Classification of Joint Stock Companies

Joint stock companies are classified based on different perspectives. A brief description of each of them is as follows:

Classification of Joint Stock Companies

Classification of Joint Stock Companies

1. In the case of creation

(a) Chartered Companies: A chartered company with investors or shareholders, the rights granted by the Charter for the purposes of trade, research and colonialism. In the past, commercial enterprises had largely created state charters. These companies do not exist in India. Bank type England (1694) and East India Company (1600) are examples of such companies.

(b) Statutory Companies: An entity may be included in a special law of Parliament or in any State Legislature. Such companies are called legal entities. Law firms are usually created to create certain public institutions. These are often associated with general uses. Examples: Railways, Water Works, Power Generation, Reserve Bank of India.

(c) Registered Companies: Companies registered under the Companies Act 2013 are called registered companies. Such companies shall come into force when the Company is registered by law and the Registrar issues a Certificate of Coordination. Such companies can be defined by shares or warranty.

2. In the public interest

(a) Private Company: A private company is the most appropriate form of family and petty concerns registered under family law. Section 2 (68) of the Companies Act, 2013 defines private companies as, “Articles of those companies regulate the transfer of shares through articles of association and prevent the public from subscribing. The characteristics of a private company are as follows:

  • The minimum paid up capital is Rs.1,00,000.
  • The minimum number of members is two.
  • The maximum number of members is fifty.
  • Issuance of shares to the public is prohibited.
  • Transfer of shares is prohibited.

Private companies must comply with all of the above conditions. It is mandatory for these companies to write “Pvt Ltd” after their names. Ownership of these companies is restricted to well-selected individuals. It takes at least two people to start a private limited company. Usually, when the partnership needs more money to expand their business, they turn themselves into private companies. In fact they combine the achievements of the company and the partnership form of the business organization. According to the Companies Act 2013, private companies can also be classified into the following two categories;

(i) Small Company

Under Section 2 (85) of the Indian Companies Act, 2013, a small company is a non-public company. It has the following features.

  1. The share capital is Rs. Does not exceed. 50 lakhs. If there is a large amount (if any) it is Rs. Should not be exceeded. 5 crore.
  2. Its turnover is Rs. Does not exceed. 2 crore. If there is a large amount (if any) it is Rs. Should not be exceeded. 20 crore.

(ii) An individual company: According to the Companies Act, 2013, “an individual company (OPC) is a company in which only one person is a member.” The entire share capital of a company is held by one man only, and in order to meet the minimum required members, some bogus members often hold 1 or 2 shares by his family members or his relatives or friends. Fake partners usually carry this with the primary partner nominees and limited responsibilities.

Also Read: Define Joint Stock Company, Features, Advantages & Disadvantages

(b) Public Company: This is a company suitable for conducting large scale business involving large amount of capital. Under the provisions of the Companies Act, 2013, a public company has the following features:

  • The minimum paid-up capital is Rs. 5,00,000.
  • The minimum number of members is seven.
  • The maximum number of members is unlimited.

The public company must use the word “limited” as part of its name. A public company must be a public limited or defined after its name. Examples: Steel Authority of India Limited and Reliance Industries Limited.

3. In terms of entitlement:

(a) Government company: A public entity in which more than 51% of the share capital is held by the Central Government or any State Government or two Governments or partly by the Central Government and partly by the State Governments. Example: State Trading Corporation Limited, Minerals and Metals Trading Corporation India Limited, BHEL, ONGC etc.

(b) Non-government Company: All companies except Government company are called Non-government Company. They do not satisfy the characteristics of government companies.

4. In case of liability:

(a) Companies limited by shares: A company is called a company limited by the number of shares limited by the value of the shares defined by the liabilities of its members.

(b) Institutions Restricted by Guarantee: When members contribute to the assets of a company, respectively, a company can contribute the liability of its members to the extent limited by its reference. Each member cannot claim the guarantee amount until it affects the company. The warranty defined companies are very small in number because they are non-commercial companies.

(c) Unlimited Companies: Members of these companies may be invited to make payments from their personal assets in order to fulfill the obligations of the Company at the time of termination of the Company. The capital of these companies can be easily transferred by implementing a special resolution without the permission of the court. However, such companies are rarely created and are found today.

5. In terms of control:

(a) Holding Company: When a company controls the management of another company, the controlling company is called a ‘holding company’.

(b) Subsidiary: A subsidiary where one company controls the management of another company. For example, if Company A holds more than 51% of B’s paid-up capital, Company B is called a subsidiary.

6. In terms of nationality:

(a) Indian Company: A company registered in India at a business location in India is called an Indian company. It can be a private company or a public company.

(b) Foreign Company: This is a company which is incorporated outside India and has a business location in India. The term business space does not mean agency business in India. When all the shareholders of a company are Indian citizens, a company is called a foreign company if it is registered outside India.

7. By region:

(a) National Company: Such institutions are regulated within the borders of the country in which the national institutions are registered. Buyer and seller are from the same country, and the currency remains the same.

(b) Multinational Company: Such companies are several national or international organizations that extend parts of their operations beyond the country of registration. Buyer and seller are from two different countries and have foreign exchange.

8. When starting a business:

(a) Inactive Company: This is a company which has not made any account transactions for two years. Such a company may call or apply to the Registrar of Companies to declare it a “dormant company.” The initiative or creation of dormant companies was taken over by the Ministry of Corporate Affairs.

(B) Defective company: A company that has no assets and liabilities, a company that fails to start a business within a year of consolidation, and such company is a dysfunctional company. Whether the status of a company was traded publicly or privately, it went bankrupt and ran out of stock.

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