Classification of Companies and Limited Liability Partnerships

Practice flashcards covering the classification of companies under the Companies Act, 2013, the features of Limited Liability Partnerships, and the definition of foreign companies.

Private Company

Defined under Section $2(68)$ as a company with a minimum of $2$ and maximum of $200$ members that restricts share transfers and prohibits public invitation for securities.

Public Company

Defined under Section $2(71)$ as a company with a minimum of $7$ members and no maximum limit, which can invite the public to subscribe to its freely transferable shares.

One Person Company (OPC)

Defined under Section $2(62)$ as a company with exactly $1$ member, which acts as a separate legal entity with limited liability and is treated as a private company.

Authorised Capital

The maximum share capital a company is permitted to issue, as specified in its Memorandum of Association.

Paid-up Capital

The actual amount of money received from shareholders in exchange for the shares issued by the company.

Joint Shareholders

Persons who jointly hold a share in a private company and are treated as a single member for the purpose of the $200$-member limit.

Employee Shareholders

Current and former employees who hold shares and are not counted towards the $200$-member limit of a private company.

Limited Liability Partnership (LLP)

A business form governed by the Limited Liability Partnership Act, $2008$, which combines the flexibility of a partnership with the limited liability of a company.

Body Corporate

The status of an LLP having a separate legal existence from its partners, allowing it to own property, sue, and be sued in its own name.

LLP Agreement

The contract that determines the rights, duties, profit-sharing ratios, and responsibilities of the partners within an LLP.

Mutual Agency (in LLP)

The principle that a partner is not personally liable for another partner's misconduct or negligence, unlike in an ordinary partnership.

Designated Partner

At least $2$ partners in an LLP, with at least one being a resident of India, responsible for legal compliance and filing documents with the Registrar.

Statement of Accounts and Solvency

A document that every LLP is required to file annually with the Registrar to report its financial status.

National Company Law Tribunal (NCLT)

The judicial body that can order the winding up of an LLP for reasons such as inability to pay debts or failure to file statutory returns.

Foreign Company

According to Section $2(42)$, any company incorporated outside India that has a place of business in India or conducts business activities in India.

Section 379(1)

A legal provision stating that if $50/$ or more of a foreign company's paid-up share capital is held by Indian citizens or entities, it must comply with specific Indian corporate governance standards.