Types of Companies Under Companies Act 2013 Explained

The Companies Act 2013 classifies companies in India into several types based on incorporation, liability, membership, and control. Understanding the different types of companies under the Companies Act 2013 is essential for students, entrepreneurs, and banking aspirants. A statutory company is created or incorporated by a special Act passed by either the Central or the State Legislature. It enjoys powers, rights and privileges as laid down in the Act. Hence, the statutory companies are not required to have Memorandum of Association.

Classification of Companies Under the Companies Act 2013

A company formed under the Companies Act 2013 may be either—

• a company limited by shares; or
• a company limited by guarantee; or
• an unlimited company.

A company shall, on and from the fifteenth day of its incorporation and at all times thereafter, have a registered office capable of receiving and acknowledging all communications and notices as may be addressed to it.

A company shall, on being so requested by a member, send to him within seven days of the request and subject to the payment of such fees as may be prescribed, a copy of each of the following documents, namely—

• the memorandum;
• the articles; and
• every agreement and every resolution that have not been embodied in the memorandum or articles.

Private Company vs Public Company

A Private Ltd company has to have a minimum of 1 member and a maximum of 200 (new Companies Act 2013) with a paid-up share capital of Rs. 1 Lakh. The maximum number does not include members who are in the employment of the company.

A Public Ltd company has to have a minimum of 7 members and a maximum of unlimited members, with a minimum paid-up capital of Rs. 5 Lakh as per the Companies Act, 2013.

The minimum number of members to constitute a private company has been reduced from 2 to 1 (as per the new Companies Act 2013), but a public company cannot be formed unless there are at least seven members. The maximum number of members in case of a private company has been increased from 50 to 200, while there is no maximum limit of members for a public company. It can have members equal to the number of shares issued by it.

Directors Under the Companies Act 2013

A company may appoint more than fifteen directors after passing a special resolution, and such class or classes of companies as may be prescribed shall have at least one woman director.

Every company shall have a Board of Directors consisting of individuals as directors and shall have (as per the new Companies Act 2013)—

• a minimum number of three directors in the case of a public company;
• two directors in the case of a private company;
• one director in the case of a One Person Company; and
• a maximum of fifteen directors.

Every listed public company shall have at least one-third of the total number of directors as independent directors, and the Central Government may prescribe the minimum number of independent directors in case of any class or classes of public companies. For a public company, the minimum number of directors required is 3.

One Person Company (OPC)

The new Companies Act 2013 provides a new form of private company, i.e., the One Person Company, which may have only one director and one shareholder. In contrast, the Companies Act, 1956 required a minimum of two shareholders and two directors in case of a private company. The One Person Company limits the number of its members to one (with a nominee).

Liability of Members

In the case of a company limited by shares, the liability of its members is limited to the amount unpaid, if any, on the shares held by them.

In the case of a company limited by guarantee, the liability of its members is limited to the amount up to which each member undertakes to contribute—

• to the assets of the company in the event of its being wound up while he is a member or within one year after he ceases to be a member, for payment of the debts and liabilities of the company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and
• to the costs, charges and expenses of winding-up and for adjustment of the rights of the contributories among themselves.

In the case of a company having share capital, the liability of members of the company is limited to:

• the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount, and the number of shares which the subscribers to the memorandum agree to subscribe (not less than one share); and
• the number of shares each subscriber to the memorandum intends to take, indicated opposite his name.

Holding and Subsidiary Restrictions

No company shall, either by itself or through its nominees, hold any shares in its holding company, and no holding company shall allot or transfer its shares to any of its subsidiary companies. Any such allotment or transfer of shares of a company to its subsidiary company shall be void.

Memorandum of Association Under the Companies Act 2013

The memorandum of a company shall state—

• the name of the company with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company;
• the State in which the registered office of the company is to be situated;
• the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;
• the liability of members of the company, whether limited or unlimited.

The memorandum of a One Person Company shall include the name of the person who, in the event of the death of the subscriber, shall become the member of the company. This nominee provision is unique to the OPC structure introduced by the Companies Act 2013.

Understanding these classifications under the Companies Act 2013 helps in identifying the right structure for business needs, compliance requirements, and governance norms applicable to each type of company in India.