A Company is a voluntary association
of persons formed for the purpose of doing business, having a distinct
name and limited liability. It is a juristic person having a separate
legal entity distinct from the members who constitute it, capable of rights
and duties of its own and endowed with the potential of perpetual succession.
In India, the Companies
Act,1956, provides for the formation of a company, powers and responsibilities
of the directors and managers, raising of capital, holding of company
meetings, maintenance and audit of company accounts, powers of inspection
and investigation of company affairs and regulating other affairs of the
companies. The Act applies to the whole of india and to all types of companies,
whether registered under this Act or an earlier Act.
The Companies Act is administered by
the Central Government through the Ministry
of Corporate Affairs and the Offices
of Registrar of Companies, Official
Liquidators, Public Trustee, Company
Law Board, Director of Inspection, etc. The Registrar of Companies
controls the task of incorporation of new companies and the administration
of running companies.Under the Companies Act, an entrepreneur
can form two types of companies, namely a private company or a public
company.
A Private Company is one, the articles
whereof contains the following restrictions:-
- Restricts the minimum paid up share capital to such an
amount as may be prescribed but which shall not be less than rupees
one lakh;
- Restricts the rights of members to transfer its shares,
if any;
- Limits the number of its members to fifty excluding the
past or present employees of the company who are members of the company;
- Prohibits any invitation to the public to subscribe for
any shares or debentures of the company;
- Does not invite or accept any deposits from persons other
than its members, directors or their relatives
Also, the minimum number of members in a private company
is two and such a company must have the words 'Pvt Ltd' as the last part of
its name.
A Public Company, as defined in the Companies Act, has
the following features:-
- Its shares are freely transferable;
- There is no ceiling on its membership;
- It can invite general public to subscribe to its shares;
- It has a minimum paid up capital of Rs.5 lakhs or such
higher paid up capital as may be prescribed;
- it is a private company which is a subsidiary of a public
company.
Also, the minimum number of members in a public company
is seven and such a company must have the word 'Ltd' as last part of its
nameAfter the formation of a company, an entrepreneur can
change the type of its business organisation from public to private or
vice versa. The Companies Act also contains the provisions for such conversions.
