Kinds of Companies under the Companies Act, 2013

The Companies Act, 2013 recognises several kinds of companies, classified on different bases. AP Intermediate commerce students preparing for BIEAP class 11 commerce questions and answers should be able to identify the basis of each classification, not just list the names.

On the basis of incorporation

• Chartered companies were created by a royal charter in earlier times (for example, the East India Company); this mode of formation is now obsolete in India.
• Statutory companies are created by a special Act of the Central or State Legislature, for example the Reserve Bank of India and the Life Insurance Corporation of India. Their powers and objects are laid down in the Act itself rather than in a memorandum.
• Registered companies are formed by registration under the Companies Act, 2013. Almost every company referred to elsewhere in this chapter — private or public — is a registered company, and this is by far the most common mode of incorporation today.

On the basis of liability

• A company limited by shares is one where a member's liability is limited to the unpaid amount, if any, on the shares held. This is the most common form.
• A company limited by guarantee is one where each member undertakes to contribute a fixed amount only if the company is wound up; such companies are often used for non-profit, charitable or professional bodies.
• An unlimited company has no limit at all on the liability of its members, who remain personally liable for the company's debts in full; this form is rare in practice.

On the basis of number of members

• A One Person Company (OPC), introduced by Section 2(62) of the Companies Act, 2013, has only a single member, who is also its sole shareholder; it lets a single entrepreneur enjoy the benefit of a separate legal entity and limited liability without needing a co-promoter.
• A private company and a public company, as defined and distinguished in the previous section.

On the basis of control

• A holding company controls one or more other companies, either by holding a majority of their share capital or by controlling the composition of their board of directors.
• A subsidiary company is the company so controlled by a holding company.
• An associate company is one in which another company has significant influence (typically holding 20% or more of its share capital) without it being a subsidiary.

On the basis of ownership

• A government company, under Section 2(45), is one in which not less than 51% of the paid-up share capital is held by the Central Government, or by one or more State Governments, or partly by the Central Government and partly by one or more State Governments; the Central Government and various State Governments, including the Government of Andhra Pradesh, use this form for public-sector undertakings.
• All other companies are non-government (private-sector) companies.

Other important kinds

• A foreign company, under Section 2(42), is a company incorporated outside India that has a place of business in India.
• A listed company has its shares listed for trading on a recognised stock exchange, unlike an unlisted company. …