Kinds of Companies

Classification of companies can be done from several point of view. Generally, the companies are of the following types:

On the Basis of Incorporation:

1. Chartered Company:

It is a company which is created by the charter on special sanction granted by the Head of the State giving certain exclusive privileges and rights to the company. East India Company and Chartered Bank of India, Australia and China are the examples.

2. Statutory Company:

When a company is brought into existence through a special Act of Parliament or legislature, it is called statutory company. The Act by which the company is formed, defines the power, liabilities and activities of the company. Usually such companies are formed to run the enterprises of social or national importance. State Bank of Pakistan, Steel Mill, Security and Exchange Commission of Pakistan etc are the examples of statutory companies.

3. Registered Company:

A company which is formed and registered under Companies Ordinance, 1984 is known as registered company. Most of the industrial and commercial companies are registered companies.

Kinds of Registered Companies:

1. Private Company:

A company which has the following characteristics is private company:

• The quantity of the owners cannot exceed 50.
• It restricts the transfer of its share through its articles of association and
• It does not invite public to purchase its shares and debentures.

A private company can be formed with 1 person in case of SMC and minimum 2 in case of other private company. The maximum limit is 50 in case of other private company and in case of SMC, it is 1.

1. Public Company:

As per Companies Ordinance 1984, a public company is a company which is not a private company. It means that a public company is a company which

• Does not limit its members to be 50.
• Does not restricts the rights of its members to transfer their shares and
• Invites the public by issuing prospectus to purchase its shares and debentures.

A public company can be formed with minimum 3 people in case of public unlisted and minimum 7 people in case of private company. There is no limit on maximum no of its members.

On the basis of Liability:

1. Company Limited by Shares:

It is a company which keeps the liability of its members limited upto the value of share purchased by them. It is essential for such companies to use the word ‘Limited’ at the end of their name so that the public can understand that the liability of its members is limited. Most of the joint stock companies take this form of ownership. Such companies are profit seeking institutions. They are by far the most popular among the registered companies.

2. Company Limited by Guarantee:

It is also a company with limited liability of its members. But in its case, the liability of the members is limited to the amount each of them has undertaken to pay in the event of winding up of the company. It may or may not issue shares. In case of a company limited by guaranteed and with share capital, liability of its members is limited to the extent of the unpaid amount of the shares held by them plus the amount of guarantee. Such companies are generally formed to undertake non-business operations.

On the basis of Control:

1. Government Company:

It is a company in which not less than 51% of its share capital is held by the government. It is also registered under the Companies Ordinance, 1984.

2. Non-Government Company:

A registered company which is not a government company is known as Non-government Company.

3. Holding Company:

A company is said to be the holding company of the other when it holds more than 50% of the share capital of the other company or it has got control over the constitution of the board of directors of the other company. It may be added here that the control over the constitution of the board of directors is ordinarily vested in the ordinary shareholders of the company. But is may also be acquired under a contract.

4. Subsidiary Company:

Subsidiary company is a company when any other company is holding it i.e. when that other company either holds more than 50% of its share capital or controls the composition of its board of directors.

5. Associate Company:

Associate is a company in which another company as an investor has significant influence but not control or joint control. Significant influence is the power to participate in the financial and operating policy decisions but not control them.

6. Foreign Company:

Foreign Company is a company registered outside Pakistan, under a foreign law other than Pakistani law and establishes its place of business in Pakistan.

7. Domestic Company:

A company that conducts its affairs in its home country is domestic company. A domestic corporation is often taxed differently than a foreign corporation, and may be required to pay duties or fees on the import of its products. Typically, a domestic corporation is able to conduct business in other states or other parts of the country where it has filed its articles of incorporation .