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Business Laws and Management · Elements of Company Law

Types of Companies under the Companies Act, 2013

Updated 11 October 2026 · Fact-checked

Companies are classified on four bases: incorporation (chartered, statutory, registered), liability (limited by shares, limited by guarantee, unlimited), number of members (private, public, one person) and control (holding, subsidiary, associate). Other kinds are small, producer, government, foreign and Section 8 companies. To answer, find the basis of classification first, then the test for that kind.

Understand Kinds of Companies

A company is a separate legal person. But companies differ in who owns them, how many members they have, what members risk and who controls them. The law therefore sorts companies into kinds. Each kind has its own rules. Your first job in any question is to spot which basis of classification is being tested.

By incorporation: a chartered company is created by a royal charter, a statutory company by a special Act of Parliament or a State legislature, and a registered company by registration under the Companies Act. Almost every company you meet today is a registered company.

By liability: in a company limited by shares, a member's liability is limited to the amount unpaid on the shares held. In a company limited by guarantee, each member promises to pay a stated amount if the company is wound up. In an unlimited company, members' liability has no limit. Section 4 says the memorandum must state whether liability is limited or unlimited, and must state the amount for each guarantee member. Section 43 adds that the share capital of a company limited by shares is of two kinds: equity share capital and preference share capital.

By number of members: a private company needs at least two members, is limited to 200 members (employee-members and joint holders are treated specially), restricts the transfer of its shares and cannot invite the public to subscribe to its securities. Its name ends with "Private Limited". A public company needs at least seven members, has no upper limit on members and its name ends with "Limited". A one person company (OPC) has a single member. Section 4(1)(f) requires its memorandum to name the person who becomes the member if the subscriber dies. Section 366 also says a company with fewer than seven members that registers under that Part must register as a private company.

Special kinds: a small company is a private company that stays within limits of paid-up capital and turnover set by the Government (it is not a holding or subsidiary company or a Section 8 company, and gets lighter compliance). A government company is one where the Central Government, State Governments or both hold at least 51% of paid-up share capital. A foreign company is incorporated outside India but has a place of business in India. A holding company controls a subsidiary. A Section 8 company works for charitable and similar objects, and the Section 4 proviso exempts it from the "Limited" or "Private Limited" name rule. A producer company is a special company of primary producers, covered below.

Key formulas to remember

Producer company: who can form it (Section 378C(1))
10 or more individuals (each a producer) OR 2 or more Producer Institutions OR a mix of 10 or more individuals and Producer Institutions
The objects must fall within section 378B and the Chapter's requirements must be met.
Producer company: registration and liability (Section 378C(2), (3))
Registrar registers within 30 days of receiving documents; liability limited to the amount unpaid on shares
It is termed a company limited by shares.
Producer company: status (Section 378C(5))
Body corporate like a private limited company, with no limit on members; never a public company
The words "under any circumstance" make this absolute.
Producer company: name (Section 378F(a))
Name ends with "Producer Company Limited"
Each subscriber must take at least one share.
Name endings (Section 4(1)(a))
Public: "Limited"; Private: "Private Limited"; Section 8 company exempt
Exemption applies only to Section 8 companies.
Guarantee company memorandum (Section 4(1)(d))
States the amount each member undertakes to contribute on winding up (while a member or within one year after ceasing to be one)
Contribution covers debts, winding-up costs and adjustment among contributories.
Members: private, public, OPC
Private: 2 to 200 | Public: at least 7, no maximum | OPC: 1
Private company limit of 200 excludes certain employee-members and counts joint holders as one.
Government company
Government holding ≥ 51% of paid-up share capital
Government may be Central, State or both together.
Kinds of share capital (Section 43)
Equity share capital + Preference share capital
Equity includes voting and differential-rights shares.

How to solve Kinds of Companies questions

Use the same method for any question on kinds of companies, whether it is an MCQ or a written answer.

  1. 1Read the facts and find the basis being tested: incorporation, liability, number of members, control, or a special kind.
  2. 2Pick out the key fact: number of members, who holds the shares, where it was incorporated, what members promise to pay, or the nature of the objects.
  3. 3Recall the test for each candidate kind from the list in this page.
  4. 4Check the conditions exactly: minimum members, name ending, and whether the rule is a minimum or a maximum.
  5. 5Eliminate options that break any condition, for example a public company with five members.
  6. 6For a written answer, define the kind, state the test, apply it to the facts in one line and give the conclusion.
  7. 7For difference questions, compare on the same points: members, name, share transfer, public invitation, and compliance.

