On the incorporation of a company under the Companies Act 2016, a company may elect to have _____________ .
Answers
Explanation:
The Companies Act, 1956 broadly classifies the companies into private and public companies and provides for regulatory environment on the basis of such classification. However, with the growth of the economy and increase in the complexity of business operation, the forms of corporate organizations keep on changing. There is a need for the law to take into account the requirements of different kinds of companies that may exist and seek to provide common principles to which all kinds of companies may refer while devising their corporate governance structure. Rigid structures, unnecessary controls and regulations inhibit the risk taking initiatives of the entrepreneurs. Private companies and small companies, who do not generally go for public issues or deposits for their financial requirements but utilize their personal or in-house resources, need to be given flexibility and freedom of operation and compliance at a low cost. Equally, public companies that access capital from public need to be subjected to a more stringent regime of corporate governance. To enable a comprehensive framework for different forms of corporate organizations, the Company Law should ensure multiple classifications of companies. It should also enable smooth change-over of companies from one type to another.
Classification of Companies
2. The corporate form can take many shapes in order to respond efficiently to the environment. Company Law should therefore recognize a multiple classification of companies. The Committee indicates the criteria for classification on the basis of the forms discernible today, but recognizes that such classification can never be exhaustive.
i) On the basis of size: a) Small companies b) Other companies
ii) On the basis of number of members: a) One person company b) Private companies c) Public companies
iii) On the basis of control: a) Holding companies b) Subsidiary companies c) Associate companies
iv) On the basis of liability: a) Limited (I) by Shares (II) by Guarantee (with or without share capital) b) Unlimited
v) On the basis of manner of access to capital: a) Listed companies b) Un-listed companies
3. The law should recognize the potential for diversity in the forms of companies and rather than seeking to regulate specific aspects of each form, seek to provide for principles that enable economic inter-action for wealth creation on the basis of clear and widely accepted principles.