What are the different types of companies that can be incorporated in India ?

Companies may be incorporated in a variety of ways. Thus :

(i) A Co. may be incorporated by being formed and registered under the present Act in the manner provided by the Act. It may also have been formed and registered under any of the earlier companies Acts of 1857 or 1860, 1866 or 1882, or 1913 (s.3).

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(ii) A co. may also be incorporated by Royal Chatter or Letters patent e.g. the Bank of England or the East India Company. The special feature of such companies are that (a) their member are not personally liable for the debt of the corporation, (b) the debt also, are extinguished on dissolution, and (c) the corporation can exercise all powers of an ordinary individual as regards dealing with property , entering into contacts, etc. although the charters gives only restricted powers.


(iii) a Company may also be incorporated by means of a special Act of the Legislature, either of the British or other Parliament or of the Government of India. Such companies are called “Statutory Companies”, e.g. the London and the North Western Railway Company. These companies are generally formed to carry out some special public undertaking; e.g. Railway, Waterworks, Gas, Tramways etc. The carrying out of such undertaking usually involves committing  acts, which would amount to nuisance at common law.

The Acts incorporating such companies, therefore, grant them permission and power to do such acts. In other respects, such companies are similar to ordinary limited companies incorporated under the Companies Act; the liability of their members is limited by shares, their powers are limited by the provisions of the Act and they cannot use their fund for other purposes, however beneficial they may be. Instances of Statutory Companies in India are the imperial Bank of India, the Reserve Bank of India etc.

Notice that certain class of incorporated companies have special Acts, which also govern them, e.g. companies which areby Insurance Act (4 to 1938), Provident Insurance Societies which are governed by Act 5 of 1912 and Court-operative Societies which are governed by Act 2 of 1912 and Registered Societies which are governed by act 21 of 1860 and Banking Companies which are Governed by Act 10 of 1949.

Types of Companies:

(i) Companies may be, either (i) public or (ii) private.

A public incorporated Company means a Company which offers its share capital to the public generally for subscription. A private incorporated company is a company which, speaking generally does not so offer its share capital to the public for subscription. Company may also be either


(i) Companies with limited liability or (ii) Company with unlimited liability. These last are called “unlimited companies”. Limited Company comprise two classes: (a) companies limited by shares, i.e. companies having the liability of their members limited by the memo, to the amount, if any, unpaid on the shares respectively held by them, or

(ii) companies limited by guarantee, i.e. companies having the liability of their members limited by the memo, to such amount as the members may respectively thereby undertake to contribute to the assets of the Company in the events of its being wound upon. Of these two, the former is by far the most common “Guarantee companies”, on the other hand, the rarely found in the East, their most favorite place in America. This form is convenient for clubs, syndicates and other associations which do not require the interest of their members to be expressed in terms of cash. The whole property of such Companies belongs to all the members in certain proportions:

(ii) Joint- stock companies:

These have been defined as “Associations of person incorporated to promote, by joint contribution to a common stock the carrying on of some commercial enterprise”. These were originally partnership, consisting of large fluctuating bodies of individuals, the shares of partners being transferable. They were unregistered and a limitation on the liability of their members was sought to be introduced into them. Such Companies were common in the 17th and 18th centuries in England. Their chief difficulty were that person dealing with them did not know whom to sue for their claims. The law therefore did not look upon them with favour.

They were however made compulsorily register able in England by the Company Act of 1844. The principle of limited liability was only introduced for the first time by the company Act of 1862. In the present Indian Companies Act provision is made for registration of such companies in part IX. Sec.566 defines such Company as follows-“A Joint-stock Company” means a company having a permanent paid up or nominal share capital of a fixed amount divided into shares of fixed amounts or held and transferable as stock (or divided and held, partly in one and partly in other way) and formed on the principle of having for its members the holders of such shares and/ or stock and no others”.

(iii) “One Man Companies”:


These are Companies in which one man holds practically the whole of the share capital of the company, while the remainder is held either by his relations or nominees. Being the largest holder, such person is generally the sole or the managing director and enjoys full control over the company. Such companies are generally private companies and after consist of either man or wife or of man, wife and children.

Saloman’s case (supra) is an instance of one of such Companies. Such Companies however are not illegal. It should not be thought; however that frauds would be allowed to be perpetrated under the guise of “one man companies”. If a business is insolvent when sold to a “one man company ”, the Court has sufficient power under the Companies Act, to hold the directors guilty of fraudulent trading and as such individually liable for all the debts of the Company (sec.542).

(iv) Associations not for profit:

These are Companies which do business and realize profit but do not divide it amongst its members. Their object is generally to promote commerce, arts, science etc. Their management, rests, not with as board of directors, but with a committee of management. Their membership is by election or on payment of a subscription. Such Companies can be formed with limited liability under sec 25 of the Act, after obtaining a license from the Central Government. They enjoy special privileges, one of them being that they need not use the word “Limited” as part of their names, as other limited liability company have to do (see post).

The powers given by the sec. have proved very useful and many kinds of associations have availed themselves of these powers in England, e.g. medical institutes, Law societies, Chamber of commerce, Clubs, Schools and learned Societies. The principle of limited liability generally takes the form of guarantee Company, in case of such associations.

(v) Banking Companies:

These are defined as “company which carry on as their principal business, the accepting of deposits of money on current account or otherwise, subject to withdrawal by cheque, draft or order”. These Companies are now governed by the Banking Companies Act (10 of 1949).

(vi) Investment Companies:

These are Companies whose principal business is the acquisition and holding the shares, stocks, debentures, or other securities of other companies’ on behalf of and for the benefit of their members. They are governed by the same rules as other incorporated Companies.

(vii) Subsidiary and Holding Companies (see post):

For statuary Companies etc. see ante.

(viii) Unregistered Company:

This has been defined by sec. 582 of the Act, as any partnership, association or Company, consisting of more than seven members, which is not registered either under the Indian Companies Act of 1866 or under any Act repealed thereby, Or under the Indian Companies Act of 1882(not being a Company whose registered office was in Burma, Aden or Pakistan immediately before the separation of that country from India or in Jammu and Kashmir immediately before 26 Jan, 1950) under the present Act but not including a railway company incorporated by an act of Parliament or other Indian Law or any act of parliament of United Kingdom. Provision for the winding up of such companies has been made by ss. 582-590 of the Act.

(ix) Foreign Company:

means a Company incorporated outside India and having at the commencement of this Act a place of business in India or which, thereafter establishes such a place of business in India. Provision for such Companies has been made in sec 591-608 of the Act.

(x) Unincorporated Companies:

These were large partnerships. Their shares were transferable. Their management rested with a select body of managers of directors. They were generally accompanied by a deed of settlement. Their continuity was preserved not withstanding bankruptcy or death of their members. They were very common in the 17th and 18th centuries. Now they are extinct by reasons of provisions of the English and Indian Companies Acts regarding compulsory registration.

(xi) Registered Societies:

These are not incorporated Companies under the Companies Act. They are governed by a special Act, viz. Societies registration Act (21 of 1866) Societies formed for the purpose of promoting science, art, literature, political education or charity, can obtain certain advantages by getting them registered under that Act. The Act lays down certain rules for the formation, registration and regulation of such societies.

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