1. Chartered companies:
A chartered company is established by the Royal Charter or special sanction granted by the king or queen of a country. It is governable by its special charter and the Companies Act does not apply to it. It is granted certain exclusive privileges and powers.
For example, The British East India Company was created by a Charter of the Queen of England. The Bank of England, the Hudson’s Bay Company, and the Dutch East India Company are other examples of chartered companies.
This type of company is rare now due to the decline of monarchies. This type of company cannot be formed in India.
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2. Statutory companies:
A statutory company is established by a special Act of the Central or State Legislature. Its objectives, powers and activities are defined by the special law under which it is created.
Though it is governed by a special Act, it is also subject to the provisions of the Companies Act in so far as these provisions do not conflict with those of the special Act.
A statutory company is generally formed to run enterprises of national importance. The Reserve Bank of India, Life Insurance Corporation of India, Industrial Development Bank of India and State Bank of India are some examples of statutory companies in India.
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3. Registered or incorporated companies:
A registered company is established by registering (incorporating) it with the Registrar of Companies under the Companies Act.
The formation, working and winding up of such a company are governed by the provisions of the Companies Act. Registered companies are the most common type of companies in India. Tata Iron and Steel Co., Reliance Industries Ltd., Hindustan Steel Ltd., and Maruti Udyog Ltd., are some of the examples of registered companies in India.
On the Basis of Liability
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1. Company limited by shares:
It is a company which is registered with a specific amount of share capital divided into a specified number of shares. The liability of every member is limited to the amount, if any, unpaid on shares held by him.
For example, X Ltd. has a share capital of Rs. 5 lakhs divided into 50,000 shares of Rs 10 each, X has purchased 5,000 shares on which he has paid Rs 6 per share.
The liability of X is now limited to Rs 4 (unpaid amount per share. Even if the assets of the company are not sufficient to fully meet the claims of its creditors, X cannot be called upon to pay anything more than Rs 20,000 (5,000 shares x Rs 4 each). This type of company is most common in actual practice.
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2. Company limited by guarantee:
In this type of company, the liability of every member is limited to the amount which he had undertaken to contribute, if necessary, to the assets of the company at the time of winding up.
This amount called guarantee is specified in the Memorandum of Association of the company. The amount of guarantee may differ from member to member. Such a company may or may not have share capital.
If the company has share capital, every member is liable to pay the amount impair on the shares held by him in addition to the amount of guarantee.
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The guaranteed amount is in the nature of reserve capital which can be called upon only at the time of winding up. The Articles of Association of such a company must state the number of members with which the company is registered.
This type of company is generally formed to promote art, literature, sports, education and other non-business activities. Members are admitted on payment of admission and subscription fees.
3. Unlimited company:
It is a company in which the liability of members is unlimited like that of partners in a partnership firm. If the company’s assets are insufficient for satisfying the claims of its creditors the personal property of members can be attached to meet the obligations.
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However, the creditors of the company cannot directly sue the members. It is only the liquidator who, at the time of winding up, can call upon the members to contribute towards the assets of the company.
An unlimited company must have its own memorandum and articles. It may or may not have share capital. The Articles of Association of such a company must state the number of members with which the company is to be registered.
The amount of share capital, if any, must also be stated in the Articles. The Companies Act, 1956 permits unlimited companies but such companies are rarely found in India.
On the Basis of Nationality
1. Indian company:
A company incorporated in India under the Companies Act 1956 is known as an Indian company. It may have foreign share holders and it may also carry on business outside India.
2. Foreign company:
It is any company incorporated outside India which (a) had a place of business in India prior to the commencement of the Companies Act 1956 and continues to have the same place, or (b) establishes a place of business is India after the commencement of the Companies Act 1956. A company which is not a foreign company is called a ‘domestic company’.
A foreign company must conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated in English and in one of the local languages.
It must deliver the prescribed documents to the Registrar of Companies within 30 days of establishing a place of business in India.
3. Multinational company:
A company carrying on business in a country or countries other than the country of its incorporation in called a multinational company. A multinational company is a giant company.
It carries on production and marketing activities on an international scale and attempts to maximise profits world over. It may operate in the form of branches, subsidiaries, joint ventures, franchises and turnkey projects. Coca Cola Co. Pepsi Corporation, Sony, Sujuki, L.G. Electronics IBM, Microsoft, etc., are examples of multinational companies.
On the Basis of Control
1. Holding company:
A holding company is defined as any company which directly or indirectly through the medium of another company either holds more than half of the equity share capital or controls the composition of the board of directors of some other company. A holding company may have any number of subsidiaries.
2. Subsidiary company:
It is a company in which another company (a) holds more than fifty percent of the issued equity share capital, or (b) holds more than fifty percent of its voting rights; or (c) controls the right to appoint the majority of its directors.
The annual accounts of a holding company must disclose full information about its subsidiary.
On the Basis of Membership: According to the Companies (Amendment) Act, 2000
1. Private company:
A private company means a company which has a minimum paid-up capital of one lakhs rupees or such higher paid-up capital as may be prescribed, and which by its Articles of Association.
(a) Restricts the right of its members to transfer its shares, if any;
(b) Limits are number of its members (excluding present and past employee shareholders) to fifty;
(c) Prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company and;
(d) Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
A private company can be registered with only two members. It must use the words ‘Private Limited’ after its name.
2. Public company:
Public company means a company which:
(a) Is not a private company;
(b) Has a minimum paid-up capital of five lakhs rupees or such higher paid-up capital, as may be prescribed;
(c) Is a private company which is a subsidiary of a company which is not a private company a public company is authorised to invite the general public to subscribe to its shares and debentures and to accept deposits from the public. Its shares are freely transferable. It must have at least seven members.
3. Government company:
A company of which not less than 51% of the paid up share capital is held by the Central Government or any State Government or Governments, singly or jointly, is called a Government company.
It includes a company subsidiary to a Government company. Hindustan Machine Tools Ltd.; Bharat Heavy Electricals Ltd; Mahan agar Telephone Nigam Ltd; National Thermal Power Corporation Ltd; State Trading Corporation of India Ltd., are some of the examples of Government companies in India.