A company is defined as an association of people which is formed to achieve a common goal and it should be incorporated under the law. In India, companies are governed by the Indian Companies Act, 2013. The Companies Act is passed by the central government of the country to regulate the activities of companies to provide protection to investors.
Indian Companies Act, 2013 defined company as “A Company formed and registered under this Companies Act or under any previous company law”.Every company which is registered under Indian Companies Act, exhibits certain special characteristics, such as it is regarded as an artificial person having a separate legal entity and it should be incorporated with the Registrar of Companies and it contains a Common Seal(Stamp) under its name, etc.
The companies are of various types and Based on Membership, it is divided into One Person Company(OPC), Private Company (Pvt Ltd) and Public company (Ltd). There are several differences between Private Company and Public Company which many of us don’t know, This article concentrates on differentiating the Private company and Public company under companies act 2013.
PRIVATE COMPANY
According to the Companies Act, 2013 “A Private company is a company which has a minimum paid-up capital of 1 lakh rupees and which is restricted to have the right to transfer of share”. The Private Limited company has “Pvt.Ltd” at the end of its name.
PUBLIC COMPANY
According to the Companies Act, 2013 “A Public company is a company which is not a private company and has a minimum paid up capital of 5 lakh rupees and have the right to transfer of shares of a company”. The Public Limited company has “Ltd” at the end of its name.
Difference Between Private company and Public company
Lets know private company and public company differences under the companies act 2013.
| PUBLIC COMPANY | PRIVATE COMPANY |
|---|---|
| A Private company has "Pvt.Ltd" at the end of its name. | A Public company has "Ltd" at the end of its name. |
| Minimum number of members | |
| The minimum number of members needed to form a private company is at least 2 members. | The minimum number of members needed to form a Public Company is at least 7 members. |
| Maximum number of members | |
| The Maximum number of members in a Private Company is restricted to 200. | The Public Company have no restriction on a maximum number of members. |
| Minimum Paid-up Capital | |
| Private Company should have a minimum paid up capital of 1 lakh rupees. | Public Company should have a minimum paid up capital of 5 lakh rupees. |
| Commencement of Business | |
| Commencement of business of a Private Company takes place immediately after getting the certificate of incorporation. | A Public Company can only Commence its business after receiving a certificate of incorporation and Certificate to commencement. |
| Number of Directors | |
| A Private Company must have at least 2 directors to head and supervise the affairs of the company. | A Public Company must have at least 3 directors to manage and lead the affairs of the company. |
| Issue of Prospectus | |
| A Private Company cannot issue a Prospectus. Private Company is not allowed for inviting the public for subscription of its shares. | Public Company can issue a Prospectus. Public Company is free to invite public for subscription of its shares. |
| Minimum Subscription | |
| A Private Company can allot shares without waiting for the completion of minimum subscription limit. | A Public Company cannot be able to allot shares before the minimum subscription of shares is completed. |
| Transferability of shares | |
| The Articles of Association of a Private Company lays restriction on transfer of the shares from one person to another person. | The Public Company is free to transfer the shares of its company from one person to another. |
| Quorum | |
| A Private Company is obligated to have at least 2 members personally present for holding the company meeting. | A Public Company is obligated to have at least 5 members personally present to constitute the meeting. |
| Statutory meeting | |
| A Private Company is not required to conduct a Statutory Meeting of the members or filing of Report to the Register of Companies. | A Public Company is required to conduct a statutory Meeting and file the Report to the Register of Companies. |
| Managerial remuneration | |
| There are no restrictions on payments and remunerations offered to the directors or managers of a Private Company. | There are some restrictions on payments and remunerations offered to the directors or managers and the remuneration should not exceed 11% of the net profits. |
CONCLUSION:
From the above discussion, it is evident that there are many differences between Private Company and Public Company. The Companies Act defines the rules and laws that the companies should follow. It directs the companies to register and incorporated with REGISTRAR OF COMPANIES by submitting Articles of Association(AoA) and Memorandum of Association(MoA). Read more about Articles of Association and Memorandum of Association.
Further Readings:
Difference Between Partnership and Company
Difference Between Cost Accounting and Financial Accounting
