies companies into different categories based on incorporation, liability, ownership, size, and other factors. Understanding these classifications is crucial for entrepreneurs, professionals, and students, as it helps in selecting the right business structure and meeting statutory requirements effectively.

On the Basis of Incorporation

According to Section 2(20) of the Companies Act, a “company” means a company incorporated under this Act or under any previous company law. Companies can be formed in three ways:

(a) Chartered Company

  • Incorporated under a special charter granted by the King or Parliament (e.g., East India Company, Bank of England).
  • Not applicable in India now, but historical relevance.

(b) Statutory Company

  • Created by a special Act of Parliament or State Legislature.
  • Governed by their respective Acts (not by Companies Act, 2013, except where expressly applicable).
  • Examples: RBI (Reserve Bank of India), LIC (Life Insurance Corporation), SBI (State Bank of India).

(c) Registered Company

  • Incorporated under the Companies Act, 2013 (or earlier laws like Companies Act, 1956).
  • Most common type in India.
  • Subject to provisions of Companies Act, 2013.

 

On the Basis of Liability of Members

Companies can be classified based on the liability of their members:

(a) Company Limited by Shares (Section 2(22))

  • Liability of members is limited to the amount unpaid (if any) on their shares.
  • Most common form of company.
  • Example: Infosys Ltd.

(b) Company Limited by Guarantee (Section 2(21))

  • Members’ liability is limited to the amount they agree to contribute to the assets of the company at the time of winding up.
  • Common for non-profit organisations (NPOs), NGOs, clubs, research associations.

(c) Unlimited Company (Section 2(92))

  • No limit on liability of members.
  • Members are personally liable for debts if assets are insufficient.
  • Rare in practice.

 

On the Basis of Number of Members

(a) Private Company (Section 2(68))

  • Minimum members: 2 (except in case of One Person Company).
  • Maximum members: 200 (excluding current & past employees).
  • Restrictions:
    1. Cannot invite the public to subscribe shares.
    2. Restricts transfer of shares.
  • Minimum Paid-up Capital: No minimum limit (removed in 2015).
  • Must use “Private Limited” (Pvt. Ltd.) in its name.

(b) Public Company (Section 2(71))

  • Minimum members: 7.
  • No maximum limit on members.
  • Can invite the public to subscribe shares and accept deposits.
  • Must use “Limited” in its name.

(c) One Person Company (OPC) (Section 2(62))

  • Introduced in Companies Act, 2013.
  • Single member company with limited liability.
  • Must nominate a nominee who becomes member in case of death/incapacity.
  • Cannot carry out NBFC or investment activities.
  • Restricted to small business activities.

 

On the Basis of Control / Ownership

(a) Holding Company (Section 2(46))

  • A company which controls another company (subsidiary).
  • Control may be through:
    • Ownership of more than 50% voting power, or
    • Control of board of directors.

(b) Subsidiary Company (Section 2(87))

  • A company controlled by another company (holding company).

(c) Associate Company (Section 2(6))

  • Company in which another company has significant influence, i.e., at least 20% shareholding or control of business decisions.

(d) Government Company (Section 2(45))

  • At least 51% of paid-up share capital held by Central/State Government(s) or jointly.
  • Example: ONGC, NTPC, SAIL.

(e) Foreign Company (Section 2(42))

  • Incorporated outside India, but has a place of business in India (by itself or through agents/electronic mode) and conducts business activity in India.

 

On the Basis of Size (as per Section 2(85))

(a) Small Company

  • Not a public company.
  • Paid-up share capital ≤ ₹4 crore (may be prescribed up to ₹10 crore).
  • Turnover ≤ ₹40 crore (may be prescribed up to ₹100 crore).
  • Exemptions: lesser compliance, no need for cash flow statement, fewer board meetings, etc.
  1. On the Basis of Access to Capital

(a) Listed Company (Section 2(52))

  • Company whose securities are listed on any recognized stock exchange (NSE, BSE).
  • Must follow SEBI regulations + Companies Act.

(b) Unlisted Company

  • Not listed on stock exchange.
  • Fewer compliance requirements compared to listed companies.

 

Special Types of Companies

(a) Producer Company (as per Companies Act, 1956 – provisions continued)

  • Formed by farmers/agriculturists to improve income and standard of living.
  • Example: Amul (Gujarat Co-operative Milk Marketing Federation).

(b) Nidhi Company (Section 406)

  • Formed to cultivate habit of thrift and savings among members.
  • Deals only with members: accepts deposits and lends loans.

(c) Section 8 Company (Section 8 of Companies Act, 2013)

  • Non-profit companies formed for promotion of commerce, art, science, charity, education, environment protection, etc.
  • Profits applied for objects only; no dividend distribution.

 

Other Important Provisions

  • Conversion of Companies:
    • Public → Private and vice versa requires approval from Tribunal/ROC.
    • OPC can be converted into Private/Public company on crossing threshold limits.
  • Registration:
    • Incorporation through SPICe+ form (MCA portal).
  • Compliance:

Different for each type (private company enjoys fewer compliance obligations than public/listed companies).

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