CLASSIFICATION OF COMPANIES -(New Amendments)
A company is an artificial person created by Law and destroyed by Law. Where two or more persons hold one or more shares in a company jointly, they shall be treated as a single member. Any two persons or more persons can join hands to register a private limited company. However, its maximum membership should not exceed 50. The Word Private Limited should be used at the end of the company’s name. A private limited company must have its own Articles of Association.
Section 3(1) (iii) of the Companies Act defines a Private Company as follows:
“A company which has a minimum paid up capital of one lakh rupees or such higher paid up capital as may be prescribed and by its articles —
1) Limits the number of its members to 50; not including;
(i) persons who are in the employment of the company, and
(ii) persons who, having been formerly in the employment of the company were members of the company while in that employment and have continued to be members after the employment ceased; and
2) restricts right to transfer its shares, if any;
3) Prohibits any invitation to the public to subscribe or any shares in, or debentures of the company
4) Prohibits any invitation or acceptance of deposits form person other than its members, directors or their relatives.
Every private company existing on the commencement of the Companies (Amendment) act, 2000, i.e. on 31.12.2000 with a paid up capital of less than one lakh rupees shall within a period of two years from 31.12.2000 enhance its paid capital to one lakh rupees.
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Where a private company fails to enhance its paid up capital to one lakh rupees within the period of two years, such company shall be deemed to be a defunct company and its name shall be struck off from the register by the Registrar.
A company registered under section 25 shall not be required to have minimum paid up capital as specified above.
The above restrictions are mandatory provisions of a private limited company.
A Private company is classified into:
1) Companies limited by shares and
2) Companies limited by guarantee (if it has share capital)
3) Unlimited Companies (if it has a share capital)
4) Producer Companies.
Producer Companies:
Secs 581 A to 581 ZT inserted by Companies (Amendment) Act, 2002 introduced the registration of producer companies limited by shares as if it is a private company.
Section 3(1) (iv) states that all companies other than private companies are called public companies. A company which is not a private company is a public company. Any seven or more persons can join and to form a public company. Its maximum membership is unlimited. The above restrictions applicable to private limited companies do not apply to public companies. By companies (Amendment) Act, 2000, a public company shall mean a company, which —
1) is not a private company;
2) has minimum up capital of five lakh rupees or such higher paid capital as may be prescribed
3) Is a private company which is a subsidiary of a company which is not a private company.
Every public company existing on 31.12.2000 with a paid up capital of less than five lakh rupees shall within a period of two years from 31..12.2000 enhance its paid up capital to five lakhs rupees.
Where a public company fails to enhance its paid up capital to five lakh rupees within the period of two years, such company shall be deemed to be a defunct company and its name shall be struck off from the register by the Registrar.
A company registered under the section 25 shall not be required to have minimum paid up capital as specified above.
Procedure for converting a private company into public limited company (Sec 44)
Section 44 of the companies act prescribes the following procedures for converting a Private Limited Company into a public Limited Company:
1) Alter the articles of the company’s by special resolution to eliminate restrictions of a private company under Sec 3 (1) (iii).
2) If the number of members is less than 7, it must be raised al least to 7.
3) If the number of directors is less than three it must be raised at least to three.
On the date of such alterations private company shall cease to exist. It shall become a public company. It shall within 30 days file with the Registrar either a prospectus or statements in lieu of prospectus and the resolution altering the articles.
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Dr.R.SRINIVASAN is a Post graduate in commerce and corporate secretary ship . He received his doctoral degreein the Managementfaculty from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects. Before Joining BGCW, he was teaching in SNR College, Coimbatore, Sindhi college, Chennai& T.S.Narayanasamy College, Chennai for eight years. He was with the industry for a short term at Salzar Electronics Pvt. Ltd, Coimbatore. He has about 20 years of teaching experience and having research experience of 15 years. His interests are in Accounting and finance, Capital Market, Quantitative Methods. He underwent the Faculty Development Programme at Indian Institute of Management Ahmedabad during 2000-01. He has presented 20 papers in national and international conferences and has published twenty papers in the areas of Finance and Human resource Management in National Journals. Co-authored a book titled, ‘Investors Protection, published by Raj Publications, New Delhi . Delivered lectures in contemporary finance topics at Pondicherry University. He is involved in consultancy projects for Godrej Saralee, Chennai in the areas of Statistical Applications. Supervised a number of research projects in the area of corporate finance and Human Resource Management. He is the Board of examiner in corporate Secretaryship and Management for the past two decades. UGCSanctioned funded major project in Management (Finance area) for two years (2010-2012).
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