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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’.
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.

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