THE COMPANIES
Bulls Eye: ACT, 2013
Classification of Companies on the
bases of: PART 2
Members Liability
Control Others
Access to capital
MEMBERS
Classification of OTHERS
Private Co. companies Government Co.
Public Co. on the basis of Foreign Co.
OPC Co. Nidhi Co.
Small Co.
Dormant Co.
Sec 8 Co.
CONTROL
LIABILITY
Holding Co. ACCESS TO
Limited Co.
Subsidary Co. CAPITAL
By Share
Associate Co.
Listed Co. b) By Guarantee
Unlisted Co. Unlimited Co.
ON THE BASIS OF MEMBERSHIP. NOTE DOWN
1. One person company: Section 2(62)
One Person Co. means a company having
only one person as member.
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THE COMPANIES
ACT, 2013
Key features of OPC Co. PART 2
OPC shall also have one nominee member.
The word OPC shall be mentioned below the name in brackets.
The person shall be termed to be resident if has stayed in
india for 120 days.
One person can only have one OPC. NOTE DOWN
The member/nominee need to be a natural person being
Indian citizen & resident in India or otherwise.
Minor cannot become a nominee in OPC.
OPC can be voluntarily converted to any other company any
time.
Except for specific provision in OPC, provisions of private co
apply to OPC.
Penalty for contravention : Upto Rs 10000 & 1000/day if
default continues.
Such co. cannot be converted into a section 8 co., although it
may be converted into private or public co.
Such Companies cannot perform the act of NBFC or Invest in
securities of other body corporate.
Penalty for contravention : Upto Rs 10000 & 1000/day if
default continues.
2. Private company: Section 2(68) Exception
Private company refers to co: 1. Joint holders to be
a) Having paid up capital as may be prescribed and considered as one.
b) Shall contain in its AOA following Restrictions: 2. Employees &
i) Shall contain restriction w.r.t right to transfer its shares. Ex-employees to whom
ii) Limit its Maximum members to 200 shares are allotted shall not
iii) Prohibits any invitation to the public to subscribe for any be counted for calculating
securities of the company. the limit of 200 members.
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THE COMPANIES
ACT, 2013
PART 2
3. PUBLIC company:
Section 2(71) NOTE DOWN
Public company means a Co. which is
i) Not a private company and
ii) Has minimum paid up capital as may be prescribed.
A Subsidiary company of a Public Co. is Always a Public
company.
NOTE DOWN
ON THE BASIS OF CONTROL.
1. Holding AND
Subsidiary
Co. Section 2(71)
i) When one company controls the
another by way of:
Holding more than half of the
voting power on its own or other
subsidiaries. OR
Has the power to control the BOD of another co. (Such Co.
shall be termed as holding of another.
ii) Meaning of “Control”
The term control would refer to power to appoint or remove Explanation
the majority of Directors of another co.
Layer in relation to
holding co. shall be its
iii) Restriction on Layers. subsidiary or
No co. shall have not more than two layers of subsidiaries. subsidiaries.
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THE COMPANIES
ACT, 2013
PART 2
iv) Non applicability.
1. Banking Co.
2. NBFC NOTE DOWN
3. Insurance Co.
v) Status of Private Co.
A private [Link] is a subsidiary of a public co. shall be
termed as public co. for the purpose of compliances.
2. Associate company Section 2(6)
ii) Meaning
Term associate co. refers to a company in which another co.
has a significant influence but is not a subsidiary of another &
explanation
Includes Joint venture co.
Total share capital
ii) Meaning of significant influence. includes paid up share
It refers to the control of atleast 20% of total voting power capital & convertible
or control or participation in business Decisions under an preference share
agreement. capital.
NOTE DOWN
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THE COMPANIES
ACT, 2013
PART 2
ON THE BASIS OF LIABILITY.
NOTE DOWN
i) Limited by Guarantee:
In this case, the liability of the member is limited upto the
amount guaranteed by the members to contribute to the assets
of the company in the event of winding up.
ii) Limited by Share:
In this case, the liability of company shall be limited upto the
unpaid amount of the shares held by them. In other words, liabili-
ty shall not exceed FV or Nominal value of shares.
iii) Unlimited Company:
It refers to a company where liability of its members is to the
extent of the debts of the company. In other words, the liabil-
ity of the members is equal to the liability of the compa-
[Link] ,unlimited liability shall invoked during winding up
only. Until winding up, the liability shall not exceed the unpaid
amount of shares held by them.
ON THE BASIS OF ACCESS TO CAPITAL exception
Provided that such
i) Listed Company: class of companies
A company which has any of its securities listed on any rec- which have listed or
ognised stock exchange. intend to list such
class of securities, as
ii) Unlisted Company: may be prescribed in
Company other than listed company. consultation with the
SEBI, shall not be
considered as listed
companies.
