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The Companies Act of 1956

KINDS OF COMPANIES

Classification of companies:
On the basis of incorporation
Companies

Incorporate d

Unincorporated

Chartered Companies

Statutory Companies

Registered Companies

Classification of companies:

Incorporated companies:
Which is formed for the purpose of carrying a business Which is incorporated under companies

act of 1956

Classification of companies:

Unincorporated companies: These are to all intents and purposes large Partnerships Transferable shares Liability of the members is unlimited These companies continue even after the death or insolvency of the members Maximum number of members 10 in case of banking business & 20 in case of any other business

Classification of companies:
On the basis of incorporation Chartered companies:
Incorporated under a special charter granted by king or queen

Statutory companies:
Created by special act of legislature

Registered companies:
Formed and registered under companies act 1956 or were registered under any of the earlier companies acts

Classification of companies:
On the basis of liability & members
Private Limited Company Limited Company by Share

Companies Before & after Company Act 1956

Limited Company By Guarantee

Public Limited Company

Unlimited Company

Classification of companies: On the basis of liability

Companies limited by shares:


Liability of members of a company is limited by memorandum to the amount ,if any, unpaid on the shares.

Companies limited by guarantee:


Liability of members of a company is limited by memorandum to a fixed amounts which the members contribute at the time of wound up

Unlimited companies:
A company without limited liability

Classification of companies:
On the basis of Member

a)
b) c)

Private limited company:


Restricts the right to transfer its shares Limits the number of its members to fifty Prohibits any invitation to the public to subscribe for any shares in , debentures of , the company

a) b) c)

Public company:
Does not restrict the right to transfer its shares, if any; Does not limit the number of its members Invites public to subscribe for any shares in , debentures of , the company

Distinction between a public and private company


Basis Minimum number Maximum number Public company 7 Unlimited Private company 2 50

Number of directors Appointment of directors


Invitation to subscribe for shares Transferability of shares

At least 3 Must file consent with registrar


Invites public Free transfer

At least 2 N/A
Restricted Restricted

Foreign company
It means any company incorporated outside India Which: a) after 1st April, 1956,established a place of business within India, or b) before 1st April,1956 established a place of business in India and continued to have an established place of business within India on the 1st April

Classification of companies:
On the basis of Control

Holding companies: A company is deemed to be holding company if but only if, that other company is its subsidiary

Classification of companies:
On the basis of Control

Subsidiary companies: Company is deemed to be subsidiary of another company in the following: 1. If the composition of board of directors of the company is controlled by another company 2. Holding of majority of shares 3. Subsidiary of another subsidiary

Classification of companies:
On the basis of Ownership Government company: A company in which 51 % of the paid up share capital is held by central government and/or by any state government or governments ,or partly by central government and partly by one or more state governments Non government company: controlled and operated by private capital

Public financial institution

According to sec 4-A of companies ( Amendment ) act 1974, each of the financial institutions shall be regarded as a public financial institution, namely:
The industrial credit and investment corporation of India The industrial financial corporation of India The industrial development bank of India The life insurance corporation of India The unit trust of India

i. ii. iii.

iv.
v.

Public financial institution

Sec 4-A(2) authorize the central government to specify by notification in official gazette , any other institution to be public financial institution , but no institution shall be so specified unless:
It has been established or constituted by or under any central act or Not less than 51% of paid up share capital of such a institution is held or controlled by the central government

i. ii.

Associations not for profits(sec25)

The name of the limited company must end with the word limited , in the case of public company and with the word private limited in the case of private company Sec 25, however, permits the registration , under a license granted by the central government , of an association not for profits with limited liability without using the word limited or the words Private limited to its name.

Associations not for profits(sec25)

The central government may grant such license to an association where it is proved to the satisfaction of the government that is :

Is about to be formed as limited company for promoting commerce , science, religion, charity, or any other useful object; and b) 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
a)

Section 43-A company


Private company which has become public company by virtue of sec 43-A but not treated as public company in all respects it is a special type of public company Features of such a company: a) it can retain the features of a private company , viz., restriction on the transfer of shares ,limitation on the number of members to fifty etc b) Number of members may be below seven c) The minimum number of directors does not apply d) Profit and loss account of the company is not open for the public

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