Company Types under Companies Act

Under the regulatory framework of the Companies Act, 2013 in India, various distinct types of corporate entities can be established, each with its unique characteristics and prerequisites. This comprehensive guide outlines the primary categories of companies recognized under the Companies Act, of 2013:

1. Private Limited Company:

• This company structure mandates a minimum of two and a maximum of 200 members.
• Shares in a private limited company cannot be freely traded or transferred to the public without the consent of existing members.
• A minimum of two directors and a maximum of 15 directors are required for its management.

2. Public Limited Company:

• Shares of a public limited company can be freely bought and sold by the general public.
• A minimum of seven shareholders is required for its establishment.
• Similar to a private limited company, it necessitates a minimum of two directors and a maximum of 15 directors.

3. One Person Company (OPC):

• An OPC can have only one member/shareholder, who can also serve as the director of the company.
• Although there can be only one member, an OPC can have a maximum of 15 directors to oversee its operations.

4. Section 8 Company (Non-Profit Company):

• Section 8 companies are instituted to promote various charitable and social objectives, such as education, healthcare, environmental conservation, and more.
• All profits and incomes generated by these companies are dedicated to furthering their charitable activities, and they are prohibited from distributing dividends to members.

5. Holding Company:

• A holding company possesses the majority of voting rights in another company, referred to as its subsidiary.
• The holding company acts as the parent company, exerting control over the subsidiary’s policies, assets, and management decisions.
• While it exercises control, the holding company typically remains uninvolved in the day-to-day operations of the subsidiary, focusing instead on setting strategic direction.

6. Subsidiary Company:

• A subsidiary company is either partially or entirely owned by another entity, known as the holding company.
• The holding company exercises control by influencing board composition or by owning over 50% of the subsidiary’s voting powers.
• If the holding company owns 100% of the voting powers in a subsidiary, it is termed a Wholly Owned Subsidiary (WOS), signifying full control.

7. Listed Company:

• Listed companies are officially registered and traded on recognized stock exchanges, either domestically or internationally.
• Their shares are openly traded on these exchanges, permitting the general public to participate in buying and selling activities.
• Adherence to the regulatory guidelines and regulations established by the Securities Exchange Board of India (SEBI) and the relevant stock exchange is mandatory.

8. Unlisted Company:

• Unlisted companies are not featured on recognized stock exchanges, and their shares are not publicly traded.
• Typically, they raise capital through various channels such as private placements, financial institutions, friends, family, or relatives.

9. Limited By Shares:

• In such companies, members’ liability is confined to the unpaid portion of the shares they hold.
• They are not personally responsible for the company’s debts beyond the value of their shares.
• Ownership and participation in company affairs are determined by the number of equity shares each member holds.

10. Limited by Guarantee:

• Members in these companies are liable only up to the predetermined amount they guarantee to contribute to the company’s assets in the event of liquidation.
• Personal liability for the company’s debts extends only to this guaranteed amount.
• Ownership and control within the company typically correspond to the guaranteed contribution made by each member.

11. Unlimited Company:

• Members of unlimited companies face no limitations on their liability for the company’s obligations.
• Their personal assets may be utilized to cover the company’s debts, if necessary.
• This structure is relatively uncommon among entrepreneurs due to the increased risk it poses to personal assets in the face of business challenges.

In conclusion, the Companies Act, 2013 in India offers a diverse array of company structures, each tailored to specific business objectives and liability preferences, ensuring flexibility and choice for entrepreneurs and organizations alike. Careful consideration of these options is crucial for making informed decisions regarding corporate establishment in India.