Types of Companies, Meaning, Listing, Size and Control

In the business world, types of Companies come in various forms, each designed to meet specific needs and objectives. Their classification can be based on multiple factors, such as ownership structure, liability, number of members, and operational focus.

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Types of Companies in India

• Public Limited Company : A public limited company in India allows the general public to buy and trade shares on the stock exchange. There is no maximum limit on the number of shareholders, but a minimum of seven members is required to establish this type of company.
• Private Limited Company : In India, a private limited company is privately held with limited liability and a maximum of 200 shareholders. Shares of this company cannot be publicly traded or transferred.
• One-Person Company (OPC) : A one-person company is owned and operated by a single individual who can also serve as the director. OPCs offer complete control over business operations with no minimum share capital requirement, making them ideal for small enterprises seeking limited liability.
• Companies Limited by Guarantee : Also known as Guarantee Companies, these types of companies have members who commit to contributing a specific amount to the company’s assets if it ceases operations. This commitment limits their financial liability based on their promised contribution.
• Companies Limited by Shares : In this type of company, members' liability is restricted to any unpaid amounts on their shares. Shares are issued through an Initial Public Offering (IPO), and ownership is determined by the equity shares held.
• Unlimited Company : An unlimited company has no limit on its members' liability, which may extend to their assets in the event of significant company debt. This type of company may or may not have share capital.
• Small Companies : The Companies Act 2013 defines small companies as having plant and machinery investments under Rs.10 crore and annual turnover below Rs.50 crore. These companies have paid-up share capital below Rs.4 crore and turnover below Rs.40 crore and are eligible for various benefits.
• Micro Companies : Micro companies have investments in plant and machinery not exceeding Rs.1 crore and an annual turnover below Rs.5 crore.
• Section 8 Company (NGO) : Under Section 8 of the Companies Act, individuals or groups can register a company for charitable purposes. These companies are set up to advance commerce, science, art, education, sports, research, religion, social welfare, charity, or environmental protection. They must use their profits and income solely to support their activities and are prohibited from distributing dividends to their members.
• Medium Companies: Medium companies have investments in plant and machinery up to Rs.50 crore and an annual turnover not exceeding Rs.250 crore.
• Holding Company : A holding company owns one or more other companies, known as subsidiaries. It controls these subsidiaries by holding more than 50% of their shares or controlling their board of directors.
• Subsidiary Company: A subsidiary company is controlled by another company, the parent or holding company. If the parent company owns 100% of its shares, it is a ‘wholly-owned subsidiary’.

Types of Companies Basis of Liabilities

• Companies Limited by Shares: In companies limited by shares, shareholders may only sometimes pay the full value of their shares immediately. The liability of members in these companies is confined to any unpaid amounts on their shares, meaning their financial responsibility is limited to the balance of unpaid dividends.
• Companies Limited by Guarantee : For companies limited by guarantee, the memorandum of association specifies the monetary amounts members agree to contribute if the company is liquidated. Members are only liable for the guaranteed amount and cannot be required to pay more than this sum, even if additional financial needs arise.
• Unlimited Companies : In unlimited companies, there is no cap on the liabilities of its members. If the company faces liquidation, shareholders’ assets may be used to settle the company’s debts. The members' liability encompasses the entire company's outstanding debts.

Types of Companies Based on Control

• Holding Company: A holding company is a business entity that holds most of the voting rights in another company, known as a subsidiary. As the parent company, it oversees and influences the subsidiary's policies, assets, and management decisions but does not engage in daily operations.
• Subsidiary Company: A subsidiary company is controlled, either fully or partially, by another company, referred to as the holding company. The holding company typically has significant influence over the subsidiary, including control over its board of directors or holding more than 50% of its voting shares. When a holding company owns 100% of a subsidiary's voting rights, the subsidiary is termed a Wholly Owned Subsidiary (WOS).

Companies Based on Members

• One-Person Companies (OPCs) : As the name implies, One-Person Companies are owned by a single individual. These companies are legally distinct from their sole members and are not classified as sole proprietorships. Unlike other types of Company, OPCs do not require a minimum share capital.
• Private Companies : Private companies restrict the transfer of their shares and limit them to a closed group. They must have at least 2 and 200 members, including current and former employees who may also hold shares.
• Public Companies : Public companies allow for the unrestricted transfer of shares among the public. They must have at least 7 members, with no upper limit on the number of members, facilitating a broader and more open shareholder base.

Types of Companies Based on Listing

• Listed Company : A listed type of Company is registered on recognized stock exchanges in India or abroad. Shares of these companies are freely traded on the stock exchanges, and they must comply with the guidelines set by the Securities and Exchange Board of India (SEBI). To list its shares, a company must issue a prospectus to the public for subscription, either through an Initial Public Offering (IPO) or, if already listed, through a Further Public Offer (FPO).
• Unlisted Company: An unlisted company is not registered on any stock exchange, meaning its shares cannot be traded publicly. These companies typically raise capital through private means, such as funds from friends, family, or financial institutions. If an unlisted company wants to list its shares on a stock exchange, it must convert to a public company and issue a prospectus for its securities.

Types of Companies Based on Size

• Micro Companies : A micro company is one in which the investment in plant and machinery does not exceed Rs.1 crore, and the annual turnover is below Rs.5 crore.
• Medium Companies : A medium company is defined by an investment in plant and machinery up to Rs.50 crore and an annual turnover not exceeding Rs.250 crore.
• Small Companies: A small company invests in plant and machinery of up to Rs.10 crore, with an annual turnover not exceeding Rs.50 crore. Additionally, under the Companies Act 2013, a small company is defined as one with a paid-up share capital of less than Rs.4 crore and an annual turnover below Rs.40 crore.