Page 11 - DEBK12

8

C H A P T E R

Company Accounts—

Accounting for Share Capital

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Company It is an entity incorporated through a 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, a private company or a
public company.
2. One Person Company It means a company which has only one person as a member.
3. Private Company It is a company with minimum paid-up share 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 the case of 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 share capital as may
be prescribed* and
(i) is not a one person company or a private company;
(ii) is a private company, being a subsidiary of a company which is
not a private company.
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’.

* The companies are not required to have minimum paid-up capital at present vide notification dated
20th May, 2015.