Corporates in India are governed by various statutes (corporate law in India) which are regulated by different Government / Regulatory Agencies.
Companies in India, are governed by statutes and agencies depending on the activities carried out by that company. In spite of the fact that a plethora of statutes are applicable to a Company, Companies Act remains the base act which all Companies incorporated in India are mandated to follow and abide. It’s important to note that corporate law in India is more than merely company law and it involves various other statues.
Corporate Law in India has evolved over a period of years. From Indian Companies Act, 1913 to Companies Act, 1956 and now Companies Act, 2013. Depending on the need of the industry and opening up of the Indian economy, the Companies Act too has kept pace with the changing times. There is no doubt that corporate law in India means more than company law, however the company law remains the foundation of corporate law in India.
There are various types of companies in India and there is a difference between private and public company under companies act 2013. At present Companies Act, 2013 is in force and Section 1(4) of the Act states as under:
“(4) The provisions of this Act shall apply to:
(a) companies incorporated under this Act or under any previous company law;
(b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(c) banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949 (10 of 1949);
(d) companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003);
(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and
(f) such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.”
From the above we can infer that Companies Act is applicable to all types of Companies existing and to be incorporated in India and there are various types of companies in India.
However, in addition to the above, Special Acts of the Parliament or the State Legislature may provide for incorporation of Companies to which the Companies Act, 2013 would not apply. The types of companies in India falling in those categories, to name a few, are as under:
The types of Companies in India may broadly be classified based on the extent of liability of the Member.
Section 2(92) of Companies Act, 2013 Defines Unlimited Company.
“Unlimited Company means a company not having any limit on the liability of its members.”
In this type of Company, Members are liable for the debts or losses of the company, even to the extent of their personal property.
Section 2(21) of Companies Act, 2013 Defines Company Limited by Guarantee.
“Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up.”
In this type of company in India, the person who has guaranteed to pay the company’s debt is liable to pay debts only when the company is winding up and has incurred losses.
Section 2(22) of Companies Act, 2013 Defines Company Limited by Shares.
“Company limited by shares means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.”
In these types of companies, members are liable to pay the amount only up to the value of unpaid shares held by them.
Companies Limited by Shares can further be classified as
Section 2(71) Defines a Public Company as:
Public company means a company which
(a) is not a private company;
(b) has a minimum paid-up share capital as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;
Section 2(68) Defines a Private Company as:
Private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles —
Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:
Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and (iii) prohibits any invitation to the public to subscribe for any securities of the company.
Section 2(62) Defines a One Person Company (“OPC”) as:
One Person Company means a company which has only one person as a member.
OPC was introduced to encourage corporatization for small businesses.
Other Forms/Types of Companies in India
Other forms/types of companies in India that are in existence are:
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