Section 3 of Company Act 2013

Welegal-Company act 2013


In section 3 of companies act 2013, they described the rules and regulations that are faced by an individual while building their own company and registering it with the government. There are different types of classification that needs to be understood before going forward with the organization. In this article, we have discussed the Classification of companies based on public and private companies, classification of the company on the grounds of limitation and limitless companies.

Classification of companies on the grounds of limitations

1. The introduction of the company’s act 2013 is necessary if you want to establish your company. It does not matter whether it is a limited company or an unlimited company. 

2. Some of the other classifications that you may see in the limited company:

  • The company that is limited by the shares.
  • The company that is limited by having no guarantee over the share capital.
  • The company that is limited by having a guarantee along with the share capital. 

3. Some of the classifications that unlimited company has:

  • The unlimited company that does not have any share capital.
  • The unlimited company that has a share capital.

Classification of companies as Private and Public company

As we, all know that the formation of every company comes under section 3 of the company’s act 2013 and it does not matter whether it is a private company or a public company. This classification of companies comes under Section 3 (1) and if we look at Section 3 (2) then we get the knowledge about the classification of the company under the limited and unlimited category. 

Some of the legal documents that are required for the formation of the company

  • The purpose is lawful– Section 3 clearly states that all the resources and objects that are used under an organization are for the lawful purpose. As unlawful object would get the support under this act. 
  • Enrollment in the Memorandum– There is a memorandum which an individual needs to sign and the signature over the memorandum declare them as the official subscriber of the company. There are some of the provisions that are related to the memorandum of the company. 

Requirement of Memorandum

Here we have discussed some of them: 

1. If you are looking to start a company that lies under the public category then you need at least seven to eight people for signing over the memorandum of the company.  The most possible reason behind it is that in a public company, there is no specific owner of the company and the whole infrastructure of the company depends on a group of people or a team. Therefore, the whole team is responsible for the actions that would be taken in favour of the company. This is the main reason why the memorandum of the company would get the signature of seven people or more. 

2. If you want to start a private company then the memorandum of the company needs to get the signature of two or more people. The main aim behind it is that if you were starting up your business with a partner then there would be equal responsibilities on both of you. Whether it is in favour of the company or against it, both of you need to work on it and try to resolve it with all your efforts. In the same way, if there is any legal action that would be taken against the companies, then both of you are responsible for it and the circumstances need to be faced by both of you. 

3. If you are looking to start a company by your own then you need to sign it as individual and all the legal action would be taken under your name, as you are the only owner of the company. 

What is a public company?

According to section 3, the company is said to be a public company when it does not work like a private company but have a subsidiary like a private company. Along with that, the focus of a public company is to perform the task that lies for the benefit of the public.

What is a Private Company?

According to Section 3, the company is said to be a private company if two or more person holds the share capital of the company and they both are treated as a single member of the company. If a person is working under a private company then he always becomes a member of the company even the employment of the work is prohibited.

What is One-person Company?

However the description of one member company is already done under section 2 (62) but under the companies act 2013, they changed the whole concept of One Person Company and then the new rules are constituted under section 3 (1) (c). These changes are declared as the official ones in 2014. 

The new changes made by the government has changed the whole definition of one-person business as the new rules will make an entrepreneur as a complete head of the business and give all the power to the owner only. Along with that, some of the rules were also getting the relaxation under companies Act 2013. Some of the limitations that a person needs to follow for making their business as a one-person business are:

1. The person needs to be a citizen of India or residing in India.

2. A person cannot get an approval over different OPC.

3. A person who belongs to a minority can also apply or OPC.

Conclusion  With the final words, we conclude that here we have discussed some of the important information that an individual needs to know before starting their own business. We hope that after reading this article you will get all the important information about these classifications. ask a lawyer online free

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