CLASSIFICATION OF COMPANIES IN INDIA
CLASSIFICATION OF COMPANIES IN INDIA
When starting a business or investing in one, understanding the classification of companies in India is essential. The Companies Act, 2013, lays out the various types of companies recognized under Indian law. Each classification has its own legal structure, operational style, and compliance requirements. This guide will help you explore all the important types and their key features.
- 1. Based on Incorporation
- a) Chartered Companies:
These are companies created by a royal charter or a special order. Today, they are extremely rare in India. - b) Statutory Companies
These companies are established by a special act of Parliament or State Legislature. Examples include the Reserve Bank of India (RBI) and Life Insurance Corporation (LIC). - c) Registered Companies
Most businesses in India are registered under the Companies Act, 2013. They can be private limited, public limited, or others.
- a) Chartered Companies:
- 2. Based on Liability
- a) Companies Limited by Shares
The liability of members is limited to the unpaid amount of shares held by them. This is the most common form of company. - b) Companies Limited by Guarantee
Here, members’ liability is limited to a specific amount they guarantee to pay in case the company is wound up. - c) Unlimited Companies
Members have unlimited liability, meaning personal assets could be used to settle debts if necessary.
- a) Companies Limited by Shares
- 3. Based on Number of Members
- a) One Person Company (OPC) Introduced in the Companies Act, 2013, OPCs allow a single entrepreneur to operate a company with limited liability.
- b) Private Limited Company A private company requires a minimum of 2 members and can have up to 200 members. It restricts share transfers and cannot invite the public to subscribe to shares.
- c) Public Limited Company A public company must have at least 7 members, and there is no maximum limit. It can offer shares to the general public.
- 4. Based on Control
- a) Holding Company A company that controls one or more subsidiary companies.
- b) Subsidiary Company A company controlled by a holding company.
- c) Associate Company A company in which another company holds at least 20% of shares but is not a subsidiary.
- 5. Based on Ownership
- a) Government Companies At least 51% of the paid-up share capital is owned by the central or state government. Example: Bharat Heavy Electricals Limited (BHEL).
- b) Non-Government Companies All other companies that are privately owned.
If you need to learn what classification your company like Limited and Private Limited Company falls under in the Companies Act, 1956, let us help you. Companies India formalities can be confusing and when you have the support of a well-established consultant like us, you will not have to worry too much. So, go ahead and call us to know more.