Legal FAQs -Distinction Between A Public Company And a Private Company

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Distinction Between A Public Company And a Private Company – Following are the main points of difference between a Public Company and a Private Company :-

1. Minimum Paid-up Capital : A company to be Incorporated as a Private Company must have a minimum paid-up capital of Rs. 1,00,000, whereas a Public Company must have a minimum paid-up capital of Rs. 5,00,000.

2. Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires at least 7 members.

3. Maximum number of members : Maximum number of members in a Private Company is restricted to 50, there is no restriction of maximum number of members in a Public Company.

4. Transerferability of shares : There is complete restriction on the transferability of the shares of a Private Company through its Articles of Association , whereas there is no restriction on the transferability of the shares of a Public company

5 .Issue of Prospectus : A Private Company is prohibited from inviting the public for subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus.

6. Number of Directors : A Private Company may have 2 directors to manage the affairs of the company, whereas a Public Company must have at least 3 directors.

7. Consent of the directors : There is no need to give the consent by the directors of a Private Company, whereas the Directors of a Public Company must have file with the Registrar a consent to act as Director of the company.

8. Qualification shares : The Directors of a Private Company need not sign an undertaking to acquire the qualification shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the public Company
9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.

10. Shares Warrants : A Private Company cannot issue Share Warrants against its fully paid shares, Whereas a Private Company can issue Share Warrants against its fully paid up shares.

11. Further issue of shares : A Private Company need not offer the further issue of shares to its existing share – holders, whereas a Public Company has to offer the further issue of shares to its existing share – holders as right shares. Further issue of shares can only be offer to the general public with the approval of the existing share – holders in the general meeting of the share – holders only.

12. Statutory meeting : A Private Company has no obligation to call the Statutory Meeting of the member, whereas of Public Company must call its statutory Meeting and file Statutory Report with the Register of Companies.

13. Quorum : The quorum in the case of a Private Company is TWO members present personally, whereas in the case of a Public Company FIVE members must be present personally to constitute quorum. However, the Articles of Association may provide and number of members more than the required under the Act.

14. Managerial remuneration : Total managerial remuneration in the case of a Public Company cannot exceed 11% of the net profits, and in case of inadequate profits a maximum of Rs. 87,500 can be paid. Whereas these restrictions do not apply on a Private Company.

15. Special privileges : A Private Company enjoys some special privileges, which are not available to a Public Company.

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About the Author

- Vakilno1 is a group of Law Enthusiasts and Legal Experts in India with a passion to provide the latest info and articles on Indian Legal System

Displaying 11 Comments
Have Your Say
  1. R.JAYAPALAN. says:

    Pl refer sl. nos.9&10.’private’ occurs in two places.Pl correct it, if it is a lapse. Thanks.
    R.JAYAPALAN.

  2. Clarification regarding diffrences is very good but point no. 10 of share warrant has some mistakes please rectify it.

  3. KISHOR KUMAR JAT says:

    Dehli

  4. kavita says:

    Sir please explain what is quoram
    By d way nice effoorts

  5. Habeeb .A. says:

    @Dehli
    Kavita the meaning of QUORUM is the minimum number of members of a company that have to be present before a meeting start.

  6. Anonymous says:

    Quorum

  7. Whts up this is kinda of off topic but I was wanting to know if blogs use WYSIWYG editors
    or if you have to manually code with HTML. I’m starting a blog
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  8. Shivani says:

    Dear sir

    Can you please clear as to wht percentage n minimum number of members are required to pass a resolution in an AGM. Thanks

  9. Rajiv Das says:

    A PRIVATE Company can commence its business immediately after its incorporation, whereas a PUBLIC Company cannot start its business until a Certificate to commencement of business is issued to it

  10. Narasimha Chari K says:

    A Private Company enjoys some special privileges, which are not available to a Public Company.

  11. I have found this article very interesting and important.
    Thank you.

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