Classification of Companies Under the Companies Act, 2013

4. Classification of Companies Under the Companies Act, 2013

The Companies Act, 2013 does not describe just one kind of company — it recognises several different bases on which companies can be classified, and a single real company is usually classified simultaneously under more than one of these bases at once (for example, a company can be, all at the same time, a registered company, a private company, and a subsidiary company).

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(a) On the basis of mode of incorporation:

1. Chartered Company — brought into existence by a special Royal Charter granted by the head of a State. This is a historical category with no modern relevance to company formation in India (the old East India Company and the Bank of England are the standard textbook examples) — retained in the classification for completeness only.
2. Statutory Company — created directly by a special Act of a legislature (Parliament or a State Legislature), rather than by registration under the Companies Act. Its powers, objects, and internal structure are governed primarily by its own constituting Act. Examples: the Reserve Bank of India (under the RBI Act, 1934), the Life Insurance Corporation of India (under the LIC Act, 1956), the State Bank of India (under the SBI Act, 1955).
3. Registered Company — incorporated by registration under the Companies Act, 2013 (or an earlier company law). The overwhelming majority of companies in India today are registered companies — and every other classification in this section (private/public, government, holding/subsidiary, and so on) is really a sub-classification of a registered company.

(b) On the basis of liability of members:

1. Company limited by shares — Section 2(22). A member's liability, as fixed by the Memorandum of Association, is limited to the amount (if any) remaining unpaid on the shares registered in their name. This is by far the most common form.
2. Company limited by guarantee — Section 2(21). A member's liability is limited to a fixed amount they undertake, in the Memorandum, to contribute to the company's assets only in the event of its being wound up. Such companies (often formed for non-profit, charitable, or professional-association purposes) typically have no share capital at all.
3. Unlimited company — Section 2(92). A company where the Memorandum places no limit at all on the liability of its members — in the event of winding up, a member's personal assets can be called upon to meet the company's debts in full, exactly as in a partnership firm. This form is legally permitted but extremely rare in practice, given how completely it forfeits the limited-liability advantage that makes the company form attractive.

(c) On the basis of number of members:

1. Private Company — Section 2(68). Minimum 2 members, maximum 200 (excluding present and past employee-members); restricts the right of members to transfer shares; prohibits any invitation to the public to subscribe for its securities.
2. Public Company — Section 2(71). A company that is not a private company. Minimum 7 members, no maximum limit; may invite the public to subscribe for its securities through a prospectus.
3. One Person Company (OPC) — Section 2(62). A company that has only one person as its member — introduced by the Companies Act, 2013 specifically to give a single entrepreneur the benefits of the company form (separate legal entity, limited liability) without needing to find a second member, as a private company otherwise would. An OPC must have at least one director, and its sole member must nominate another person (with that person's written consent) to become the member in case of the original member's death or incapacity. An OPC is treated, for most purposes, as a special category of private company, and may be required to convert into a private or public company on crossing the thresholds and conditions prescribed under the Rules made by the Central Government.

(d) On the basis of control:

1. Holding Company — Section 2(46). A company is the "holding company" of another company if it controls the composition of that other company's Board of Directors, or holds (directly, or through one or more other subsidiaries) more than one-half of that other company's total voting power.
2. Subsidiary Company — Section 2(87). The company so controlled is the "subsidiary" of the holding company described above. A subsidiary of a subsidiary is itself treated, for the purposes of the Act, as a subsidiary of the ultimate holding company at the top of the chain.

(e) On the basis of ownership:

1. Government Company — Section 2(45). A company in which not less than 51% of the paid-up share capital is held by the Central Government, or by any State Government(s), or partly by the Central Government and partly by one or more State Governments — and also includes a company that is itself a subsidiary of such a government company.
2. Non-Government (private-sector) Company — any registered company that does not meet the Section 2(45) government-shareholding test; ownership rests with private individuals, families, institutional investors, or a combination of these. …