Classification of Companies

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Companies are Body Corporates incorporated under The Companies Act, 2013 or The Companies Act, 1956. They are primarily classified as Public Company and Private Company. However, it is seldomly known that there are a lot more kind of companies defined under the Act.

In this Article we shall be discussing the classification of companies based on various factors:

A. On The basis Of Liability:

1. Company Limited by Guarantee:

It refers to a company having the liability of its members limited to such amount as the members may undertake to contribute to the assets of the company in the event of it being wound up. Such companies may or may not have share capital of its own.

2. Company Limited by Shares:

It refers to a company having the liability of its members limited to the amount unpaid, if any, on the shares held by them.

3. Unlimited Company:

It refers to a company which has no limit on the liability of its members. Such companies may or may not have share capital of its own.

B. On The basis Of Ownership:

1. Public Company:

A Company which is not a private company and who can invite public at large to subscribe to its securities is known a Public Company.

 2. Private company:

A Company which cannot invite public at large to subscribe to its securities and restricts the transfer of its shares, is known a Private Company. The name of such company shall contain the words Private limited”.

 3. Holding Company:

A Company holding 51% or more of the share Capital of other company is the Holding company of that other company.

4. Subsidiary Company:

A Company whose 51% or more of the share capital is held by another company, such company is the Subsidiary company of that other (Holding) company.

5. Associate company:

When a Company has Significant influence on another company, such other company becomes Associate of the first mentioned company.

Significant Influence means control of minimum 20% of the total voting power/ Control/ Participation in business decision under an agreement.

E.g.: A Ltd. is holding 20% Shares of B ltd. Thus, B limited becomes Associate company of A ltd.

 6. One-person Company:

Where the entire share capital of the company is owned by a single shareholder. Such company as know as one person company. The name of such company shall contain the words “(OPC) Private limited”.

 7. Government Company:

It means any company where in minimum 51% of share capital is owned by the Government and includes subsidiary of a government company.

C. On The basis Of Transfrability Of Shares:

1. Listed Company:

Companies whose securities are listed on any recognized stock-exchange are known as Listed Companies. The Securities and Exchange Board of India oversees these companies.


2. Unlisted Company:

Companies whose securities are not listed on any recognized stock-exchange are known as Un-Listed Companies.

D. On The basis Of Size:

1. Small Company:

Company With paid up capital not exceeding 4 cr. and turnover not exceeding 40cr. is a small company, but does not include a holding company, a subsidiary company, a Section 8 Company and a company governed by any special Act.

E. On The Basis Of Activity:

1. Dormant company:

It is an inactive company which has obtained the status of a Dormant company by making an application to the registrar of companies.

2. Nidhi company:

It means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, solely its members, for their mutual advantage, and in accordance with the regulations set forth by the central government for the regulation of this kind of businesses.

3. Not For Profit Company (Section 8 Co.):

A Corporate form of business is said to be not-for-profit if its only goal is to further commerce, art, science, sports, education, research, social welfare, religion, charity, environmental protection, or any other worthwhile cause without any consideration of financial gain.

F. On The Basis Of Jurisdiction :

1. Indian Company:

Companies Incorporated in the territorial jurisdiction of India under the Companies Act, 2013 or any previous act thereof is known as Indian Company.

 2. Foreign Company:

Companies Incorporated on foreign land under any foreign law is known as Foreign Company.

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