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On the basis of the control, how a company may be classified?

On the basis of the control, we can classify company as Holding and Subsidiary companies
Holding and Subsidiary companies (Sec 4)

A company shall be deemed to be subsidiary of another company if: -

1. That other company controls the composition of its board of directors; or

2. That other company holds more than half in face value of its equity share capital

3. Where the first mentioned company is subsidiary company of any company, which that other’s subsidiary. eg Company B is subsidiary of the Company A and Company C is subsidiary of Company B, therefore Company C is subsidiary of Company A.

The control of the composition of the Board of Directors of the company means that the holding company has the power at its discretion to appoint or remove all or majority of directors of the subsidiary company without consent or concurrence of any other person.

On the basis of the ownership, a company can be classified as

· Government Companies

· Non Government Companies

· Foreign Companies


Government Companies

It means any company in which not less than 51% of the paid up share capital is held by the Central Government or any State Government or partly by the Central Government and partly by the one or more State Governments and includes a company which is a subsidiary of a government company. Government Companies are also governed by the provisions of the Compa­nies Act. However, the Central Government may direct that certain provisions of the Companies Act shall not apply or shall apply only with such exceptions, modifications and adaptions as may be specified to such government companies.

Non Government Companies

It is controlled and operated by a private capital

Foreign Companies

By this, we mean a company incorporated in a country outside India under the law of that other country and has established the place of business in India.

There is another important type of company which is called as One Man Company

One man company is a company in which one man holds practically the whole of the share capital of the company, and in order to meet the statutory requirement of minimum number of members, some dummy members who are mostly his friends or relations, hold just 1or 2 shares each. It is like any other company is a legal entity distinct from its members. The dummy members are usually nominees of the principal shareholder who is the virtual owner of the business and who carries it on with limited liability.
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