Meaning and Kinds of

Companies

Avtar Singh
 Under Companies Act 1956

 Private company
 Public company
 Government company
 Foreign company
 Company limited by guarantee
 Unlimited Company
 Producer Company
 Companies with licence under section 25
 Holding & Subsidiary Company
 "Private company"

 "Private company" is defined in section 3(1)(iii) of the Act and it

means a company which has a minimum paid-up capital of one
lakh rupees or such higher paid-up capital as may be prescribed,
and by its articles,
 restricts the right to transfer its shares, if any;
 limits the number of its members to fifty (50) not including —
 persons who are in the employment of the company; and
 persons who, having been formerly in the employment of the
company, were members of the company while in that employment
and have continued to be members after the employment ceased;
and
 prohibits any invitation to the public to subscribe for any shares in,
or debentures of, the company; and
 prohibits any invitation or acceptance of deposits from persons
other than its members, directors or their relatives ;
 Public company

 "Public company" is defined in section 3(1)(iv) of

the Act and it means a company which —
 is not a private company;
 has a minimum paid-up capital of five lakh rupees
or such higher paid-up capital, as may be prescribed;
 is a private company which is a subsidiary of a
company which is not a private company.
 Government company

 "Government company" is defined in section 617 of the Act

and it means any company in which not less than fifty-one
per cent of the paid-up share capital is held by the Central
Government, or by any State Government or Governments, or
partly by the Central Government and partly by one or more
State Governments and includes a company which is a
subsidiary of a Government company as thus defined.
 As provided by section 620(1) of the Act, the Central
Government may, by notification in the Official Gazette, direct
that any of the provisions of this Act (other than sections 618,
619 and 619A specified in the notifications:—
 Shall not apply to any Government company; or
 Shall apply to any Government company, only with such
exceptions, modifications and adaptations, as may be
specified in the notification.
 Foreign company

 "Foreign company" is defined in section 591 of the Act and it means a

company which
 is incorporated outside India and
 has established a place of business within India.
 Within 30 days of establishment of such place of business within India, the
Foreign Company is required to submit documents/details under section
592. Alterations and changes in these documents/details are required to be
notified within 30 days.
 The provisions of Section 108C on restrictions of transfer of shares of
foreign companies, sections 118 (right to obtain copies of trust deed), 124 to
145 (registration of charges), 159 (annual returns to be made by company),
209 (books of account to be kept by company), 209A (inspection of books of
account of company), 233A (power of Central Government to direct special
audits in certain cases), 233B (audit of cost accounts in certain cases), 234 to
246 (power of Registrar to call for information, etc.), 295 (loans to
Directors), 297 (Board’s sanction to be required in certain contracts in
which Directors are interested), apply to such foreign company.
 Company limited by guarantee

 "Company limited by guarantee" is defined in section

12(2)(b) of the Act and it means a company having the
liability of its members limited by the memorandum to
such amount as the members may respectively
undertake by the memorandum to contribute to the
assets of the company in the event of its being wound
up. Such company could be a "company limited by
guarantee and not having share capital" or a "company
limited by guarantee and having a share capital".

The Memorandum and Articles of Association of such

companies are as per Tables C and D of Schedule I of the
Act, respectively.
 Unlimited Company

 "Unlimited Company" is defined in section 12(2)(c)

of the Act and it means a company not having any
limit on the liability of its members. The liability of a
member extends to the whole amount of company’s
debts and liabilities but the member will be entitled
to claim contribution from other members. The
Memorandum and Articles of such company is as
per Table E of Schedule I of the Act.
 Producer Company

