classification of Companies

1. Presented by:
Mrs. Seema Mahajan
Asst. Prof. in Commerce
Pt. Mohan Lal S.D. College for Women
Gurdaspur

2.  Classification of Companies by Mode of Incorporation
 Classification of Companies based on the liability of the members
 Classification of Companies based on The Number of Members
 One Person Company
 Holding vs. Subsidary company
 Government company
 Foreign company

3. Royal Chartered Companies
These companies are formed under a special charter by the monarch or by a special
order of a king or a queen. Few examples of royal chartered companies are BBC,
East India Company, Bank Of England, etc.
Statutory Companies
These companies are incorporated by a special act passed by the central or state
legislature. These companies are intended to carry out some business of national
importance. For example, The Reserve Bank of India was formed under RBI act
1934.
Registered or Incorporated Companies
These companies are formed/incorporated under the companies act passed by the
government. These companies come into existence only after these are registered
under the act and the certificate of incorporation is passed by the Registrar of
companies.

4. Companies Limited By Shares
These companies have a defined share capital and the liability of
each member is limited by the memorandum to the extent of the
face value of shares subscribed by him.
Companies Limited By Guarantee
These companies may or may not have a share capital and the liability
of each member is limited by the memorandum to the extent of the
sum of money s/he had promised to pay in the event of liquidation
of the company for payments of debts and liabilities of the
company.
Unlimited Companies
There is no formal restriction to the amount of money that the
shareholder/member of the company has to pay in the event of the
liquidation of an unlimited company.

5. Public Company (or Public Limited Company)
A public company is a corporation whose ownership is
open to the public. In other words, anyone can buy the
shares of a public company. There are no restrictions to
the number of members of a public company or to the
transferability of shares. However, there are some
other restrictions:
A public company should have at least 7
members and 3 directors, and issue a prospectus or file
a statement in lieu of prospectus with the Registrar
before allotting shares.

6. Private Company (or Private Limited Company)
A private company cannot be owned by the
public; it restricts the number of members, the
right to transfer its shares and prohibits any
invitation to the public to subscribe for any
shares or debentures of the company.
A private company is a separate legal entity
with a suitable company name, an address, at
least 2 members and at most 200 members, and
at least two directors with one being an Indian
resident.

7. A one-person company is an Indian private limited
company which has only one founder/promoter. The
founder should be a natural person who is a country
resident. There is also a threshold of paid-up capital (₹
50 lakh) and average turnover (₹ 2 crores in 3 immediate
preceding financial years) for a one-person

8. As per Section 2(46) “holding company”, in relation to one or more
other companies, means a company of which such companies are
subsidiary companies;
Definition of Holding Company
As per Section 2(87) “subsidiary company” or “subsidiary”, in
relation to any other company (that is to say the holding
company), means a company in which the holding company—
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total share capital
either at its own or together with one or more of its subsidiary
companies:
Provided that such class or classes of holding companies as may be
prescribed shall not have layers of subsidiaries beyond such
numbers as may be prescribed.

9.  One of the most famous examples of a holding
company is Berkshire Hathaway. The holding
company owns significant stakes in dozens of different
businesses — and owns some businesses outright.
 Another example of a holding company is Alphabet.
Alphabet is the parent company of Google. It also owns
Google Fiber, Calico, Verily, Sidewalk Labs, GV,
CapitalG, JigSaw, DeepMind, X, Waymo, and Project
Wing.
 Sony is another well-known holding company, owning
Sony Electronics, Sony tions, Sony Music
Entertainment, Sony Network Communications, and
Sony Pictures.

10. Many relaxations to private Company are not available to subsidiary of public
Company.
Many relaxations available to a private company are not applicable if that private
company is subsidiary of another public Company. Thus, for all practical
purpose, the private company is treated as a Public Company.
Subsidiary of Public Company is Public Company.
A private company which is subsidiary of a public company is a ‘public company’,
even when such subsidiary company continues to be a private company in it
Articles.
Subsidiary can’t given loans for purchase of shares of holding Company
A subsidiary can’t give loans or financial assistance for purchasing or subscribing
to shares of its holding Company.
Company can’t buy its shares through subsidiary.
A holding company can’t buy directly or indirectly its own shares through any
subsidiary company, including its own subsidiary.
Right of holding company to inspect books of account of subsidiary
Inspection of books of account of subsidiary company shall be done by person
authorized by Board of Directors.

11.  A holding company is not liable for provident dues of
a Subsidiary Company.
 Workmen of subsidiary Company are not workmen of
holding Company.
 It was held that holding company is not liable for
wages of its subsidiary company which was under
winding up.
 A holding Company can’t be penalized for violation of
foreign exchange provisions of Subsidiary Company.
 Holding and subsidiary companies are independent
legal entities, and are to be treated as such. These can’t
be treated as one single unit for all purposes.
 Holding and subsidiary are separate and distinct legal
entities.

12. A Government company is one in which not less
than 51% of the paid-up share capital is held by the
Central Government or a State Government or
jointly by both.
A Government company may either by wholly
owned by the Government, in which case 100%
capital is provided by Government; or may be
owned by the Government (holding minimum of
51% share-capital) and private
concerns/individuals (holding maximum of 49%
share capital).

13. Foreign Company under
Companies Act 1956 –
Section 591
ForeignCompany as per
Companies Act, 2013 –
Sec2(42)
Company incorporated
outside India and having a
place of business in India
Company or Body
Corporate
incorporated outside India
having a a place of
business in India whether
by itself or through an
agent, physically or
through electronic
mode andb. conducts
any business activity in
India in any other manner.

14. Thank you