Companies in India are classified along multiple dimensions—how they are formed, member liability, public-interest footprint, and control relationships such as holding–subsidiary—each with distinct compliance and governance implications for banking and finance stakeholders. This guide maps these dimensions under the Companies Act, 2013 and related frameworks to aid structuring, risk assessment, and regulatory alignment.
Mode of incorporation
- Statutory company: Created by a special Act of Parliament or State Legislature; governed by its special statute alongside applicable provisions of the Companies Act (e.g., RBI Act entities, electricity companies by special Acts). These entities often fall under specialized oversight and sectoral norms.
- Registered company: Formed under the Companies Act, 2013 by incorporation; includes companies limited by shares, limited by guarantee, and unlimited companies, as well as public, private, and One Person Companies. Registration confers separate legal personality and perpetual succession.
Liability classification
- Company limited by shares: Member liability is limited to the unpaid amount on shares subscribed; the dominant corporate form for commercial enterprises and capital-raising via equity.
- Company limited by guarantee: Members undertake to contribute a fixed amount in the event of winding up; common for non-profit objectives, often paired with Section 8 status.
- Unlimited company: No limit on member liability; relatively rare due to elevated risk exposure and limited capital market appeal.
Public vs private (and OPC)
- Public company: Can invite public subscription, has freely transferable shares, and higher disclosure and governance obligations; minimum member thresholds apply as per statute. Public status typically aligns with broader market access and stricter oversight.
- Private company: Restricts share transfer, caps members, and cannot invite the public to subscribe to its securities; compliance is relatively lighter compared to public companies.
- One Person Company (OPC): A company with a single member under Section 2(62); treated as a private company with tailored relaxations, enabling limited liability with simplified compliance for small businesses.
Public interest perspective (PIE/NFRA scope)
- Public Interest Entities (PIEs) under the NFRA framework include listed companies and large unlisted public companies crossing thresholds for capital, turnover, or debt, bringing them under enhanced audit and reporting regulation. This classification underscores systemic significance and investor protection concerns.
- NFRA coverage: Listed entities; unlisted public companies with paid-up capital ≥ ₹500 crore, turnover ≥ ₹1,000 crore, or aggregate debt (loans, debentures, deposits) ≥ ₹500 crore as of the preceding 31 March; specified sectoral companies and certain foreign subsidiaries/associates of Indian entities.
Holding and subsidiary
- Holding company: A company that has one or more subsidiaries; control can be through board composition or voting power paths recognized by law, including through subsidiary layers.
- Subsidiary company: A company controlled by another through the ability to control the composition of its Board or to exercise/control more than one-half of the voting power, directly or together with subsidiaries; a wholly-owned subsidiary exists when 100% ownership (voting control) is held.
- Layering and control nuances: Control exercised through another subsidiary still deems the downstream entity a subsidiary of the ultimate holding company; “company” includes anybody corporate for this purpose, expanding the scope beyond Indian-incorporated entities.
Quick map of types
- By incorporation: Statutory vs Registered (Companies Act). Registered includes public, private, OPC, Section 8, and special liability forms.
- By liability: Limited by shares; limited by guarantee; unlimited.
- By public interface: Public vs Private; PIE significance via NFRA triggers.
- By control: Holding, Subsidiary, Wholly-owned Subsidiary; associate companies (significant influence without control) are also recognized for disclosure and consolidation contexts.
Key takeaways
- Regulatory perimeter: Public companies and PIEs face enhanced oversight(PIE/NFRA Scope) affecting audit quality, disclosures, and governance—key for credit assessment and market signaling.
- Risk and liability: Limited by shares structures dominate bankable corporate credit due to predictable liability and capital structure, while guarantee and unlimited forms are niche with distinct risk profiles.
- Group structures: Holding–subsidiary chains impact consolidation, related-party exposure, and upstream/downstream credit risk; legal control can exist via board composition or voting power across layers.
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