November 17, 2024
PRIVATE COMPANY
We often see companies with names ending with public limited or private limited. Many times we fail to understand what they mean. If they both are companies, then what’s the difference? What can be different in two types of companies doing business in the same country?
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November 17, 2024
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Business in India is like a roller coaster ride. There are different types of businessmen on that ride, all unsure about the future. Every businessman has his own way of coping with the surroundings, every businessman has his own strategy of taking the business forward.
We often see companies with names ending with public limited or private limited. Many times we fail to understand what they mean. If they both are companies, then what’s the difference? What can be different in two types of companies doing business in the same country?
In simple words, A Private limited company is a closely held one and requires at least two or more persons, for its formation. On the other hand, a Public limited company is owned and traded publicly. It requires seven persons for its setup.
BASIS | PRIVATE COMPANY | PUBLIC COMPANY |
| Minimum number of Members Required | 2 Members | 7 Members |
| Maximum number of members | 200 Members | Unlimited Members |
| Commencement of Business | A private limited company must get a Certificate of Incorporation and the Certificate of Commencement of Business | A public limited company must obtain both the Certificate of Incorporation and the Certificate of Commencement of Business. |
| Publication of the prospectus | A private limited corporation, by law, has no authority to invite the public to its meetings and, as a result, are not required to publish prospectus a prospectus | A public limited business can issue shares to the general public. Before issuing shares, it must either issue a prospectus or file a statement in place of a prospectus. |
| Members’ rights to transfer their shares in a private limited corporation are limited by the Articles of Association. | In a Public limited corporation, members are free to transfer their shares. |
| Articles of Association | A Private limited company may have its own Articles of Association although it isn’t mandatory for them. | A public limited company may or may not have Articles. It can adopt Table-A of the Schedule of Companies Act. |
| The number of directors | A private limited corporation must have at least two directors to manage the company. | In the management of a public limited corporation, there should be at least three directors. |
| Directors’ retirement | In a private limited business, there is no requirement to retire. This can be because of the less no. of directors as advised by the law. | In a public limited corporation, at least two-thirds of the directors must depart from management via rotation. |
| Minimum Subscription | No such requirement but transfer of shares is restricted. | No such requirement and shares are freely transferable. |
| Company’s name | The words “Private Limited” must be added to the end of the name of a private limited corporation. | The term “Limited” must be added to the end of the name of a public limited business. |
| Issuance of warrants on stock | Share warrants cannot be issued by a private limited corporation. | In the case of fully paid up shares, a public limited corporation can issue share warrants. |
| Quorum for a general meeting | In the case of a private firm, the quorum consists of two people. | A quorum of 5 people is necessary for a meeting of a public business. |
| Annual accounting audit | Non-members of a Private limited company are not permitted to see the annual accounts. | The Annual Reports are open to the public. A public limited company’s accounts are open to the public. |
Conclusion
Depending upon one’s need a type of company is chosen to be registered. However, the principal reason for choosing a public company is to have the ability to offer shares to the public.
In situations where a public company no longer wishes to operate within the business model, it can be converted into private limited company.
In situations where a private limited company thinks of converting into a public company, it will make the compliances easier and a company will exercise greater control.
Both public limited and private limited companies function in their respective zone.
Team Udyog Buddy will help you to incorporate your Public Limited Company with the best professionals who will save your back from all the hectic paperwork required.
To avail all the Compliance services for your Company/ LLP / OPC /Startup Advisory/IPR/GST/ Drafting etc. our team of professionals will guide you.
To avail any of the services and obtain a position Over Your Competitors Call/Whatsapp +91 9301789019 or email at hello@udyogbuddy.com. We would be happy to assist you.