A Detailed Classification of Companies, (OPCs, Public, Private, Government, Foreign, Charitable And All Other Types Included)


The classification of companies is a crucial aspect for understanding the diverse landscape of business entities. Companies vary in their structure, formation, and objectives. Categorizing them based on specific criteria provides a comprehensive framework for analysis. In this blog post, we explore the classification of different types of companies, examining their incorporation methods, liabilities, size, control or holding structures, access to capital, and various other characteristics. This exploration sheds light on the diverse nature of businesses and the regulatory frameworks that govern them.


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1.      On the basis of its incorporation

A.      Charter Company

Companies incorporated by a special charter are known as charter companies. The British East India Company serves as a prominent historical example of this type. However, in post-independence India, such companies are no longer relevant.


B.      Statutory Companies:

Constituted by a special Act of Parliament or State Legislature, statutory companies aim to provide public services. While primarily governed under the Special Act, they are also subject to the provisions of the Companies Act, 2013, where applicable. Examples include the Reserve Bank of India and the Life Insurance Corporation of India.


C.      Registered Companies:

Companies registered under the Companies Act, 2013, or any previous Company Law fall under the category of registered companies.

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2.      Companies on the Basis of Liabilities

When we look at the liabilities of members, companies can be limited by shares, limited by guarantee or simply unlimited.

A.      Companies Limited by Shares

In the case of a company limited by shares, its members are only responsible for the value of shares they hold at the time of its winding up.


B.      Companies Limited by Guarantee

In some companies, the memorandum of association mentions amounts of money that certain members guarantee to pay. In the event of winding up, they will be liable only to pay the guaranteed amount. Examples include clubs, trade associations, and research associations.


C.      Unlimited Companies

Unlimited companies have no limits on their members’ liabilities. Hence, the company can use all personal assets of shareholders to meet its debt during winding up. Their liabilities will extend to cover the company’s entire debt.

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3.      Companies on the basis of size or members

A.      One Person Companies (OPC)

This concept was first introduced by the 2013 Company’s Amendment Act. These kinds of companies have only one member as their sole shareholder. Section 2(62) contains the provisions regarding the same. They are distinct from sole proprietorships because:

I.                     OPCs are legal entities distinct from their sole members.

II.                   Unlike other companies, OPCs don’t need to have any minimum share capital.

Important features

•         Single-member: OPCs can have only 1 member or shareholder, unlike other private companies.

•         Nominee: A unique feature of OPCs that sets them apart from other kinds of companies is that the sole member of the company has to mention a nominee while registering the company. Since there is only one member in an OPC, their death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.

•         Special privileges: OPCs enjoys several privileges and exemptions under the Companies Act.


B.      Private Companies

Private companies are those that follow the principle of restrictions, limitations, and prohibitions (RLP) imposed in terms of S2(68) and also contain the word ‘Private’ in their name.

In these kinds of companies, restrictions are imposed on the free transferability of shares. In terms of members, private companies need to have a minimum of 2 and a maximum of 200. These members include present and former employees who also hold shares.


C.      Public Companies

In contrast to private companies, public companies do not follow the principle of RLP and allow their members to freely transfer their shares to others. Secondly, they need to have a minimum of 7 members, but the maximum number of members they can have is unlimited. Some important provisions regarding these companies are:

•         Defined u/s 2(71) of the CA, 2013 – A public company means a company which is not a private company.

•         Section 3(1) of the CA, 2013– Public company may be formed for any lawful purpose by 7 or more persons.

•         Section 149(1) of the CA, 2013 – Every public company shall have minimum 3 director in its Board.

•         Section 4(1)(a) of the CA, 2013 – A public company is required to add the words “Limited” at the end of its name.

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4.      Companies on the basis of Control or Holding

In terms of control, there are two types of companies.

A.      Holding and Subsidiary Companies

In some cases, a company’s shares might be held fully or partly by another company. Here, the company owning these shares becomes the holding or parent company. Similarly, the company whose shares the parent company owns becomes its subsidiary company.

Holding companies exercise control over their subsidiaries by dictating the composition of their board of directors. Furthermore, parent companies also exercise control by owning more than 50% of their subsidiary companies’ shares and play a vital role in decision-making.

Example: Tata Capital, a wholly-owned subsidiary of Tata Sons Limited.


B.      Associate Companies

Associate companies are those in which other companies have significant influence. This “significant influence” amounts to ownership of at least 20% of the shares of the associate company.

For example, A holds 22% in B, and B holds 30% in C. In this case, C company is an associate of B but not of A.

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5.      Companies in terms of Access to Capital

When we consider the access, a company has to capital, companies may be either listed or unlisted.

A.      Listed company

Listed companies have their securities listed on stock exchanges. This means people can freely buy their securities. Therefore, only public companies can be listed, and not private companies.


B.      Unlisted company

Unlisted companies, on the other hand, do not list their securities on stock exchanges. Both public and private companies can fall under this category.


6.      Other Types of Companies

A.      Government Companies

“Government company “under Section 2(45) of the Companies Act, 2013 is defined as, company in which equal to or more than 51% of the paid-up share capital is held by the Central Government, or by any State Government or Governments (more than one state’s government), or partly by the Central Government and partly by one or more State Governments, and includes the company, which is a subsidiary company of such a Government company.

A government company gives its annual reports which have to be tabled in both houses of the Parliament and state legislature, as per the nature of ownership.

Some examples of government company are National Thermal Power Corporation Limited (NTPC), Bharat Heavy Electricals Limited (BHEL), etc.


B.      Foreign Companies

Foreign companies are incorporated outside India. They also conduct business in India using a place of business either by themselves or with some other company, by any means, as per section 2(42) of CA 2013. Sections 379 to 393 of the CA, 2013, prescribe the provisions applicable to such companies.


C.      Section 8 company, Charitable Companies

Certain companies have charitable purposes as their objectives. These companies are called Section 8 companies because they are registered under Section 8 of the Companies Act, 2013.

Charitable companies are incorporated for the promotion of arts, science, culture, religion, education, sports, trade, commerce, etc. Since they do not earn profits, they also do not pay any dividends to their members.


D.     Dormant Companies

These companies are generally formed for future projects. They do not engage in significant accounting transactions and are not required to carry out all the compliances of regular companies.


E.      Small Company:

It is defined under section 2(85) of the CA, 2013 – “small company” means a company, other than a public company,—

I.         paid-up share capital of which does not exceed 50 lakh rupees or such higher amount as may be prescribed which shall not be more than 10 crore rupees; and

II.       turnover of which as per profit and loss account for the immediately preceding financial year does not exceed 2 crore rupees or such higher amount as may be prescribed which shall not be more than 100 crore rupees

Provided that nothing in this clause shall apply to.

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In conclusion, the classification of companies provides a nuanced understanding of the diverse structures that businesses adopt. From the historical significance of charter companies to the contemporary distinctions between public and private entities, each classification serves a unique purpose in the business landscape. Recognizing the implications of liabilities, size, control structures, and access to capital allows stakeholders, regulators, and investors to navigate the intricate web of corporate entities. As businesses evolve, the frameworks outlined here continue to shape the regulatory landscape, influencing how companies operate, grow, and contribute to the broader economy. In the dynamic world of commerce, a thorough comprehension of these classifications is indispensable for informed decision-making and fostering a robust business environment.


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