 "Producer Company" is defined in section 581A of the

Act and it means a body corporate having objects or
activities specified in section 581B and registered as
Producer Company under this Act.
 Section 581B
 The objects of the producer company shall relate to all or
any of the following matters, namely—
 production, harvesting, procurement, grading, pooling,
handling, marketing, selling, export of primary produce
of the Members or import of goods or services for their
benefit.
 Provided that Producer Company may carry on any of the activities specified in this
clause either by itself or through other institution.
 processing including preserving, drying, distilling, brewing, vinting, canning and
packaging of produce of its members.
 manufacture, sale or supply of machinery, equipment or consumables mainly to its
members.
 providing education on the mutual assistance principles to its members and others;
 rendering technical services, consultancy services, training, research and development
and all other activities for the promotion of the interest of its members;
 generation, transmission and distribution of power, revitalisation of land and water
resources, their use, conservation and communications relatable to primary produce;
 insurance of producers or their primary produce;
 promoting techniques of mutuality and mutual assistance;
 welfare measures or facilities for the benefit of members as may be decided by the
Board;
 any other activity, ancillary or incidental to any of the activities referred to in clauses
(a) to (i) or other activities which may promote the principles of mutuality and mutual
assistance amongst the members in any other manner;
 financing of procurement, processing, marketing or other activities specified in
clauses (a) to (j) which include extending of credit facilities or any other financial
services to its members.
 Every Producer Company shall deal primarily with the produce of its active Members
for carrying out any of its objects specified in this section.
 Companies with licence under
section 25
 Companies with licence under section 25
 Where it is proved to the satisfaction of the Central Government that an
association—
 is about to be formed as a limited company for promoting commerce, art, science,
religion, charity or any other useful object, and
 intends to apply its profits, if any, or other income in promoting its objects, and to
prohibit the payment of any dividend to its members, the Central Government may,
by licence, direct that the association may be registered as a company with limited
liability, without the addition to its name of the word "Limited" or the word "Private
Limited".
 The association may thereupon be registered accordingly and on registration shall
enjoy all the privileges and (subject to the provisions of this section) be subject to all
the obligations, of limited companies.
 Such companies are generally associations, clubs or chambers of commerce.
 The Central Government has conferred powers under section 25(6) to exempt or
modify certain provisions of the Act in relations to such companies.
 Holding & Subsidiary Company

 Holding & Subsidiary Company

 According to Sec. 2(19) "holding company" means a holding company within the
meaning of section 4 of the Act;
 According to Sec. 2(47) "subsidiary company" or "subsidiary" means a subsidiary
company within the meaning of Section 4 of the Act.
 Sec. 4 of the Act states,
 For the purposes of this Act, a company shall, subject to the provisions of sub-section (3),
be deemed to be a subsidiary of another if, but only if—
 that other controls the composition of its Board of directors; or
 that other —
 where the first-mentioned company is an existing company in respect of which the
holders of preference shares issued before the commencement of this Act have the same
voting rights in all respects as the holders of equity shares, exercises or controls more
than half of the total voting power of such company;
 where the first-mentioned company is any other company, holds more than half in
nominal value of its equity share capital; or
 the first-mentioned company is a subsidiary of any company which is that other’s
subsidiary.
 Under Income Tax Act 1960

 Indian Company
 Foreign Company
 Domestic Company
 A Company In Which Public Are
Substantially Interested
 Widely Held Company
 Closely Held Company
 COMPANY

 COMPANY [ Sec. 2(17) ]

 A "Company" means-
 (i) any Indian company, or

(ii) any body corporate incorporated by or under the laws of a

country outside India, i.e. Foreign Company as defined u/s
2(23A)] or
(iii) any institution, association or body which is or was assessable
or was assessed as a company for any assessment year under the
Indian Income-tax Act, 1922 or
(iv) any institution, association or body, whether incorporated or
not and whether Indian or non-Indian, which is declared by general
or special order of the Board to be a company:
 INDIAN COMPANY

 INDIAN COMPANY [ Sec. 2(26)]

 "Indian company" means a company formed and registered under the Companies
Act, 1956, and includes-
 (i) a company formed and registered under any law relating to companies formerly
in force in any part of India (other than the State of Jammu and Kashmir [and the
Union territories specified in sub-clause (iii) of this clause]);
 (ia) a corporation established by or under a Central, State or Provincial Act;
(ib) any institution, association or body which is declared by the Board to be a
company under section 2(17);
 (ii) in the case of the State of Jammu and Kashmir, a company formed and
registered under any law for the time being in force in that State;
(iii) in the case of any of the Union territories of Dadra andNagar Haveli, Goa,
Daman and Diu, and Pondicherry, a company formed and registered under any law
for the time being in force in that Union territory:
Provided that the registered or principal office of the company, corporation,
institution, association or body, in all cases is in India.
 FOREIGN COMPANY

 FOREIGN COMPANY [ Sec. 2(23A) ]

 It means a company which is not a domestic company, i.e. a company registered outside India
in any other foreign country.

