A company is a legal organization formed by a group of individuals to carry out a specific purpose, usually a business. It is recognized as a separate legal entity, meaning it has its own rights, responsibilities, and liabilities, separate from its owners. A company can own property, enter contracts, sue or be sued, and conduct business under its own name.
According to Company Act-2063 of Nepal, a company can be established for either profit-making or non-profit purposes. It is created when people agree to work together, pool resources, and register the organization under the law.
Types of Companies According to Company Act-2063
The Company Act-2063 divides companies into the following categories:
1. Based on Ownership:
Private Company
A private company is a type of business organization owned by a limited number of individuals. According to the Company Act-2063, a private company cannot publicly sell its shares. It can have up to 101 shareholders, making it smaller and more closely controlled than a public company. These companies are usually formed by families or small groups of individuals for personal or shared business goals. Decision-making is easier because of the limited number of members.
Public Company
A public company is a business organization that can offer its shares to the general public. According to the Company Act-2063, a public company must have at least seven shareholders. It is generally larger and more regulated than a private company. Public companies raise money by selling shares on the stock market, allowing people to invest in them. These companies are required to follow strict rules and provide transparency about their financial activities to protect public interests.
2. Types of Companies Based on Liability of Members
Companies can also be categorized based on the financial responsibility of their members:
Company Limited by Shares:
In this type of company, shareholders are only responsible for the value of the shares they own. For example, if a shareholder owns shares worth Rs. 50,000, they are liable only up to that amount, regardless of the company’s debts. This is the most common type of company as it limits personal financial risk.
Company Limited by Guarantee:
Here, members agree to pay a certain amount if the company cannot pay its debts. This type is often used by organizations like charities or non-profits, where members ensure the company’s stability without making profits for themselves.
Unlimited Liability Company:
In this type, members are fully responsible for all the company’s debts, even if it means using their personal property to pay. This type of company is rare because of the high financial risks involved.
3. Types of Companies Based on Purpose
Companies can also be categorized based on their objectives or goals:
Profit-Oriented Company:
These companies are formed to earn profits and distribute them among shareholders. They focus on providing goods or services in exchange for revenue. Examples include banks, industries, and trading businesses.
Not-for-Profit Company:
These companies are established for purposes like charity, education, or social work. They do not aim to make profits but instead use any revenue to fulfill their goals. Examples include NGOs, sports clubs, and other community service organizations.
4. Based on Nationality
National Company
A national company is a business that is entirely owned and operated by the citizens of the same country. According to the Company Act-2063, the ownership, control, and management of such companies are limited to individuals or entities within the country. National companies contribute to the local economy and are governed by the laws and regulations of the nation they operate in.
Foreign Company
A foreign company is a business that is registered in one country but operates or conducts business in another country. According to the Company Act-2063, a foreign company can establish a branch, office, or operation in Nepal only after receiving proper registration and authorization from the concerned authorities. These companies are subject to local laws and regulations while conducting business in Nepal.
These different types of companies help classify how businesses are run and how they meet legal, financial, and operational requirements in Nepal.