Features and types of companies

The essentials

A company is an artificial person created by law, registered under the Companies Act, 2013 (or an earlier Companies Act). It has a separate legal existence from its members, can own property, enter into contracts and sue or be sued in its own name. Its capital is divided into shares, and the shareholders own the company while the board of directors manages it.

Key points

• Separate legal entity: the company is distinct from its members.
• Limited liability: in a company limited by shares, a member's liability is limited to the unpaid amount on his shares.
• Perpetual succession: the company continues to exist despite death, insolvency or change of members.
• Transferability of shares: shares of a public company are freely transferable; a private company restricts transfer.
• Separation of ownership and management.
• Types by liability: limited by shares, limited by guarantee, unlimited.
• Types by membership: One Person Company (one member), private company (minimum 2, maximum 200 members, excluding certain employees), public company (minimum 7 members).
• Other types: government company (at least 51% of paid-up share capital held by the government), holding and subsidiary companies.

Exam tips

Learn the membership limits and match features to their meaning, as one-line conceptual questions are common.

Common mistakes

• Saying shareholders are personally liable for all debts of a company limited by shares.
• Mixing up the minimum number of members for private and public companies.