[Economy] Different Types of Companies: Pvt.Ltd, Public Ltd., Public Corporation, Departmental Undertaking, PSUs

SubscribeZ-Miscellaneous

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  1. Paid up Capital
  2. Private company
  3. Public company
  4. Holding company and subsidiary company
  5. Departmental undertakings
  6. Government Company
  7. Public corporation
  8. PSU (Public Sector undertakings)

Paid up Capital

  • This word is going to keep reappearing in next few articles, so better understand it in advance.
  • You already saw that there are two ways to finance a company: Debt + Equity.
  • Paid up Capital means the amount of money contributed via Equity (shareholders)

Private company

  • It has a minimum paid-up capital of Rs.1 lakh
  • It needs minimum two members and maximum 200 members (i.e. The persons who hold its ‘equity’)
  • This company is to use the word “Private Limited” at the end of its name.
  • It cannot have more than 50 members
  • It cannot borrow for general public.
  • For example Balaji Telefilms private ltd= Ektaa Kapoor’s company, involved in making those boring Saas Bahu serials.
  • Another example: Neela telefilms private ltd. = Asit Modi’s company, they produce the comedy serial Tarak Mehta Kaa oolta Chashmaa.
  • Flipkart.com : the online shopping website is also a private company, started by Sachin and Binni Bansal.

Public company

  • It has minimum paid-up capital of Rs.5 lakh.
  • Requires minimum seven members to start a public company.
  • It has to hold annual general meeting of shareholders.
  • It can borrow from general public via IPOs and Bonds.
  • For example, Infosys started as a private ltd company in 1981, but in 1992, it re-registered itself as a Public Ltd company and launched the IPO in 1993.

Holding company and subsidiary company

  • If company A holds more than 50% Shares of company B then,
  • Company A is a holding company
  • Company B is a subsidiary company
  • Example: Coal India is a holding company. Bharat Coking ltd, Mahanadi CoalFields ltd are its subsidiary companies.
  • Similarly, Konkan Railway is a subsidiary company of Indian Railways. Although Indian Railways is not a ‘Holding Company’, it is a Departmental undertaking.

Departmental undertakings

  • They are involved in some commercial activity such as engineering, manufacturing etc. But
  • They’re directly controlled by the government, just like any other department
  • For example: Indian Railways, postal Department.
  • They are not registered as companies under the companies act
  • They are wholly financed by the government (and not through Debt+Equity like a normal company)
  • They cannot use their profit to meet their expenditure, or to expand their business activities without the permission of Government (by extension parliament. I.e. Railway budget for Railways and General Union budget in case of postal Department)
  • Their employees are government servants.
  • Directly audited by CAG.
  • RTI applies to Departmental undertakings.

Government Company

  • It is a company in which government holds not less than 51% of paid-up share capital.
  • For example, ONGC, SAIL
  • Here, The “Government” means the union government or the State government(s) on both.
  • For example, in Company A, 30% shares are held by union government, 10% by Gujarat government, 11% by Madhya Pradesh government, still Company A is a Government company (30+10+11=51%)
  • The government company is managed by the board of directors.
  • Board of Directors are appointed by the shareholders. But since government owns majority of the shares, majority of directors are chosen by the government.
  • They can borrow extra money from public via IPOs and bonds.
  • This company does not need Parliament’s approval on how to use the profit, But it will need approval of Board of directors on how to spend the profit.
  • They’re not directly audited by CAG, but CAG appoints the private firms (Chartered accountants) as auditors.
  • RTI applies to Government companies.

Public corporation

  • They are established by a special act of Parliament or state legislature (Vidhan Sabha)
  • The act defines how this organization will run. For example: LIC, Air India, IDBI, UTI
  • They are wholly financed by the government, but still they can also borrow from general public via Bonds and shares.
  • Government appoints board of directors.
  • They can use their profit as per their requirements without Parliament’s approval
  • Employees of public corporation are not government servants.
  • Directly audited by CAG, although in some cases CAG outsources the work to private firms.
  • RTI applies to Public Corporations.

PSU (Public Sector undertakings)

  • When we use the word PSU: it means Public corporations + Government companies.
  • Departmental undertakings (Railway/Postal) are not PSUs.
  • CAG has two wings:
  • 1. The Civil wing looks after the auditing of Ministries + Departmental undertakings.
  • 2. The Commercial wing looks after the auditing of Government companies +Public Corporations.
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