Tuesday, 3 April 2012

Public Company Vs. Private Company

Distinction between a public company and a private company :
The distinction between a public company and a private company are explained in the following manner:

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:

The minimum number of person required to form a public company is seven, whereas in a private company their number is only two.

3. Maximum number of members:

There is no limit on the maximum number of member of a public company, but a private company cannot have more than fifty members excluding past and present employees.

4. Commencement of Business:

A private company can commence its business as soon as it is incorporated. But a public company shall not commence its business immediately unless it has been granted the certificate of commencement of business.

5. Invitation to public:

A public company by issuing a prospectus may invite public to subscribe to its shares whereas a private company cannot extend such invitation to the public.

6. Transferability of shares:

There is no restriction on the transfer of share In the case of public company whereas a private company by its articles must restrict the right of members to transfer the share.

7. Number of Directors:

A public company must have at least three directors whereas a private company may have two directors.

8. Statutory Meeting :

A public company must hold a statutory meeting and file with the register a statutory report. But in a private company there are no such obligations.

9. Restrictions on the appointment of Directors:

A director of a public company shall file with the register a consent to act as such. He shall sign the memorandum and enter into a contact for qualification shares. He cannot vote or take part in the discussion on a contract in which he is interested. Two-thirds of the directors of a public company must retire by rotation. These restrictions do not apply to a private company.

10. Managerial Remuneration :

Total managerial remuneration in the case of public company cannot exceed 11% of net profits, but in the case of inadequacy of profit a minimum of Rs. 50, 000 can be paid. These restrictions do not apply to a private company.

11. Further Issue of Capital:

A public company proposing further issue of shares must offer them to the existing members. A private company is free to allot new issue to outsiders.

12. Name :

A private company has to use words ‘private limited’ at the end of its name. But a public company has to use only the word ‘Limited’ at the end of its name.


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