In legal terms, a Company is an association of persons who come together for a common objective, usually to carry out business and earn profits. Under Section 2(20) of the Companies Act, 2013, a company is defined as "a company incorporated under this Act or under any previous company law."
From a legal perspective, a company is an artificial person created by law, having a separate entity from its members, with perpetual succession and a common seal.
Types of Companies
Companies can be classified based on various criteria such as liability, members, and control.
1. On the Basis of Liability
Company Limited by Shares: The liability of members is limited to the unpaid amount on the shares held by them.
Company Limited by Guarantee: Members undertake to contribute a specific amount to the assets of the company only in the event of its winding up.
Unlimited Company: There is no limit on the liability of its members; their personal assets can be used to clear company debts.
2. On the Basis of Number of Members
One Person Company (OPC): A company that has only one person as a member.
Private Company: A company that restricts the transfer of shares and limits its members to 200.
Public Company: A company that is not a private company and has no limit on the maximum number of members.
3. On the Basis of Control/Ownership
Holding and Subsidiary Companies: Where one company (holding) controls the composition of the Board or more than half the voting power of another (subsidiary).
Associate Company: A company in which another company has a "significant influence" (at least 20% of total voting power).
Government Company: A company in which 51% or more of the paid-up capital is held by the Government.
Difference between Private and Public Company
The distinction between these two is the most common classification in company law.
| Feature | Private Company | Public Company |
| Minimum Members | 2 | 7 |
| Maximum Members | 200 (excluding employees) | No Limit |
| Minimum Directors | 2 | 3 |
| Transfer of Shares | Restricted by Articles (AoA) | Freely Transferable |
| Public Subscription | Prohibited from inviting public | Can invite public to subscribe |
| Prospectus | Not required to issue | Must issue or file a statement |
| Name Ending | Must end with "Private Limited" | Must end with "Limited" |
| Quorum for AGM | 2 members personally present | 5, 15, or 30 (depends on member count) |
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