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[Economy] Different Types of Companies: Pvt.Ltd, Public Ltd.,

Public Corporation, Departmental Undertaking, PSUs
Posted BySupport StaffOn 25/04/2012 @ 2:50 pm In Z-Miscellaneous | Comments Disabled
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Paid up Capital
Private company
Public company
Holding company and subsidiary company
Departmental undertakings
Government Company
Public corporation
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 Kapoors company, involved in making those
boring Saas Bahu serials.
Another example: Neela telefilms private ltd. = Asit Modis 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
Theyre 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 Parliaments approval on how to use the profit, But it will need
approval of Board of directors on how to spend the profit.
Theyre 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 Parliaments 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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