Kinds of Companies

The Companies Act, 2013 classifies companies mainly by the number and nature of their members, and by ownership pattern.

Private Company [Section 2(68)]. A private company must have a minimum of 2 members and cannot have more than 200 members (past and present employee-members are excluded from this count). Its articles of association must restrict the right of members to transfer their shares, and must prohibit any invitation to the public to subscribe for its securities. Because it cannot raise money from the general public, a private company is typically a closely-held or family enterprise that still wants the benefit of a separate legal entity and limited liability.

Public Company [Section 2(71)]. A public company is simply defined as a company that is not a private company. It needs a minimum of 7 members, with no upper limit on membership, and — unlike a private company — it may invite the general public to subscribe for its shares or debentures through a prospectus.

One Person Company (OPC) [Section 2(62) / Section 3(1)(c)]. Introduced for the first time by the Companies Act, 2013 — this was a wholly new concept, not present in the earlier 1956 Act — an OPC is a company that has only one person as its member. Under Section 3(1)(c), a single person can form such a company, provided a nominee is also named who will step in as the member if the original member dies or becomes incapable of contracting. An OPC lets a solo entrepreneur enjoy a separate legal entity and limited liability without needing to find a co-owner.

Government Company [Section 2(45)]. A Government company is any 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 this also includes a company that is a subsidiary of such a Government company. What makes a company a "Government company" is this ownership pattern, not a separate legal form; a Government company may itself be structured as either a private or a public company. …