Difference between Private and Public Companies
A Private Company company is one that requires at least two or more people to form. On the other hand, a Public Company is owned and traded publicly. It requires seven or more people to set up it. There are vast differences between Private Limited Companies and Public Limited Companies.
The Definition of Public Limited Company
A Public Limited Company or PLC is a joint stock company formed and registered under The Indian Companies Act, 2013 or any other previous act. It is an association of persons formed voluntarily, having a minimum paid up capital of Rs. 5,00,000.
There is no defined limit on the number of members that the company may have. There is also no restriction on the transferability of shares. The company can invite the public to subscribe to shares or debentures, which is why the term ‘ Public Limited ‘ is added to its name.
The Definition of Private Limited Company
A Private Limited Company is a joint stock corporation incorporated under the 2013 Indian Companies Act or any previous act. It is a voluntarily formed association of persons with the minimum paid-up capital of Rs. 1,00,000.The maximum number of members is 200, excluding current employees and ex-employees who were members during their work or who continue to be members after the company’s termination of work.
The company restricts the transfer of shares and prohibits public invitations for shares and debentures to be subscribed. At the end of its name, it uses the term ‘ private limited. ‘
Here are some Key Differences Between Public and Private Limited Company
The difference between public and private company can be drawn clearly on the following grounds:
- The public company refers to a company that is listed on a recognized stock exchange and traded publicly. A Private Ltd. the company is one that is not listed on a stock exchange and is held privately by the members.
- There must be at least seven members to start a public company. As against this, the private company can be started with a minimum of two members.
- The is no ceiling on the maximum number of members in a public company. Conversely, a private company can have a maximum of 200 members, subject to certain conditions.
- A public company should have at least three directors whereas the Private Ltd. company can have a minimum of 2 directors.
- It is compulsory to call a statutory general meeting of members, in the case of a public company, whereas there is no such compulsion in the case of a private company.
- In a Public Ltd. Company, there must be at least five members, personally present at the Annual General Meeting (AGM) for constituting the requisite quorum. On the other hand, in the case of Private Ltd. Company, that number is 2.
- The issue of prospectus/statement instead of the prospectus is mandatory in case of a public company, but this is not the case with the private company.
- To start a business, the public company needs a certificate of commencement of business after it is incorporated. In contrast, a private company can start its business just after receiving a certificate of incorporation.
- The transferability of shares of a Pvt. Ltd. company is completely restricted. On the contrary, the shareholders of a public company can freely transfer their shares.
- A public company can invite the general public for subscribing shares of the company. As opposed, a private company has no right to invite the public for subscription.
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