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THE COMPANIES
ACT, 2013
OTHERS CLASSIFICATION. PART 2
1. Government co. Section 2(45)
Government Company is defined as “any company in which not
less than 51% of the paid-up share capital is held by:
i) By Central Government, or
ii) By any State Government or State Governments, or
iii) Partly by the Central Government and partly by one or
more State Governments, Note: Company which is a subsidiary
NOTE DOWN
company of such a Government Company shall also be termed as
government Co.
2. Foreign co. Section 2(42)
It means a company which is incorporated outside India &
having a place of business in India directly or indirectly
through electronic mode & conducts business in India.
3. Nidhi Company. Section 406(1) OBservation
It means a company which the central government may by
It means a company
notification in official gazette,declare to be nidhi or mutual
which is created for
benefit society, as the case may be.
the purpose of
cultivating habit of
4. Small Co. Section 2(85) thrift and savings
i) Meaning
among members
It refers to a company having Paid up share capital of not
receive deposit
more than 4crs OR Having Turnover of not more than 40crs. in
thereon & lending to
the preceding FY.
its members only for
their mutual benefit.
ii) Non applicability i.e Following Co‛s cannot be small Co.
Public co.
Non profit co.
Neither a holding or subsidiary co of another.
A company governed by special Act.
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THE COMPANIES
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PART 2
5. Dormant company [sec 455]
i) Meaning
Where a co. is formed for a Future project or holds an Asset
or any Intellectual Property and has no significant Accounting
Transactions, such company or an Inactive company may make
an application to registrar for obtaining dormant status.
NOTE DOWN
ii) Meaning of Inactive Company
“Inactive Co.” means a co.
Not carrying any business or operations.
Not made any significant accounting transaction during the last
2 FY OR
Has not filed Financial statements and annual returns during
the last 2 FY.
iii) Meaning of Significant Transaction.
It means any transaction other than:-
Payment of fees by [Link] the registrar. (ROC Charges)
Payment made to fulfil requirement of law. (Audit fees to
CA/CS)
Maintenance of its office and records. (Rent)
Allotment of shares to fulfil requirements of Act. (Minimum
shares)
iv) Compliance Requirements for a Dormant Co.
Should have such min directors, file such documents and pay
such annual fee as may be prescribed.
If it fails to comply with these requirements, The Registrar
shall strike off its name from the register of dormant
companies.
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THE COMPANIES
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PART 2
6. Formation of Companies with Charitable
objects. [Sec 8]
i. Object for doing business as Section 8 Co.
Object for incorporating the co. must be to promote
commerce, art, science, culture, religion, social welfare,
education, research, charity and protection of
NOTE DOWN
environment or such other object.
ii) Declaring dividend is prohibited.
All Profits shall be re-invested and hence there shall be
no distribution of dividend to the members.
iii) Discretion of CG to grant License.
It shall be at the sole discretion of CG to grant the
license as Section 8 Co.
iv) Application to ROC.
Application shall be made to ROC after obtaining license
from CG for incorporation of co.
v) Revocation of License by CG.
Any change in object or failure to comply with conditions
without approval of CG may lead to revocation of license
after getting opportunity of being heard.
vi) Effect of Revocation by CG.
CG may direct it to convert its status to private co. or
amalgamate with another [Link] similar object or order
winding of co.
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THE COMPANIES
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PART 2
vii) Advantages of Section 8 Co
a) Partnership Firm can also become a member. NOTE DOWN
b) No insertion of words limited after the name.
c) No Minimum limit as to capital.
d) Right to call meeting within 14 days notice instead of 21
days notice.
e) No requirement of minimum directors or independent
director‛s is applicable.
f) No need to constitute Nomination & Remuneration
committee.
viii) Conversion of Co. Voluntary
Any existing co. or and section 8 co. may get itself converted
into S/8 Co or Other [Link] complying with provisions for such
conversions.
7. Public Financial Institutions (PFI)
Sec 2(72) states the following institutions are regarded as
public finance institutions
The Life Insurance Corporation of India, established under the
Life Insurance Corporation Act, 1956;
The Infrastructure Development Finance Company Limited,
Specified company referred to in the Unit Trust of India
(Transfer of Undertaking and Repeal) Act, 2002;
Institutions notified by the Central Government under section
4A(2) of the Companies Act, 1956 so repealed under section
465 of this Act;
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THE COMPANIES
ACT, 2013
PART 2
Such other institution as may be notified by the Central
Government in consultation with the Reserve Bank of NOTE DOWN
India:
Conditions for an institution to be notified as PFI: No
institution shall be so notified unless-
Established or constituted by or under any Central or
State Act
Atleast 51% of the paid-up share capital is held or
controlled by the CG or by any SG or Governments or
partly by the CG and partly by one or more SGs.
PROF. CA DHWANIK SHAH