A company is a business organization. It is an association or collection of individual real persons and/or other companies, each of them provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be made to exist in law and then a company is itself considered a “legal person”.
Classification of Companies in India
On The Basis Of Their Incorporation, Companies Can Be Classified As:
- Statutory company: These companies are not governed by the provisions of the companies act, 1956. They are formed by a special act of parliament or state legislature. Examples include RBI and LIC.
- Registered / Incorporated Company: All the Companies which are registered with the registrar of companies and formed under the Companies Act, 1956, including the existing companies which are earlier registered, are generally known as an Incorporated or Registered Company. Most firms trading on the stock exchanges are registered companies.
On The Basis of Registration, Companies Can Be Classified As:
- Private limited company: A company whose shareholders are offered limited liability and shareholders cannot sell their shares on the stock exchange to the public is called Private Limited Company. In private limited company a fixed number of individuals are considered to be shareholders and the sale or transfer of a shareholder’s share must be first offered to the other shareholders. The Companies Act, 1956, confers certain privileges on such firms by exempting them from complying with some provisions of the Act. The reasons for exemption are negligible public interest in its affairs.
- Public Limited Company: A Company whose securities is traded on a stock exchange and can be bought and sold by anyone is called public limited company. Any member of the public willing to pay the price can buy its shares or debentures. Public companies are strictly regulated, and are required by law to publish their complete and true financial position so that investors can determine the true worth of its stock. Such a firm has a minimum paid-up capital of Rs 5 lakh .
Public Documents of a Company
- Articles of association: These are bylaws, or rules and regulations that govern the management of its internal affairs. It defines the mode in which the business needs to be carried on and members’ rights and duties. T he articles of association are subordinate to the memorandum.
- Memorandum of association: It is a document that lays the constitution of the company and contains the fundamental provisions on which the company is incorporated. The purpose of this document is two-fold. First, it helps the intended shareholder to determine the purpose for which his money will be used and enables him to assess the investment risk. Secondly, any person dealing with the company will know without doubt the legally permitted range of the firm’s activities.
Both memorandum and articles are public documents and anyone can access these on payment of a nominal fee.