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Types of Companies notes – CSEET

Types of Companies notes – CSEET

Types of Companies:

ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.

The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.

Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.

We are now going to discuss the details of CSEET Paper-2 Legal Aptitude and Logical Reasoning – Types of Companies notes.

Types of Companies

Types of Companies

Types of Companies:

Companies may be classified on the basis of their incorporation, number of members, size, basis of control and motive. On the basis of incorporation of the companies, it may be classified into Charter Companies, Statutory Companies and Registered Companies. On the basis of liability, it may be Companies limited by shares/guarantee and unlimited liability companies. Further, on the basis of number of members, they may be classified into One Person Company, private company and public company. On the basis of size, they may be divided into small companies and other companies. On the basis of control, they may be classified into holding company, subsidiary company and associate company. Besides, companies may be nonprofit companies licensed under Section 8, Government companies, foreign companies, holding/subsidiary companies, investment companies, producer companies etc.

The Companies Act, 2013 provides for the kinds of companies that can be promoted and registered under the Act. The three basic types of companies which may be registered under the Act are:

–      Private Companies;

–      Public Companies;

–      One Person Company

Private Company

Private company means a company having a minimum paid-up share capital as may be prescribed, and which by its articles,—

(i)    restricts the right to transfer its shares;

(ii)   except in case of One Person Company, limits the number of its members to two hundred:

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.

Public Company

Public company means a company which—

(a)   is not a private company and;

(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.

One Person Company

One Person Company means a company which has only one person as a member (to be formed as Private Limited Company).

Companies with Charitable Objects

A person or an association of persons registered and licensed under Section 8 of the Companies Act, 2013 as a limited company—

(a)   has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b)   intends to apply its profits, if any, or other income in promoting its objects; and

(c)   intends to prohibit the payment of any dividend to its members.

Government Company

Government company means any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company.

Foreign Company

Foreign company means any company or body corporate incorporated outside India which,—

(a)   Has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b)   Conducts any business activity in India in any other manner.

Associate Company

Associate Company in relation to another company, means a company in which that other company has a significant influence, but which is not a subsidiary company of the company having such influence and includes a joint venture company.


(a)   the expression “significant influence” means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement;

(b)   the expression “joint venture” means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.

Holding Company

Holding company in relation to one or more other companies, means a company of which such companies are subsidiary companies. It may be noted that here “company” includes anybody corporate.

Subsidiary Company or Subsidiary

Subsidiary company or “subsidiary, in relation to any other company (that is to say the holding company), means a company in which the holding company—

(i)    Controls the composition of the Board of Directors; or

(ii)   Exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.

Explanation.—For the purposes of this clause,—

(a)   a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b)   the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(c)   the expression “company” includes anybody corporate

(d)   “Layer” in relation to a holding company means its subsidiary or subsidiaries;

Small Company

Small company means a company, other than a public company,—

(i)    paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and

(ii)   turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:

Provided that nothing in this clause shall apply to—

(A)  a holding company or a subsidiary company;

(B)  a company registered under section 8; or

(C)  a company or body corporate governed by any special Act;

Dormant Company

–      Where a company is formed and registered for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar for obtaining the status of a dormant company.

–      “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;

–      In case of a company which has not filed financial statements or annual returns for two financial years consecutively, the Registrar shall issue a notice to that company and enter the name of such company in the register maintained for dormant companies.

–      A dormant company shall have a minimum number of three directors in case of a public company, two directors in case of a private company and one director in case of a One Person Company.

–      Provisions of the Act in relation to the rotation of auditors shall not apply on dormant companies.

–      The Registrar shall strike off the name of a dormant company from the register of dormant companies, which has failed to comply with the requirements.

Nidhi Company

Nidhi means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.

Producer Companies

According to the Section 581A(l) of the Companies Act, 1956, a producer company is a body corporate having objects or activities specified in Section 581B and which is registered as such under the provisions of the Act. The membership of producer companies is open to such people who themselves are the primary producers, which is an activity by which some agricultural produce is produced by such primary producers.

In terms of Section 581B (1) of the Companies Act, 1956, the objects of a producer company registered under this Act may be all or any of the following matters:

(a)   production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for their benefit.

(b)   processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its members.

(c)   manufacturing, sale or supply of machinery, equipment or consumables mainly to its members.

(d)   providing education on the mutual assistance principles to its members and others.

(e)   rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its members.

(f)    generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce.

(g)   insurance of producers or their primary produce.

(h)   promoting techniques of mutuality and mutual assistance.

(i)    welfare measures or facilities for the benefit of the members as may be decided by the Board.

(j)    any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) above or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner.

(k)   financing of procurement, processing, marketing or other activities specified in clauses

(a)    to (j) above, which include extending of credit facilitiesor any other financial services to its members.

Non-Banking Financial Company (NBFC)

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/ securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

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