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C H A P T E R

Joint Stock Company—

Issue of Shares

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Company
It is an entity incorporated through the process of law for undertaking (usually) a business. It is an
artificial person distinct and separate from its members who are known as shareholders.
A company may be one person company or private company or a public company.
2. One Person Company
It is a company which has only one person as a member.
3. Private Company
It is a company which has minimum paid-up capital as may be prescribed* and which by its Articles
of Association:
(i) restricts the right to transfer its shares, if any.
(ii) except in One Person Company, limits the number of its members excluding its present and
past employee members to 200; if the past or present employee acquired the shares while in
employment and continue to hold them.
If any share is held jointly by two or more persons, they shall be treated as a single member.
(iii) prohibits any invitation to the public to subscribe for any securities of the company.
The minimum number of members required to form a private company is two.
The name of a Private Company ends with the words, ‘Private Limited’.
4. Public Company
It is a company which has minimum paid-up capital as may be prescribed* and which
(i) is not a one person company or a private company;
(ii) is a private company, which is a subsidiary of a public company.
The minimum number of members required to form a public limited company is seven. There is
no restriction on maximum number of members.
The name of a Public Company ends with the word ‘Limited’.
5. Share
‘Share’ means a share in the Share Capital of a company and includes stock.
[Section 2(84) of the Companies Act, 2013]
It is a unit into which Share Capital of a company is divided.
6. Preference Share Capital
It is a kind of share capital which carries preferential rights in respect of dividend payment and
repayment of capital over Equity Shareholders, if the company is wound up.
*Companies are not required to have minimum paid-up capital w.e.f. 29th May, 2015.