Quickest way: Number-and-name check

When to use it: Use this for one-mark MCQs in Paper 4 where you have under a minute per question.

  1. Underline any number in the question: 1, 2, 7, 10, 200, 51%.
  2. Match it fast: 1 is OPC, 2 to 200 is private, 7 or more is public, 10 is producer company, 51% is government company.
  3. If the question gives a name ending, match it: Private Limited, Limited, Producer Company Limited.
  4. If it talks about members paying on winding up, think guarantee; if it talks about unpaid share amount, think limited by shares.
  5. Mark the answer. There is no negative marking, so never leave it blank.

Common mistakes in Kinds of Companies

  • Saying a producer company can become a public company

    Students assume any company with many members can be public.

    Fix: Section 378C(5) says a producer company is treated like a private limited company with no limit on members and can never become a public company.

  • Writing that a private company has a minimum of seven members

    The seven-member rule of public companies gets mixed up.

    Fix: Private needs at least two, public at least seven. Link 7 with public only.

  • Confusing limited by shares with limited by guarantee

    Both are called limited companies.

    Fix: Shares: liability is the unpaid amount on shares held. Guarantee: members promise a fixed sum on winding up. Section 4(1)(d) states both.

  • Using wrong name endings, such as "Limited" for every company

    Students forget the special endings.

    Fix: Public: Limited. Private: Private Limited. Producer: Producer Company Limited. Only Section 8 companies are exempt from the Section 4(1)(a) rule.

  • Treating a government company as one owned fully by the Government

    The word "government" suggests full ownership.

    Fix: The test is that the Government holds at least 51% of paid-up share capital, so private shareholders may hold the rest.

  • Calling every company with one shareholder an OPC

    Students ignore the nominee rule and the type of company.

    Fix: An OPC is a company with one member, and its memorandum must name a person who becomes the member if the subscriber dies (Section 4(1)(f)).

Worked examples

Example 1

MCQ: Only individuals who are all producers wish to form a producer company. What is the minimum number of individuals needed? (a) 2 (b) 7 (c) 10 (d) 200

Show the solution
  1. The topic is a producer company, so Section 378C(1) applies.
  2. It says any ten or more individuals, each a producer, may form it.
  3. Two or more is the rule for Producer Institutions, not individuals.
  4. Seven is the public company minimum and 200 is the private company ceiling, so both are wrong.

Answer: (c) 10

Example 2

Distinguish between a private company and a public company.

Show the solution
  1. Members: a private company needs at least 2 and is limited to 200 members; a public company needs at least 7 and has no upper limit.
  2. Name: private ends with "Private Limited"; public ends with "Limited" (Section 4(1)(a)).
  3. Share transfer: a private company restricts the right to transfer shares in its articles; a public company's shares are freely transferable.
  4. Public invitation: a private company cannot invite the public to subscribe to its securities; a public company may do so.
  5. Conclusion: the difference lies in membership size, name, transferability and access to public funds.

Answer: A private company has 2 to 200 members, restricts share transfer and cannot invite the public to subscribe, and uses "Private Limited". A public company has at least 7 members, no maximum, freely transferable shares, can invite the public, and uses "Limited".

Exam tips

  • Memorise the number table: 1 for OPC, 2 to 200 for private, 7 or more for public, 10 for producer company, 51% for government company.
  • In Paper 4, questions often test a single condition. Read for words like "minimum", "maximum", "at least" and "under any circumstance".
  • For limited by shares versus guarantee, always state what the member must pay and when.
  • Write difference answers as points on the same heads. Four crisp points earn more than a long paragraph.
  • Do not quote exact small company limits unless sure; know that it is a private company within government-set capital and turnover limits.

Practice questions from Elements of Company Law

Kinds of Companies: frequently asked questions

What are the main types of companies under the Companies Act, 2013?

They are classified by incorporation, liability, number of members and control. Private, public and one person companies are the most tested kinds. Small, producer, government, foreign and Section 8 companies are special kinds.

What is the difference between a company limited by shares and by guarantee?

In a company limited by shares, a member's liability is limited to the amount unpaid on shares held. In a company limited by guarantee, a member promises to contribute a stated amount if the company is wound up. The memorandum must state the position under Section 4(1)(d).

Can a one person company have more than one member?

No. An OPC has a single member. Its memorandum names a person who becomes the member if the subscriber dies, as Section 4(1)(f) requires.

Can a producer company become a public company?

No. Section 378C(5) says it is a body corporate as if it were a private limited company, with no limit on members. It shall not, under any circumstance, become or be deemed to become a public limited company.