The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it originally referred to an association of persons who took their meals together. In the leisurely past, merchants took advantage of festive gatherings, to discuss business matters

A company is a corporate body and a legal person having status and personality distinct and separate from the members constituting it. In the legal sense, a company is an association of both natural and artificial persons (and is incorporated under the existing law of a country). In terms of the Companies Act, 2013 (Act No. 18 of 2013) a “company” means a company incorporated under this Act or under any previous company law [Section 2(20)]. In common law, a company is a “legal person” or “legal entity” separate from, and capable of surviving beyond the lives of its members. However, an association formed not for profit also acquires a corporate character and falls within the meaning of a company by reason of a licence issued under Section 8(1) of the Act. A company is not merely a legal institution. It is rather a legal device for the attainment of social and economic end. It is, therefore, a combined political, social, economic and legal institution. Thus, the term company has been described in many ways. “It is a means of cooperation and organisation in the conduct of an enterprise”. It is “an intricate, centralised, economic and administrative structure run by professional managers who hire capital from the investor(s)”

The Companies Act, 2013 provides for the kinds of companies that can be promoted and registered under the Act. The three basic types of companies which may be registered under the Act are:

(a) Private Companies;

(b) Public Companies; and

(c) One Person Company (to be formed as Private Limited)..


1.      Minimum number of members Two Three
2.      Maximum number of members Fifty Unlimited
3.      Transferability of shares Restricted  Freely transferable
4.      Raising capital from public Not allowed Allowed
5.      Number of Directors Minimum- two

Maximum- no limit

Minimum- three

Maximum- as specified by the Article

6.      Commencement of business After obtained certificate of incorporation After obtaining certificate of commencement
7.      Holding of statutory meeting and submission of statutory report Not required Required
8.      Filing of prospectus or a statement in lieu of prospectus Not required Required
9.      Name of company Name must end with the words  ‘ Private Limited’ Name must end with the word ‘Limited’
10. Quorum at the annual general meeting Two Five
11. Rotation of Directors Need not retire by rotation Retire by rotation
12. Procedure for formation Simple and cheap Complicated and relatively costly
13. Index of members No need to maintain Index to be maintained
14. Business secrets Not required to make wider publicity of its affairs Wide publicity to all the important discussion, state of affairs, e.t.c.
15. Exemption from several legal restriction Not  required to observe several legal restrictions Too many legal formalities and restrictions to be adhered to.
16. Listing of shares in stock exchange Not listed and quoted in the stock exchange Listed and quoted in the stock exchange
17. Ability to make quick decision Possible Not possible
18. Protection to members Low protection High protection
19. Financial and managerial resources Small Large
20. Scope for explaining Low High
21. Disposal of shares Not allowed Allowed
22. Liquidity of investment in shares Lower liquidity Greater liquidity
23. Minimum paid-up-capital One lakh Five lakh



Reference Links:

  4. Image Source: YouTube