What is the specialty of a Private Limited Company according to the Companies Act, 1956?
Section 3 (1) (iii) of the Companies Act, 1956 defines what is a private company. According to the said section, a company which has a minimum paid up capital of about one lakh rupees or higher as may be prescribed by its articles and has other attributes such as
1. the rights to transfer its shares are restricted
2. number of members limited to 50 number (however, the Companies Act, 2013 increased from the maximum limit of members in a private company from 50 to 200 (section 2(68) of 2013 Act)) which excludes the following persons for counting the members of the company:
a. persons who are in the employment of the company,
b. previous employees who continued to be members after the cessation of his employment.
3. invitation to public for subscription for any shares or debenture of company, as well as deposits from persons other than the members, directors or their relatives prohibited. Please be noted that it does not restrict the invitation itself, but restricts the invitation to the public is probited.
Also, if two or more persons hold one or more shares in a company such persons are considered as single member
- What are the registration processes for a new company?
- What are the steps involved in the Formation of a Company?
Section 26 of the Act states that every private limited company should have its own Articles of Association and the articles should contain the matters specified in sub-clauses (a), (b) and (c) of clause (iii) of subsection (1) of Section 3 of Act if the company is private company having shares, otherwise, the articles must contain Sub-clauses (b) and (c) of clause (iii) of subsection (1) of Section 3 of Act
Please note that the private company which is a subsidiary to the public company will come under the scope of Public company from the commencement of Companies (Amendment) Act, 2000 as per the amended Section 3 of the said Act.
- Where to file the documents for incorporation of a Company?
- Is it possible to make amendments to the Articles of Association subsequent to its incorporation?
Types of the Companies under Act: Under the Companies Act, there are few varieties of companies that can be formed, promoted and registered, the basic company forms are
- Public companies
- Private companies
- Producer companies.
In addition to these, Companies Act, 2013 introduced new forms of company:
- “one –person company” – An OPC means a company with only one person as its member [section 3(1) of 2013 Act].
- Small company: A company, other than a public company
(i) Paid-up share capital not more than 50 lakh rupees or higher amount as may be prescribed but not more than five crore rupees
(ii) Turnover as per last profit-and-loss account not more than two crore rupees or such higher amount as may be prescribed, but not more than 20 crore rupees
3. Dormant company: Section 455 of 2013 Act states that a company be categorized as dormant if the company incorporated under Act 2013 for any future projects or to hold any assets including the intellectual property and has no accounting transaction.
- What is the minimum number of persons essential for the formation of a Company?
- What is the difference between registered and un-registered companies?
Companies that are classified based on incorporation:
- Chartered companies : A company created by the grant of a charter by the Crown is called Chartered Company. For eg: East India Company and the Chartered Bank. These are controlled by the Charter.
- Statutory Companies : Companies constituted by the Special Act of Parliament or state legislature . Eg. Reserve Bank of India and Life Insurance Corporation
- Registered Companies: Companies incorporated under the Companies Act, 1956.
- Companies are also classified based on the liability of members of the company:
- Companies limited by Shares – liability of members limited to the amount, if any, unpaid on the shares held by them in the company
- Companies limited by guarantee – wherein the liability of the members of the company limited by to such amount as they undertook in the Memorandum as guarantors of the company’s debts up to agreed amount.
Unlimited companies – member’s liability is unlimited and this company may be either public or private company
- Companies can also be classified as follows:
- Companies under Section 25 of the Act
- Government companies
- Foreign companies
- Holding and subsidiary companies
- Investment companies
- Producer companies.
Adv. Anitha Gutti