KINDS/TYPES OF COMPANIES

ON THE BASIS OF INCORPORATION

1. Chartered company
These companies were formed under a special charter of king or queen in England
and other European countries in the 16th century to start foreign trade. The powers and
nature of business of chartered company is explained by the charter. If company does not
work according to charter, the crown can cancel the charter and close the company. Word
‘limited’ is not used with the name of these companies. Such companies do not exist in
Pakistan. Chartered bank of England and chartered bank of Australia are its examples.
2. Statutory company
This company is formed by the special Act of parliament or by the order of
president of the state. The Act by which companies are formed, defines the functions of
company. These companies are generally formed for public utilities and welfare and have
monopoly in their fields. Word ‘limited’ is not used with the name of these companies.
SBP, WAPDA and ZTBL are its examples.
3. Registered Company
These companies are formed under companies ordinance 1984 (now Company Act
2017). The powers and functions of these companies are defined by the ordinance. The
main purpose of these companies is to earn profit. This is the most popular form of
incorporation of company.

ON THE BASIS OF MEMBERS

4. Public limited company

This company is formed and registered under companies ordinance 1984 (now
Company Act 2017). A public company must have at least 7 members to form it. There is
no limit to the maximum number of members. Public company issues a prospectus for
inviting people to purchase its shares. The liability of members is limited upto the value of
shares purchased by them. The shares of public company are freely sold and purchased in
the stock market. Examples are PTCL, PSO, Shall, Askari Cement, Charat Cement, Fuji
Fertilizers etc.
5. Private limited company
This company is formed and registered under companies ordinance 1984 (now
Company Act 2017). A private company must have at least 2 members and maximum
members are 50. According to Sec 2(49), a private company means a company which by
its articles:
➢ Restricts the right to transfer its shares
 ➢ Limits the number of its member to 50, not including the persons who are in
employment of company, and
➢ Prohibits an invitation to the public to subscribe for the shares or debentures of the
company.
IGI Insurance, Tapal Tea Pvt Ltd. are the examples.
6. Single Member Company
A Single Member Company (SMC) is a class of private company, limited by
shares, which is incorporated with one member only. SMC does not invite the public to
subscribe for any share of the company. Number of members of the company is limited to
a single person. Any person or a body corporate may form a SMC. All the requirements
for incorporation of a private limited company shall apply to a SMC.
Macrosoft Pakistan (SMC-Private) Limited is the example.

ON THE BASIS OF LIABILITY

7. Limited company
It is a company, in which liability of members is limited upto the amount of their
investment. In case of loss, their personal property cannot be used in payment of debts of
the company. The word ‘limited’ is used at the end of their name.
There are two types of limited company.
a. Company limited by shares
It is a company, in which liability of shareholders is limited upto the amount
of shares held by them. In case of loss, their personal property cannot be used in
payment of debts of the company.
b. Company limited by guarantee
It is a company in which the liability of its members is limited upto the
amount, of which they have given guarantee to pay in case of winding up of
company. Their personal property cannot be used in payment of debts of company.
Pakistan Stock Exchange is the examples.
8. Unlimited company
It is a company in which the liability of its members is unlimited. In case of loss,
their personal property can also be sold in payment of debts of the company. Such type of
company does not exist in Pakistan.

ON THE BASIS OF CONTROL

9. Govt. company
It is a company in which at least 51% of its share is held by federal or provincial
govt. such company may be registered as public or private company. National Fertilizer
Corporation and State Cement Corporation are its examples.
10. Holding company
A company is said to be the holding company of the other company if it owns or
holds more than 50% of share capital of other company or it has control of more than 50%
of its directors. The holding company is the parent company controlling other company’s
(subsidiary) policies, assets and management decisions.
11. Subsidiary company
A company is said to be the subsidiary company of the other company if more than
50% of its shares or more than 50% of its directors are owned by other company (holding
company). If 100% shares or voting power of subsidiary company is owned by holding
company, the subsidiary is known as Wholly Owned Subsidiary (WOS).
12. Associated company
A company is said to be the associate company of the other company if at least
20% of its shares are owned by other company. The other company has a significant
influence over voting power, control or participation in business decisions of associate
company.

ON THE BASIS OF LISTING

13. Listed company

A listed company is a company which is registered on various recognized stock
exchanges within or outside Pakistan. The shares of the listed companies are freely traded
on the stock exchanges. They have to follow the guidelines issued by the Securities and
Exchange Commission of Pakistan (SECP).
14. Unlisted company
An unlisted company is a company that is not listed on any recognized stock
exchange, and its shares are not freely tradable on the stock exchanges. These companies
fulfil their capital requirements by obtaining funds from friends, family members, relatives
or financial institutions. Both, public and private companies can fall under this category.

