Difference between a Private Company and Public Company

The upcoming discussion will update you about the difference between Private Company and Public Company.

(i) Minimum number:

The minimum number of persons required to form a private company is two whereas in the case of a public company, it is seven.

(ii) Maximum number:

The maximum number of shareholders in the case of a private company is 50. This number excludes the present and past employees of the company who may be members also. In public company, there is no restriction on maximum number of members.

(iii) Minimum paid-up capital:

The minimum paid up capital in the case of a private company is Rs 1,00,000 while in the case of a public company, it is Rs. 5,00,000.

(iv) Restriction on invitation to the general public to subscribe to shares and debentures:

A private company, by its Articles of Association, must prohibit any invitation to the general public to subscribe to any shares in, or debentures of the company. There is no such restriction in the case of a public company.

(v) Transferability of shares:

A private company, by its Articles of Association, restricts its member’s right to transfer shares. In the case of a public company, shares are freely transferable.

(vi) Special privileges:

A private company enjoys certain special privileges which are not enjoyed by a public company. For example, there is a statutory maximum limit of managerial remuneration payable in the case of a public company whereas this rule of overall maximum managerial remuneration does not apply to a private company which is not a subsidiary of a public company.

To give you another example, a private company need not hold a statutory meeting or file with the Registrar of companies, a statutory report.

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