DISTINICTION BETWEEN A PUBLIC COMPANY & A PRIVATE COMPANY

DISTINICTION BETWEEN A  PUBLIC  COMPANY & A PRIVATE COMPANY

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By K P C Rao., LLB., FCS., FICWA

Practising Company Secretary

kpcrao.india@gmail.com

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 atleast 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 atleast 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 Public 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 theRegister 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 INR 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.