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TypesOfCompaniesAndTheirDefinitions

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Types of Companies & Their Definitions :

STRUCTURE
1.1. Company [ Sec. 217]
1.2 Indian Company [ Sec. 226]
1.3. Foreign Company [ Sec. 223A]
1.4. Domestic Company
1.5. A company in which public are substantially interested. [ Sec. 218]
1.6. Residential Status of a Company

1.1. COMPANY [ Sec. 217 ]

A "Company" means
i any Indian company, or
ii any body corporate incorporated by or under the laws of a country outside India, i.e. Foreign
Company as defined u/s 2(23A)] or
iii any institution, association or body which is or was assessable or was assessed as a company for any
assessment year under the Indian Incometax Act, 1922 or

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iv any institution, association or body, whether incorporated or not and whether Indian or nonIndian,
which is declared by general or special order of the Board to be a company:

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1.2. INDIAN COMPANY [ Sec. 226]

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"Indian company" means a company formed and registered under the Companies Act, 1956, and includes

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i a company formed and registered under any law relating to companies formerly in force in any part of
India other than the State of Jammu and Kashmir [and the Union territories specified in subclause iii of
this clause];
ia a corporation established by or under a Central, State or Provincial Act;
ib any institution, association or body which is declared by the Board to be a company
under section 217;
ii in the case of the State of Jammu and Kashmir, a company formed and registered under any law for
the time being in force in that State;

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iii in the case of any of the Union territories of Dadra andNagar Haveli, Goa, Daman and Diu, and
Pondicherry, a company formed and registered under any law for the time being in force in that Union
territory:

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Provided that the registered or principal office of the company, corporation, institution, association or
body, in all cases is in India.

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Section 6(3). Residential Status of an Indian Company

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Indian companies are always treated as Resident in India whether Control and Management is in India or outside India.

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TypesOfCompaniesAndTheirDefinitions

1.3. FOREIGN COMPANY [ Sec. 223A ]

It means a company which is not a domestic company, i.e. a company registered outside India in any other foreign
country.
The Foreign Company may be treated as Domestic Company if such company makes prescribed arrangement in India
as per Rule 27.
Rule 27. Prescribed arrangement for declaration and payment of dividends within India.
The arrangements referred to in sections 194 and 236 to be made by a company for the declaration and payment of
dividends including dividends on preference shares within India shall be as follows :
1. The shareregister of the company for all shareholders shall be regularly maintained at its principal place
of business within India, in respect of any assessment year from a date not later than the 1st day of April
of such year.
2. The general meeting for passing the accounts of the previous years relevant to the assessment year and
for declaring any dividends in respect thereof shall be held only at a place within India.
3. The Dividend declared , if any, shall be payable only within India to all shareholder
Sec.6(3), Residential Status of foreign Company
Foreign Company is treated as Resident in India if its Control and Management is located wholly in India.
Foreign Company is treated as NonResident in India if its Control and Management located wholly / partially Outside
India.
Sections applicable to Foreign Company are 44BBB, 44D, 115A, 195 etc.

1.4. DOMESTIC COMPANY

A Domestic Company means an Indian Company or any other company with respect to its income, liable to tax under
the IncomeTax Act, has made the prescribed arrangements for the declaration and payment within India, of the
dividends including dividends on preference shares) payable out of such income.
Thus, all Indian Company are treated as Domestic Company but all Domestic Company are not Indian Company.
If a Foreign Company makes prescribed arrangements for payment of dividends in India it shall be treated as
Domestic Company.

1.5. A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED [Sec.218]

It includes :
i Government Company : A company owned by the Government or the Reserve Bank of India
ii A Company having Govt. participation : A Company in which not less than 40% of the shares are held whether
singly or taken together by the Government or the Reserve Bank of India or a corporation owned by RBI. (i.e. at least
40% of holding should be held by Govt. or RBI)
iii Section 25 Companies : Companies registered under section 25 of the Indian Companies Act, 1956. These
are companies which are promoted with special object to promote commerce, art, science, charity or religion or any
other useful object (these companies lose the status of a company in which the public are substantially interested at any
time they declare dividend).

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iv A Company declared by the CBDT : It is a company without share capital and which having regard to its object,
nature and composition of its membership or other relevant consideration is declared by the Board to be a company
in which public are substantially interested for the relevant AY.

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v Mutual Benefit finance Company : Where principal business of the company is acceptance of deposits from its
members and which has been declared by the Central Government to be a Nidhi or Mutual Benefit Society.

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vi A Company having Cooperative Society participation :It is a company in which at least 50% or more equity
shares have been held by one or more cooperative societies throughout the PY.
vii A Company is deemed to be a Public Company if it is not a Private Company as defined by the Companies Act,
1956 and is fulfilling either of the following two donditions :

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1. A listed Public Company : Its equity share were listed on a recognized stock exchange, as on the last day of
the relevant PY ; or
2. Any other Public Company : Its equity shares carrying at least 50% of the voting power in the case of an
industrial company the limit is 40% were beneficially held throughout the relevant PY by Government, a
statutory corporation, a company in which the public are substantially interested or a wholly owned
subsidiary of such a compan
Widely Held Company : The Company in which the public are substantially interested is also known as wholly
held Company.
Closely Held Company : It is a Company in which the public are NOT substantially interested . This type of company is

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TypesOfCompaniesAndTheirDefinitions

referred in Sec.222e and Sec. 79.

1.6. RESIDENTIAL STATUS OF A COMPANY

Indian Company : The Company registered in India is an Indian Company. Indian Company is always treated as
Resident in India whether Control & Management is in India or Outside India.

Foreign Company : If Control & Management of the affairs of the business of Foreign Company is situated
wholly in India then its residential status is Resident in India. If its Control & Management of the affairs of the business
is situated wholly / partially outside India then its Residential Status is NonResident in India.

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