Business Condition And Solution

Types of Companies

1. Public Company means a company which is not a private company.

2. Private Company means a company which by its articles of association:-

a.  Restricts the right of members to transfer its shares

b.  Limits the number of its members to fifty. In determining this number of 50, employee-members and ex-employee members are not to be considered.

c.  Prohibits an invitation to the public to subscribe to any shares in or the debentures of the company.

If a private company contravenes any of the aforesaid three provisions, it ceases to be private company and loses all the exemptions and privileges which a private company is entitled.

3. Companies deemed to be public limited company:
A private company will be treated as a deemed public limited company in any of the following circumstances :-

1.  Where at least 25% of the paid up share capital of a private company is held by one or more bodies corporate, the private company shall automatically become the public company on and from the date on which the aforesaid percentage is so held.

2.  Where the annual average turnover of the private company during the period of three consecutive financial years is not less than Rs 25 corers, the private company shall be, irrespective of its paid up share capital, become a deemed public company.

3.  Where not less than 25% of the paid up capital of a public company limited is held by the private company, then the private company shall become a public company on and from the date on which the aforesaid percentage is so held.

4.  Where a private company accepts deposits after the invitation is made by advertisement or renews deposits from the public (other than from its members or directors or their relatives), such companies shall become public company on and from date such acceptance or renewal is first made.

4.Limited and Unlimited companies:
Companies may be limited or unlimited companies. Company may be limited by shares or limited by guarantee.

a.  Company limited by shares In this case, the liability of members is limited to the amount of uncalled share capital. No member of company limited by the shares can be called upon to pay more than the face value of shares or so much of it as is remaining unpaid. Members have no liability in case of fully paid up shares.

b.  Company limited by the guarantee A company limited by guarantee is a registered company having the liability of its members limited by its memorandum of association to such amount as the members may respectively thereby undertake to pay if necessary on liquidation of the company. The liability of the members to pay the guaranteed amount arises only when the company has gone into liquidation and not when it is a going concern. A guarantee company may be a company with share capital or without share capital.

Unlimited Company: The liability of members of an unlimited company is unlimited. Therefore their liability is similar to that of the liability of the partners of a partnership firm.

5.Section 25 Companies: Under the Companies Act, 1956, the name of a public limited company must end with the word ‘Limited’ and the name of a private limited company must end with the word ‘Private Limited’. However, under Section 25, the Central Government may allow companies to remove the word “Limited / Private Limited” from the name if the following conditions are satisfied :-

1.  The company is formed for promoting commerce, science, art, religion, charity or other socially useful objects

2.  The company does not intend to pay dividend to its members but apply its profits and other income in promotion of its objects.

6.Holding and Subsidiary companies
A company shall be deemed to be subsidiary of another company if :-

1.  That other company controls the composition of its board of directors ; or

2.  That other company holds more than half in face value of its equity share capital

3.  Where the first mentioned company is subsidiary company of any company which that others subsidiary. eg Company B is subsidiary of the Company A and Company C is subsidiary of Company B, therefore Company C is subsidiary of Company A.

The control of the composition of the Board of Directors of the company means that the holding company has the power at its discretion to appoint or remove all or majority of directors of the subsidiary company without consent or concurrence of any other person.

7.Government Companies
Means any company in which not less than 51% of the paid up share capital is held by the Central Government or any State Government or partly by the Central Government and partly by the one or more State Governments and includes a company which is a subsidiary of a government company. Government Companies are also governed by the provisions of the Companies Act. However, the Central Government may direct that certain provisions of the Companies Act shall not apply or shall apply only with such exceptions, modifications and adaptions as may be specified to such government companies.

8. Foreign Companies
Means a company incorporated in a country outside India under the law of that other country and has established the place of business in India.

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