The Foreign Company may be treated as Domestic Company if such company makes
prescribed arrangement in India as per Rule 27.

Rule 27. Prescribed arrangement for declaration and payment of dividends within India.

The arrangements referred to in sections 194 and 236 to be made by a company for the
declaration and payment of dividends ( including dividends on preference shares) within India
shall be as follows :
 The share-register of the company for all shareholders shall be regularly maintained at its
principal place of business within India, in respect of any assessment year from a date not
later than the 1st day of April of such year.
 The general meeting for passing the accounts of the previous years relevant to the
assessment year and for declaring any dividends in respect thereof shall be held only at a
place within India.
 The Dividend declared , if any, shall be payable only within India to all shareholder
 DOMESTIC COMPANY

 DOMESTIC COMPANY
 A Domestic Company means an Indian Company or any
other company with respect to its income, liable to tax under
the Income-Tax Act, has made the prescribed arrangements
for the declaration and payment within India, of the
dividends (including dividends on preference shares) payable out
of such income.
Thus, all Indian Company are treated as Domestic Company
but all Domestic Company are not Indian Company.
If a Foreign Company makes prescribed arrangements for
payment of dividends in India it shall be treated as Domestic
Company.
 A COMPANY IN WHICH PUBLIC ARE
SUBSTANTIALLY INTERESTED [Sec.2(18)]

 It includes :
(i) Government Company : A company owned by the Government or the Reserve Bank
of India
(ii) A Company having Govt. participation : A Company in which not less than 40% of the
shares are held (whether singly or taken together) by the Government or the Reserve Bank of
India or a corporation owned by RBI. (i.e. at least 40% of holding should be held by Govt. or RBI)
(iii) Section 25 Companies : Companies registered under section 25 of the Indian
Companies Act, 1956. These are companies which are promoted with special object to promote
commerce, art, science, charity or religion or any other useful object (these companies lose the
status of a company in which the public are substantially interested at any time they declare dividend).
(iv) A Company declared by the CBDT : It is a company without share capital and which
having regard to its object, nature and composition of its membership or other relevant
consideration is declared by the Board to be a company in which public are substantially
interested for the relevant AY.
(v) Mutual Benefit finance Company : Where principal business of the company is acceptance
of deposits from its members and which has been declared by the Central Government to be a
Nidhi or Mutual Benefit Society.
 (v) Mutual Benefit finance Company : Where principal business of the company is
acceptance of deposits from its members and which has been declared by the Central
Government to be a Nidhi or Mutual Benefit Society.
(vi) A Company having Co-operative Society participation :It is a company in which at
least 50% or more equity shares have been held by one or more co-operative
societies throughout the PY.

(vii) A Company is deemed to be a Public Company if it is not a Private Company as

defined by the Companies Act, 1956 and is fulfilling either of the following two
donditions :
 A listed Public Company : Its equity share were listed on a recognized stock exchange,
as on the last day of the relevant PY ; or
 Any other Public Company : Its equity shares carrying at least 50% of the voting power
( in the case of an industrial company the limit is 40%) were beneficially held
throughout the relevant PY by Government, a statutory corporation, a company in
which the public are substantially interested or a wholly owned subsidiary of such a
compan
 Widely Held Company

Widely Held Company :

The Company in which the
public are substantially
interested is also known as
wholly held Company.
 Closely Held Company

Closely Held Company

It is a Company in which the
public are NOT substantially
interested . This type of
company is referred in
Sec.2(22)(e) and Sec. 79.