types of company in company law

There are several companies have opened in India that are doing different business. In order to handle so many companies and to make rules for them, it becomes necessary for the law to first divide those companies according to their work. In this article, we are going to discuss about the types of companies in company law means we will discuss about the companies that are separated by the law as per their work.

define company

The company is an artificial person that has its own identity. The company has a common seal which is used by the people to approve any document in the company. All the people doing activities in the company are employees of the company (including owner of the company). Because the company has a distinct identity, every document contains information about the company. For example- Address, the owner of the company cannot give his address in the company document, he has to give the address of the place where the company is established.

You may also like:

company act

Companies Act is a set of rules which are made by law for the smooth running of the business of companies in India. According to Companies Act, 1956 section 3(1)(i), we shall call all those things a company which has been registered in accordance with the Companies Act or any other previous law.

Till now three companies act have been passed:

  • Company Act, 1956
  • Company Act, 2013
  • Company Act, 2015

kinds of company in company law

The law has divided companies into five parts on the basis of their functions.

  1. Incorporation
  2. liability
  3. control
  4. ownership
  5. National Interest

1) Incorporation

Incorporation refers to how the company was formed and came into existence. Companies that include under incorporation are:

a) Chartered- Chartered refers to companies that are formed by passing a document by a king or queen. For example- east India company. These types of companies are not found today and we do not even need to study them deeply.

b) Statutory- Statutory companies are those companies which were formed and came into existence after the passage of an Act/Law in the Parliament. For example- Reserve bank of India (RBI).

c) Registered- Registered companies are those companies which were formed and came into existence after being registered under the Companies Act, 1956 and any other previous law. For example- Reliance, Maruti, Tata.

2) Liability

liability means loans and debt that company raises to run the business smoothly and properly. Companies that include under liability are:

a) Unlimited liability company- Unlimited liability company is described under section (2)(92). This act states that the owner of the will has to pay off all the debts and loans of the company in case the company will be closed down by any means in the future.

b) Limited liability company- The limited liability company says that in case of closure of the company in any way in future, if the owner of the will is not able to repay all the debt, then no one can tell him anything. We can also divide limited liability company into two parts on the basis of law:

  • Limited by Guarantee: In this, the owners and directors of the company decide in advance how much amount they will be liable for if the company is closed in future. The company will be responsible only for a specific amount at the time of winding up. For example- The company takes a loan of Rs 10 lakh from the bank and signs an agreement in advance with the bank that it will pay only Rs 5 lakh if the company is closed in future.
  • Limited by shares: In this, the owners and directors of the company decide a share limit in advance that if a person is buying 100 shares of the company, then the company will pay an amount of 90 shares to the shareholder at the time of closure.

3) Control

In this, the owner of the company decides how much control they want to pass on to the investors. we can divide control in two parts as per law:

a) Holding- Holding company means to buy and acquire the company by another companies. Holding companies have high control in the company as they consider as the owner of the company. Any company can take over another company in three ways:

  • The company should hold 51% of the shares
  • Board of directors to have extra control over the company
  • All the companies under the main company will go to the buying company.

b) Subsidiary- Subsidiary means the company purchased by holding company. In Subsidiary company people have less control over the company.

4) Ownership

As the name suggests ownership means who is owner of the company. we can divide ownership in two parts as per law:

a) Government- These are those companies in which ownership will be in government’s hand weather it is center govt and state government. For example- Railways, Public banks.

b) Non-Government- Non-Government are those companies in which government is not the owner and the company will be run by other normal people and board of directors. For example- Reliance, Infosys.

5) National Interest

National Interest means what is the original country of the company. we can divide National Interest in two parts as per law:

a) Indian- Indian companies means those companies that are registered as per Indian Act and belongs from India. For example- Tata, SBI.

b) Foreign- Foreign companies are those companies that are from a country other than India and come to India to do their business. For example- Dominos, Pizza hut.

2 thoughts on “types of company in company law”

Leave a Comment

5 ways to completely remove shyness from your body 4 Common Hygiene Mistake You Make Everyday Smart things to say when someone insults you Learn how law of universe teach you to live real life 7 most weird and shocking habits of highly intelligent people