This article will help you to learn about the difference between a private company and a public company.
Difference between a Private Company and a Public Company
Private Company
Difference – 1. Minimum number:
The minimum number of persons required to form a private company is two.
Difference – 2. Maximum number:
ADVERTISEMENTS:
The maximum number of members in a private company is fifty.
Difference – 3. Transfer of shares:
In private company, the right to transfer shares is restricted by its articles.
Difference – 4. Invitation to public:
ADVERTISEMENTS:
The private company by its articles prohibits any invitation to the public to subscribe for any shares in or debentures of the company.
Difference – 5. Commencement of business:
A private company can commence its business just after the incorporation.
Difference – 6. Allotment of shares:
ADVERTISEMENTS:
A private company can allot the shares just after incorporation.
Difference – 7. Prospectus or statement in lieu of prospectus:
A private company need not to file prospectus or statement in lieu of prospectus.
Difference – 8. Preparation of articles of association:
ADVERTISEMENTS:
It is necessary to prepare Articles of Association for a private company limited by shares.
Difference – 9. Signatures on memorandum and articles:
In case of private company only two members have to sign Memorandum of Association and Articles of Association.
Difference – 10. Statutory meeting:
ADVERTISEMENTS:
A private company is neither required to hold the statutory meeting nor issue statutory report.
Difference – 11. Use of ‘limited’ word:
A private limited company must have the words ‘Pvt. Ltd.’ in its name.
Difference – 12. Share warrant:
ADVERTISEMENTS:
A private company cannot issue bearer share warrant.
Difference – 13. Number of directors:
A private company must have at least two directors.
Difference – 14. Retirement of directors by rotation:
ADVERTISEMENTS:
In private company Directors need not retire by rotation every’ year.
Difference – 15. Loan to the directors:
In case of private company, loan can be given to the directors without the approval of Central Government.
Difference – 16. Remuneration of directors:
There is no legal restriction on the remuneration of directors in private company.
Difference – 17. Restriction on the appointment of directors and advertisement:
ADVERTISEMENTS:
The restrictions regarding appointment of directors and advertisement do not apply to a private company.
Difference – 18. Increase in the number of directors:
To increase the number of directors of a private company beyond the maximum mentioned in the Articles, the approval of central government is not necessary.
Difference – Difference – 19. Qualification share:
The director of a private company is not required to hold qualification share.
20. Further issue of capital:
ADVERTISEMENTS:
A private company is free to allot new issue to the outsiders.
21. Demand for poll:
In case of a private company one or two members present in person can demand for poll.
Difference – 22. Special privileges:
A private company enjoys some special privileges.
Public Company
Difference – 1. Minimum number:
ADVERTISEMENTS:
The minimum number of persons required to form a public company is seven.
Difference – 2. Maximum number:
In public company, there is no restriction on the maximum number of members.
Difference – 3. Transfer of shares:
In case of a public company, shares are freely transferable.
Difference – 4. Invitation to public:
ADVERTISEMENTS:
The public company invites the general public to purchase shares in or debentures of the company.
Difference – 5. Commencement of business:
A public company cannot commence its business unless it obtains certificate to commence the business.
Difference – 6. Allotment of Shares:
A public company can allot shares only when the minimum subscription has been received.
Difference – 7. Prospectus or statement in lieu of prospectus:
ADVERTISEMENTS:
A public company is required to file prospectus or statement in lieu of prospectus before allotment of shares.
Difference – 8. Preparation of articles of association:
It is not necessary to prepare Articles of Association for a public company limited by shares.
Difference – 9. Signatures on memorandum and articles:
In case of public company only seven members have to sign Memorandum of Association and Articles of Association.
Difference – 10. Statutory meeting:
A public company is required to hold the statutory meeting and must file statutory report with the Registrar and then issue it to members.
Difference – 11. Use of ‘limited’ word:
A public limited company must have only the word ‘Limited’ in its name.
Difference – 12. Share warrant:
A public company can issue bearer share warrant.
Difference – 13. Number of directors:
A public company must have at least three directors.
Difference – 14. Retirement of directors by rotation:
In public company, directors are subject to retire by rotation.
Difference – 15. Loan to the directors:
In case of a public company, no loan can be given to the directors without the approval of Central Government.
Difference – 16. Remuneration of directors:
There are legal restrictions on remuneration of directors in public company.
Difference – 17. Restriction on the appointment of directors and advertisement:
The restrictions regarding appointment of directors and advertisement apply to a public company.
Difference – 18. Increase in the number of directors:
To increase the number of directors of a public company beyond the maximum mentioned in the Articles, the approval of Central Government is necessary.
Difference – 19. Qualification share:
The director of a public company is required to hold qualification share (if any).
Difference – 20. Further issue of capital:
A public company proposing further issue of shares must offer them to the existing members.
Difference – 21. Demand for poll:
In case of a public company at least five members can demand for poll.
Difference – 22. Special privileges:
A public company does not enjoy such privileges.