Classification of Company – Members

Under the Company Law, a Company may be classified as under, based on the Members.

 PRIVATE COMPANY [Sec. 2(68)]


The articles of a personal company must contain the subsequent three restrictions:
A) The right to transfer the shares shall be restricted.
The articles of a private company must provide restrictions on transferability of shares. However, the articles cannot impose prohibition on transferability of shares. In other words, there can’t be an entire ban on transfer of shares.
The restrictions must be applied uniformly on all the members of the corporate . In other words, the articles must not discriminate between the members regarding their right to transfer the shares.
B) The number of members shall be limited to 200. While computing the number of members for this purpose, following provisions shall apply:
i. Joint holders of shares shall be counted as one member only.
ii.The employees of the corporate , who became members by virtue of their employment, shall not be considered while counting the limit of 200 members.
iii. the workers of the corporate , who became members by virtue of their employment, shall not be counted, albeit they need , as on date, ceased to be the workers of the company. In other words, ex-employees (or former employees) shall not be considered while counting the limit of 200 members.
C) the corporate is prohibited from making any invitation to public to subscribe for any securities. In other words, a personal company shall not make a public issue of its securities.
The words ‘Private Limited’ must be added at the top of its name by a personal Ltd. . Section 149(1) further lies down that a private company shall have a minimum number of two directors. The only two members can also be the 2 directors of the private company.


PUBLIC COMPANY [Sec. 2(71)]


A public company can be regarded as an association of seven or more members who subscribe their names to the memorandum and comply with other requirements of registration as prescribed under the Act, for any lawful purpose. Earlier there was a requirement of having minimum paid up share capital of five lakh for incorporation of public companies rupees which has been dispensed with vide the enforcement of Companies (Amendment) Act, 2015.
The Companies Act, 2013 has undoubtedly raised the standards of transparency and accountability expected from the corporate. This in turn has increased the number of compliances of companies, particularly the public company. Few of the compliances for a public company under the Companies Act, 2013 can be:
a. Appointment of an independent director and women director
b. Appointment of whole time Key Managerial Personnel
c. Formation of various committees like stakeholder committee, nomination committee etc.
d. Requirement of Secretarial Audit


The increased compliance costs plays down heavily upon those public companies which are closely held by smaller group of shareholders. Thus today, a number of public companies having smaller shareholders base find it feasible to convert themselves into a private company or a limited liability partnership to enhance their operating efficiency.


ONE PERSON COMPANY [Sec. 2(62)]


a) One-person Company has been a new concept introduced vides the Companies Act, 2013 whereby a small/micro entrepreneur can now be in a position to convert their firm into a corporate entity without worrying about the complex compliance regime.
b) The introduction of OPC in the legal system is a move that would encourage corporatization of micro businesses and entrepreneurships.
c) ‘One person company’ means a company which has only one person as a member.
d) Such a company is described under section 3(1) (c) as a private company.
e) All the provisions of the act and the rules as are applicable to a private company shall equally apply to ‘One Person Company’.
f) In case the company proposed to be formed is a ‘One Person Company’ the memorandum must be subscribed to by 1 person.
g) In the case of a One Person Company, the memorandum shall state the name of a person, who in the event of death of subscriber shall become the member of the company.
h) In case of One Person Company, the words ‘One Person Company’ shall be mentioned in brackets below the name.
i) A number of privileges in terms of procedural relaxations are available to a One-Person
Company over other companies like, it is not required to hold an annual general meeting [section 96(1), neither it is required to prepare cash flow statement as a part of its Financial Statement [section 2(40)], nor it is required to appoint an independent director on its Board [section 149(4)].
j) Further Rule 3 of Companies (Incorporation) Rules, 2014 deals with OPC.

Aishwarya Says

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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