company law lec 1_1

8/9/2019 Company Law Lec 1_1

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KINDS OF COMPANY

Kumar Ramchandani


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TYPES From the point of view of Incorporation.

From the point of view of Liability.

From the viewpoint of Nationality.

From the view point of Public Interest.


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From the point of view of Incorporation.

Types of Companies

CHARTERED STATUTORY REGISTERED


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CHARTERED COMPANY

Historically, most of the early companies were set upthrough a Royal Charter.

For example, the East India Company, the CharteredBank of Australia, India and China, etc., were

incorporated by the grant of a special Royal Charter,

In India, this form of organization does not exist nowbecause there is no monarchy.

Even in England, this method is rarely used now.Companies of this kind may be called chartered companies.


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STATUTORY COMPANY

In this case, a special law is passed to establish the

company.

This is done only in special cases when it is necessary toregulate the working of the company for some specific

purposes.

Examples of such companies in India are: the

Industrial Finance Corporation, the Life InsuranceCorporation of India, the Air India, etc.


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REGISTERED COMPANY

The Companies Act, 1956, lays down proceduresby which a company can be brought into existence.

Anybody who wants to incorporate a companycan do so by taking necessary steps outlined therein.

By far the largest number of companies isincorporated under the Companies Act. Thesecompanies may be called registered companies.


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From the point of view of Liability.

TYPES

UNLIMITED GUARANTEE LIMITED


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ULIMITED COMPANY

Do not have any limit on the extent of liability of

its members.

Liability of each member extends to whole amount

of the companys debts and liabilities.

However, the members cannot be sued upon the

directly by the company's creditors.


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COMPANY LIMITED BY GUARANTEE

Classification

Company Limited byGuarantee not

Having share capital

Company Limited byGuarantee

Having share capital


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Company Limited By Guarantee

Not Having Share Capital

Memorandum Limits the members liability.

It is limited to the amount as may have been

undertaken by MO A to contribute in the

case of winding up.


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Company Limited By Guarantee

Having Share Capital

Memorandum Limits the members liability.

Moreover, liability would also extend to the

unpaid value of the shares held by the

member.


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LIMITED COMPANY

The liability of the members of the company islimited to the amount remaining unpaid on the

shares. Hence the holders of the fully paid up shares

cannot be called upon for the further contribution.

The liability of the members holding the partlypaid up shares exists even if the company is inprocess of winding up.


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From the viewpoint of Nationality.

TYPES

NATIONAL MULTI-NATIONAL


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NATIONAL COMPANY

In this case, the control and the managementof the affairs of the company are to be

carried out within the geographical

boundaries of the country.


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MULTINATIONAL COMPANY

The branch is not an Independent entity andis linked up to the parent company existing

in some other country.


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From the view point of Public Interest.

TYPES

PRIVATE PUBLIC GOVERNEMENT


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PRIVATE COMPANY Section 3(l) (iii) states that Private Company is a company

Which by its Articles,

Restricts the rights of the members to transfer the shares,

Limits the membership to 50, excluding the past and

present employees of the company who are the members of

the company, and

Prohibits the invitation to public, for subscription of

shares or debentures of the company.


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PUBLIC COMPANY Section 3(l) (iii) states that Public Company is a company

Which by its Articles,

Does not restrict the rights of the members to transfer theshares,

Does not limit the membership to 50, excluding the pastand present employees of the company who are themembers of the company, and

Invites the public, for subscription of shares or debenturesof the company.


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GOVERNMENTCOMPANY Defined underSection 617 of Companies Act, 1956.

It is a company in which 51% of the paid up share

capital is held either by the central government or bystate government or partly by both of them.

It is introduced in Companies Act, 1956, hence it will

mean a company registered and incorporated underthe companies Act, 1956.


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PRACTICAL PROBLEMS In a private limited Company it is discovered

that there are, in fact, 54members. On an

enquiry, it is ascertained that 6 of suchmembers have been employees of the Companyin the recent past and that they acquired their

shares while they were still employees of theCompany. Is it necessary to convert theCompany into a public limited Company


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Ans. As per Section 3(1) (iii), a Company to beregistered as a private Company must restrict its

membership to 50 only. But, however, in countingthis number of 50 members, employee members andex-employee members (i.e., those who becomemembers while in the employment of the Companybut now having retired still continue to retain

membership) are to be excluded. Thus, in the givencase, the Company shall continue to be a privateCompany. There is no need for conversion.

company law lec 1_1

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