Types of Companies Under the Companies Act, 2013

The Companies Act, 2013 in India offers a multifaceted classification of companies, considering factors such as membership, size, liability & ownership structure. This guide provides an in-depth look into the various types of companies based on these parameters.

1. Types of Companies Based on Membership:

One Person Company (OPC):

The One Person Company (OPC) is a unique and innovative concept introduced under the Companies Act, 2013 in India to facilitate single-person entrepreneurship. Section 2(62) provides the definition of a One Person Company means a company which has only one person as a member.

Key Features:

1. Sole-Member Ownership: An OPC can be formed with only one individual as a member/ shareholder. This individual is the sole owner of the company.
2. Directorship: The sole member of an OPC is also the director. However, an OPC can have a maximum of 15 directors, providing flexibility for future expansion.
3. Nominee Director: The sole member is required to nominate another person as a nominee director in case of death or incapacity. The nominee can take over the management of the OPC in such situations.
4. Limited Liability: Similar to other types of companies, the liability of the sole member is limited to the extent of the unpaid amount on the shares held by the member.
5. No Minimum Capital Requirement: The Companies Act, 2013, does not prescribe any minimum capital requirement for OPCs. They can be registered with nominal capital.

Private Limited Company:

A private limited company, often referred to as a private company or Ltd., is a type of business structure that limits the liability of its owners and shareholders. Section 2(68) provides the definition of a private company. According to the Companies Act, 2013, a private company is one which:

• Restricts the right to transfer its shares.
• Limits the number of its members to 200 (excluding employees and former employees who are also shareholders).
• Prohibits any invitation to the public to subscribe for any securities of the company.

Key Features:

1. Ownership: Ownership is determined by shares, with restrictions on share transfer without shareholder approval.
2. Number of Shareholders: Requires a minimum of two and a maximum of 200 shareholders.
3. Directors: Requires a minimum of two directors, one of whom must be a resident in India.
4. Limited Liability: Shareholders’ liability is limited to the amount unpaid on their shares, protecting personal assets.
5. Minimum Capital: No specified minimum capital requirement.

Public Limited Company:

Under the Companies Act of 2013 in India, a public limited company is defined under Section 2(71) of the Act, Public company means a company which— (a) is not a private company; (b) has a minimum paid-up share capital, as may be prescribed.

Key Features:

1. Number of Members: No maximum limit on the number of shareholders, with a minimum requirement of seven members.
2. Transferability of Shares: Shares are freely transferable in the open market.
3. Listing on Stock Exchange: Can list shares on a stock exchange for public trading.
4. Limited Liability: Shareholders enjoy limited liability.
5. Share Capital: As Per Specified under Companies Act, 2013.

Section 8 Company:

Under the Companies Act of 2013 in India, Section 8 deals with the formation and regulation of companies with charitable objects, often referred to as Section 8 Companies.

Key Features:

1. Members: Unlike private and public limited companies, Section 8 Companies do not have a minimum requirement for the number of members. They can be formed with any number of members. Allows firms to be members of the company.
2. Charitable Objects: Promotes commerce, art, science, sports, education, research, social welfare, religion, charity, or environmental protection.
3. Non-Profit Orientation: Intends to apply profits or income solely towards promoting its charitable objects; prohibits the payment of dividends to members.
4. License from Central Government: Requires a license from the Central Government for registration.
5. Name Exemption: Registered without the addition of “Limited” or “Private Limited” to its name.

2. Types of Companies Based on Size (MSME Act):

• Micro Companies: Investment in plant and machinery not exceeding Rs. 1 crore, and annual turnover below Rs. 5 crore.
• Small Companies: Investment in plant and machinery not exceeding Rs. 10 crore, and annual turnover below Rs. 50 crore.
• Medium Companies: Investment in plant and machinery not exceeding Rs. 50 crore, and annual turnover below Rs. 250 crore.

3. Types of Companies Based on Liability:

Limited By Shares:

Section 2(46) of the Companies Act, 2013 provides definition of Companies Limited by Shares, A company where the liability of its members is limited to the amount unpaid on their shares.

Key Features:

• Most common type of company.
• Members’ liability is limited to the face value of their shares.
• Liability is limited to the unpaid amount on shares held by each member.

Limited by Guarantee:

Section 2(21) of the Companies Act, 2013 provides definition of Companies Limited by Guarantee, A company where the liability of its members is limited to the amount they undertake to contribute to the assets of the company in the event of its winding up.

Key Features:

• Common in non-profit organizations and charitable entities.
• Members guarantee to contribute a specified amount in the event of the company’s winding up.
• Commonly used by clubs, associations, and entities where profit distribution is not a primary objective.

Unlimited Company:

Section 2(92) of the Companies Act, 2013 provides definition of Unlimited Companies, A company where the liability of its members is not limited, and they are personally responsible for all the debts and liabilities of the company.

Key Features:

• Relatively rare.
• Members have unlimited personal liability for the company’s debts.
• Less common due to the higher level of risk associated with personal liability.

4. Types of Companies Based on Control:

Holding Company:

Section 2(46) of the Companies Act, 2013 provides definition of Holding Company, A company is regarded as a holding company concerning another company (its subsidiary) if it has control over the composition of the Board of Directors or the holding company holds more than half in nominal value of the equity share capital of the subsidiary company.

Subsidiary Company:

Section 2(87) of the Companies Act, 2013 provides definition of Subsidiary Company, company in which the holding company controls the composition of the Board of Directors or holds more than half in nominal value of the equity share capital, either directly or indirectly.

Associate Company:

Section 2(6) of the Companies Act, 2013 provides definition of Associate Company, A company in which the holding company has a significant influence, but which is not a subsidiary company.