Capital Markets [Part-1]
Types of Companies
Main types of companies in India
The companies registered under the Companies Act 1956 are of three types as follows:
- Unlimited Company
- Company Limited by Guarantee
- Company Limited by Shares: These are of two types-
- Private company
- Public Company
Further, the Companies Act 2013 has also provisions to start a One Person Company (OPC) in India.
The unlimited company is a company where there is no limit on the liability of its members. This means that if the company suffers a loss and the company’s property is not enough to pay off its debts, the private property of its members is used to meet the claims of the creditors. This means that there is a huge risk in such companies. Unlimited companies are not found in India; instead, their space is occupied by the proprietary kind of businesses.
In a limited company is limited either by Guarantee or Shares. On this basis, there are two types of limited companies in India.
- Company Limited by Guarantee: In such a company, the liability of the members is limited to the extent of guarantee given by them in the event of winding up of the company.
- Company Limited by Shares: In this kind of the company, the liability of the members is strictly limited to the extent of nominal value of shares held by each of them. If a member has already paid the full amount of the shares, he shall not be liable to pay any amount. If a member has partly paid the shares, he can be forced to pay the remaining amount during the existence of the company as well as during the winding up. Such companies are of two kinds, private and public.
Private Limited Company
In India, a private company is the one which has a minimum paid up share capital of ` 100000 or such higher capital as prescribed by the Companies Act. Its Article of association mentions that the company
- Restricts the right to transfer its shares
- Limits the number of its members from 2 to 50