ON THE BASIS OF NATIONALITY

15. Pakistani company

A company which is formed and registered in Pakistan under Pakistani law is called
Pakistani company. Its head office is situated in any province of the country but it can open
branches in foreign countries. Procter and Gamble Pakistan Limited is the example.
16. Foreign company
A company which is formed and registered in foreign country is called foreign
company. Its head office is situated in foreign country, but it can open its branch in
Pakistan. Examples are Nestle, Uni levers, Liver Brothers, Shezan, Pepsi, Coca Cola etc.
 OTHER KINDS

17. Company not for profit

A company not for profit may be registered with limited liability. Its main object
is not to earn profit but to promote commerce, art, science, religion, charity and some other
useful objects. The company should apply its profits and other incomes to promote its
activities. Pakistan Institute of Corporate Governance and Hamdard Pakistan are the
examples.
18. Mudarba Company
These companies are formed and registered under modarba companies ordinance
1980. Modarba means a business in which a person participates with his money and other
with his efforts and skills. The main purpose of this ordinance is to eliminate riba and to
establish the business according to Islam.

Conclusion
It is concluded from above discussion that a company is a company which is formed and
registered under companies ordinance 1984. But these differ from each other on the basis of
incorporation, function, liability, ownership, and nationality.

DIFFEFRENCE AMONG SOLE PROPRIETORSHIP,

PARTNERSHIP AND COMPANY
Points of Sole Partnership Company
difference proprietorship
1. Formation The formation of Sole The formation of The formation of a
proprietorship is very partnership firm is also company is very
easy. easy. complicated process.
2. Act Sole proprietorship is Partnership firm is Company is governed
not governed by an governed by by companies
Act. partnership Act 1932. ordinance 1984.
3. Sole proprietorship The registration of The registration of
Registration business cannot be partnership firm is company is
registered. optional. compulsory.
4. Members There is only one In partnership, there are In private company,
member in Sole 2 to 20 members in there are 2 to 50
proprietorship ordinary business, and 2 members, and in public
to 10 members in company, there are 7 to
banking business. unlimited members.
5. Listing Sole proprietorship Partnership firm cannot A public company can
cannot be listed at be listed at stock be listed at stock
stock exchange. exchange. exchange.
6. Research Sole proprietorship Partnership cannot Company can conduct
cannot conduct conduct research due to research due to large
research. limited capital. amount of capital.

7. Legal Sole proprietorship Partnership firm has no A company has a

entity has no separate legal separate legal entity. separate legal entity
entity. from its members.
8. Liability The liability of sole The liability of all The liability of
trader is unlimited. partners is unlimited. shareholders is limited.
9. Transfer A sole trader can A partner cannot A shareholder can
of share easily transfer his transfer his share easily transfer his
business. without the consent of share.
other partners.
10. Issuance The sole trader cannot Partnership firm cannot A company can issue
of issue debentures for issue debentures for debentures for getting
debentures getting loan. getting loan. loan.
11. The sole owner All partners can take Elected directors
Management manages all affairs of part in management of manage and control the
business. business. affairs of business.
12. Agents The sole owner is the Every partner is the A shareholders is not
agent of his business. agent of the firm. agent of the company.
13. Public Sole proprietorship Partnership firm cannot A public company can
deposits cannot accept the accept the public accept the public
public deposits. deposits. deposits.
14. Use of A Sole proprietorship A partnership business A company can use the
word cannot use the word cannot use the word word “Limited” after
“Limited” “Limited.” “Limited.” its name.
15. Issuance A Sole proprietorship A partnership firm A public company can
of cannot issue cannot issue prospectus. issue prospectus.
Prospectus prospectus.
16. The dissolution of The dissolution of The dissolution of
Dissolution Sole proprietorship is partnership is also easy. company is very
very simple and easy. complicated.
17. Audit In Sole proprietorship In partnership, audit of In company, audit of
Audit of accounts is books of accounts is books of accounts is
not required. optional. compulsory.
18. Publicity The accounts and The accounts and other The accounts and
other business matters business matters are not annual reports are
are not published to published to public. published to public.
public.
19. Changes The sole owner can The nature of business The nature of business
easily change the can be changed with the can be changed after
nature of business. consent of all partners. permission by law.
20. Capital Only sole owner All partners contribute General public
contributes capital. capital in business. contributes capital in
 the business of
company.
21. Secrecy There is complete There is not complete There is no business
business secrecy in business secrecy in secrecy in company as
Sole proprietorship. partnership. accounts are published
22. Dispute No dispute arises in A dispute among A dispute may arise
business matters. partners may arise in among directors in
business matters. business matters
23. Profit The whole profit or In partnership, The In company, the whole
and loss loss is shared by sole whole profit or loss is profit or loss is shared
sharing owner. shared by all the by all shareholders.
partners
24. Growth The growth of In partnership, The In company, there is a
business is limited growth of business is large amount of
due to small capital possible by adding a capital. So the business
and small business new partner. grows at a high rate.
size.
25. Business The life of business is In partnership, the life The life of business is
life very short in Sole of business is decided very long in company.
proprietorship. by partners. It is longer
than Sole trader ship.