The industrial revolution resulted in the rise of large-scale corporate organisations. These organisations necessitate large investments and carry a high level of risk. Restricted capital and limitless liability of partners are two significant drawbacks of alliances in large-scale business ventures. The Joint Stock Company model of business organisation has grown in popularity because it offers a solution to the limitations of partnership business. Multinational firms such as Coca-Cola and General Motors have investors and consumers all over the world. Reliance, Talco, and Bajaj Auto are examples of major Indian companies.
The literary definition of the word "company" is a group of people organised for a common goal. A company is a legal business organisation that was created by statute. It refers to a group of people who come together to do business and have their own legal life, eternal succession, and common seal. It is a legal entity established under the Companies Act of 2013 or any previous acts in force in the country.
THE COMPANIES ACT 2013 OF INDIA DEFINES A COMPANY -
Section 3 (1) (i) of the Companies Act, 1956 defines a company as
A registered association which is an artificial legal person, having an independent legal, entity with a perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability.
TYPES OF COMPANIES
A company can be classified into various types depending upon the following requirements:
CLASSIFICATION OF COMPANIES BY MODE OF INCORPORATION
· ROYAL CHARTERED COMPANIES
These companies are created under a special charter granted by the monarch or by a special order issued by a king or queen. BBC, East India Company, Bank of England, and other royal chartered companies are examples.
· STATUTORY COMPANIES
These companies are established by a special act passed by the federal or state legislature. These companies are intended to carry out some important national business. The Reserve Bank of India, is an example and was established under the RBI Act of 1934.
· REGISTERED OR INCORPORATED COMPANIES
These companies are formed/incorporated in accordance with the Companies Act, which was enacted by the government. These corporations are established only after they have been registered under the act and the certificate of incorporation has been issued by the Registrar of Companies.
CLASSIFICATION OF COMPANIES ON THE BASIS OF THE LIABILITY OF THE MEMBERS
The registered companies can be classified into the following categories based on the liabilities of members:
· COMPANIES LIMITED BY SHARES
These companies have a fixed share capital, and each member's liability is restricted by the memorandum to the face value of the securities subscribed for.
· COMPANIES LIMITED BY GUARANTEE
These companies may or may not have a share capital, and each member's liability is limited by the memorandum to the amount of money promised to pay in the event of the company's liquidation for payments of debts and liabilities.
· UNLIMITED COMPANIES
There is no formal limit to the amount of money that a shareholder/member of the corporation must pay in the case of an unrestricted company's liquidation.
CLASSIFICATION OF COMPANIES BASED ON THE NUMBER OF MEMBERS
· PUBLIC COMPANY (OR PUBLIC LIMITED COMPANY)
A public company is an organisation whose stock is available to the general public. In other words, anybody can purchase stock in a public corporation. There are no limits on the number of shareholders or the transferability of stock in a public corporation. However, there are several other constraints:
(In India) A public company must have at least 7 shareholders and 3 directors, and it must file a prospectus or a statement in lieu of a prospectus with the Registrar before issuing shares.
· PRIVATE COMPANY (OR PRIVATE LIMITED COMPANY)
A private corporation cannot be owned by the general public; it limits the number of shareholders, the right to sell its shares, and forbids any offer to the general public to subscribe for any of the company's shares or debentures.
A private company is a separate legal entity with a suitable company name, an address, at least two members and a maximum of 200 members, and at least two directors, one of whom must be an Indian citizen.
· ONE PERSON COMPANY
A one-person company is an Indian private limited company with only one founder/promoter. The creator must be a natural person who lives in the country. There is also a paid-up capital (50 lakh) and average turnover (two crores in the three immediately preceding fiscal years) threshold for a one-person company.
All the companies in India are regulated under the Companies Act, 2013 or any other previous acts, prevalent in the country. Section 3 (1) (i) of the Companies Act, 1956 defines companies. There are various types of companies such as Royal Chartered Companies, Statutory Companies, Registered or Incorporated Companies, Unlimited Companies etc.
Says, D., Jain, D., Says, M., Turay, M., Says, S., & Sharma. (2018, December 14). What are the types of companies? Definition and types. Retrieved April 03, 2021, from https://businessjargons.com/types-of-companies.html