On the basis of ownership or control, companies may be classified into three categories, i.e. (1) Holding company, (2) Subsidiary company, and (3) Government company.
(1) Holding Company:
A holding company is a company which holds majority of shares of another company. Such company exercises control over the composition of Board of Directors of the other company and is in a position to influence the formulation of policy.
(2) Subsidiary Company:
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A company is known as a subsidiary company when (a) the composition of its Board of Directors is controlled by another company; or (b) the other company holds majority of its equity shares; or (c) the other company controls more than half of its voting rights; or (d) it is a subsidiary of another subsidiary company.
(3) Government Company:
A Government company means any company in which not less than 51 per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by Central Government and partly by one or more State Governments and includes a company which is subsidiary of the Government company. Some of the examples of Government companies in India are : Coal Mines Authority Ltd., Steel Authority of India Limited and National Aluminum Company Ltd. etc. Entrepreneur has no scope for this type of company.