what is the difference between public company and private
company
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Answer Posted / harshit goyal
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 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
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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