2  Various Types of Companies and Their Memberships

Companies in India can be classified based on various criteria such as incorporation, liability, number of members, and ownership. These classifications help in understanding the scope, function, and legal obligations of each type.

1. Classification Based on Incorporation

Companies can be formed by different legal methods:

• Statutory Company
  Formed by a special Act of Parliament or State Legislature.

  Reserve Bank of India (RBI) was established under the RBI Act, 1934.

• Registered Company
  Formed by registration under the Companies Act, 2013 or earlier laws.

  Infosys Ltd., Tata Motors Ltd.

2. Classification Based on Liability

• Company Limited by Shares
  Members’ liability is limited to the unpaid amount on their shares.

  Reliance Industries Ltd. — if ₹80 is paid on a ₹100 share, liability is ₹20.

• Company Limited by Guarantee
  Members guarantee a fixed amount to be contributed in the event of liquidation. Common in non-profit entities.

  Indian Red Cross Society.

• Unlimited Liability Company
  No limit to members’ liability. Rarely formed in practice.

  Few legal or professional firms may register this way.

3. Classification Based on Number of Members

• Private Company
  Defined under Section 2(68) of the Companies Act, 2013. Restrictions include:

  • Cannot invite public to subscribe for shares
  • Maximum 200 members
  • Minimum 2 members

  Zoho Corporation Pvt. Ltd.

• Public Company
  Defined under Section 2(71). No restriction on public subscription. Minimum 7 members, no maximum.

  HDFC Bank Ltd., Infosys Ltd.

• One Person Company (OPC)
  Introduced in the Companies Act, 2013 (Section 2(62)). It allows a single individual to form a company with limited liability.

  Startups or individual-owned firms with corporate status.

4. Classification Based on Control or Holding

• Holding Company
  Controls one or more subsidiary companies.

  Tata Sons is the holding company of TCS, Tata Motors, etc.

• Subsidiary Company
  Controlled by another company (the holding company) through shareholding or board composition.

  Tata Motors Finance Ltd. is a subsidiary of Tata Motors.

5. Classification Based on Ownership

• Government Company
  At least 51% of paid-up share capital is held by central or state government.

  Bharat Heavy Electricals Ltd. (BHEL)

• Foreign Company
  A company incorporated outside India but having a place of business in India (Section 2(42)).

  Google India Pvt. Ltd., registered as a foreign company.

2.1 Membership of a Company

The term “membership” refers to those individuals or entities who have agreed to become members of a company and whose names are entered in the Register of Members.

Who Can Become a Member?

• Any individual (above age 18 and legally competent)
  
• A company (as a body corporate)
  
• LLPs, trusts, and government bodies
  
• Minors (only through a legal guardian)

Modes of Acquiring Membership

• Subscribing to the Memorandum of Association (MoA)
  
• Applying and being allotted shares
  
• Transferring or inheriting shares
  
• Acquisition through court orders (e.g., merger)

Cessation of Membership

A person ceases to be a member when:

• Shares are transferred or forfeited
  
• Member resigns
  
• Member is declared insolvent or dies
  
• Company is liquidated or membership is terminated by law

2.1.1 Summary: Types of Companies

Basis of Classification	Type	Example
Incorporation	Statutory	Reserve Bank of India
	Registered	Infosys Ltd.
Liability	Limited by Shares	Reliance Industries Ltd.
	Limited by Guarantee	NGOs, Indian Red Cross Society
	Unlimited	Rare legal firms
Number of Members	Private Company	Zoho Corporation Pvt. Ltd.
	Public Company	HDFC Bank Ltd.
	One Person Company (OPC)	Startups, freelancers
Control	Holding Company	Tata Sons
	Subsidiary Company	Tata Motors Finance Ltd.
Ownership	Government Company	BHEL, ONGC
	Foreign Company	Google India Pvt. Ltd.