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Types of Company

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Types of Company

Types of companies are based on the characteristics, ownership, liability, and the company act of various countries. The various types of companies based on their nature. Company is classified into 4 different types:

On the basis of incorporation:

a.  Chartered company.

b. Statutory company.

c.  Registered company

On the basis of liability:

a. Unlimited company.

b.  Limited company .

c. Company limited by guarantee.

On the basis of membership:

a. Private company

b. Public company

On the basis of ownership:

a. Government company

b. Non-government company

On the basis of incorporation:

Based on the mode of incorporation of the company; 3 types of companies are chartered or royal chartered companies, registered or incorporated companies, and statutory company.

Chartered Or Royal Chartered Companies

Companies that are incorporated by the royal charter (or similar instrument of government) for trade, exploration, investment, and colonization.

For example;

East India Company in 1600.

German East Africa Company in 1884.

Companhia de Moçambique in 1888.

Russian-American Company in 1799.

Barcelona Trading Company in 1755.

Registered Or Incorporated Companies

The companies which are formed and registered under the provision of common company law are known as Registered Companies. The activities and working of registered company is governed by company act. The provisions regarding the establishment and operation of such companies are mentioned in company act 2063 in context of Nepal. For this, he major documents like memorandum of association and article of association are prepared in the company. 

Statutory Companies

Companies formed or incorporated under the special act of parliament and whose objectives, powers and activities are defined by the act, are known as Statutory Companies. Such companies are governed by their respective acts and do not have any memorandum or articles of association. Ownership of such company is held by the government fully or partially. Nepal Bank Limited, Nepal Rastra Bank, Agriculture Development Bank, Nepal Industrial Development Corporation, Nepal Electricity Authority, Employees Provident Funds etc. are the example of statutory companies in Nepal. These companies are also known as Public Corporation.

On the basis of liability:

Based on the liability type and limit of the members/shareholders of the company; 3 types of companies are companies limited by shares, companies limited by guarantee, and unlimited company.

Companies Limited by Shares

A company limited by shares is a registered company having the liability of its member limited by its memorandum of association to the amount, if any, unpaid on the shares respectively held by them. A shareholder cannot be called upon to pay more than the amount remaining unpaid on his shares. Shareholder’s assets cannot be called upon for the payment of the liabilities of the company if nothing remains to be paid on the shares purchased by him. Such a company is also known as a “Share Company.”

Companies Limited by Guarantee

It’s a company without any shareholders but it is owned by members called guarantors who agrees to pay a nominal amount in the event of company’s being wound up. It’s a specific form used for non-profit organization. Under this form, profits earned by the company are re invested again in the company to use it for different purposes. Hence, it’s a legally preferred structure for non-profit companies, clubs, charitable trusts and other similar set ups. A company limited by guarantee has a separate legal identity. It can carry out activities in the name of the company such as employing human resources, borrowing credit, buy and sell of property and defending a lawsuit etc. Memorandum of association is specifically drafted for such type of companies.

Unlimited Company

It is a company in which the liability of the members is unlimited like that of a partnership firm. If the assets of the company are not sufficient for satisfying the claims of creditors, the shareholders are liable to pay more than the face or nominal value of the share held by them even from their personal property.

On the basis of membership:

Based on the number of members/shareholders of the company; 3 types of companies are public limited company, private limited company.

Public Limited Company

A public company is a company which collects major capital by offering shares to the general public. Its number of memberships is governed by the authorized capital with which it is registered. The share is transferable to others. It can sell debentures in markets to raise additional capital as loans. Nepal Bank Ltd, Commercial Bank Ltd., etc., are some examples. 

Private Limited Company

 A private limited company can be formed with the one member but the maximum number of shareholders cannot exceed fifty and restricts the transfer of share from one shareholder to another. It is not necessary to issue prospectus to collect share capital. It is not necessary to hold statutory meeting for private company. The private company must use the words “Pvt. Ltd” at the end of its name. Companies can go from private to public, by selling shares to the public, often as a way to raise a large amount of money. In reverse, public companies can be taken private if, for example, a majority owner wants to consolidate control.

Differentiate between a private company and a public limited company.

Public limited company

Private limited company

A public limited company requires at least 7 members for its incorporation. Its maximum number is unlimited.

A private limited company can be established by a single member. Its maximum number is limited to 50.


it requires the ‘certificate of incorporation’ and the ‘certificate of commencement of business’ to start its business.

 

It requires only the ‘certificate of incorporation’ to start its business.

 

It does not restrict the transfer of its shares.

 

It restricts the transfer of its shares.

 

It has to publish its annual financial statements.

 

It is not required to publish its annual financial statements.

It must file a statutory report.

It need not file any statutory report.

It cannot allot shares without receiving the minimum subscription.

It can allot shares without raising the minimum subscription.

It uses the word  ‘Ltd’ after its name.

It uses the words ‘Pvt.Ltd’ after its name.


On the basis of Ownership

Based on ownership; 2 types of companies are government company and non-government company.

Government Company

A government company is a company in which no less than 51 percentage of the paid-up share capital is held by the government. Himal Cement Company, Lumbini Sugar Mills are some of the examples of Government.

Non-Government Company

The company which is not a government undertaking is called the non-government company. Generally, company owned, managed and controlled by the private sector come under this category. Buddha Airlines, Chaudhary Group, etc. are some examples of non-government companies.