Important Differences between Private Limited and Public Limited Company

Recently updated on August 20th, 2023 at 11:50 am

Private Limited Company

A private limited company in India is a type of business entity that is privately owned and has a limited number of shareholders. Some key characteristics of a private limited company in India include:

  1. Limited Liability: The liability of the shareholders of a private limited company is limited to the amount of capital they have invested in the company. This means that shareholders are not personally liable for the company’s debts.
  2. Separate Legal Entity: A private limited company is considered a separate legal entity from its shareholders. This means that the company can enter into contracts, sue or be sued in its own name, and own assets in its own name.
  3. Minimum Shareholders: A private limited company must have at least two shareholders and a maximum of 200 shareholders.
  4. Minimum Capital: There is no minimum capital requirement for a private limited company in India.
  5. Board of Directors: A private limited company must have at least two directors and a maximum of 15 directors.
  6. Annual Filing: A private limited company must file annual returns with the Registrar of Companies (ROC) and file financial statements with the ROC.
  7. Restriction on Transfer of Shares: The shares of a private limited company are not freely transferable, and the transfer of shares is subject to certain restrictions, as per the company’s articles of association.
  8. Restriction on Public Offer: A private limited company cannot make a public offer of its shares or debentures.

In India, Private limited companies are governed by the Companies Act, 2013 and the rules made there under, and are regulated by the Ministry of Corporate Affairs (MCA) through the Registrar of Companies (ROC).

Private Limited Company acts and laws

A private limited company in India is governed by the Companies Act, 2013 and the rules made thereunder. The Companies Act, 2013 is the primary legislation that regulates the incorporation, management, and winding up of companies in India.

Additionally, private limited companies are also subject to regulations and oversight from other government agencies and regulatory bodies, such as the Reserve Bank of India (RBI), the Ministry of Corporate Affairs (MCA) and the Registrar of Companies (ROC).

The Companies Act, 2013 lays down the rules and regulations for the formation, management and winding up of private limited companies in India. Some of the key provisions of the act that are relevant to private limited companies include:

  1. Incorporation: The act lays down the procedure for incorporating a private limited company, including the requirements for minimum capital, minimum number of shareholders, and minimum number of directors.
  2. Share Capital: The act lays down the rules for issuing and allotting shares, and the rights and obligations of shareholders.
  3. Board of Directors: The act lays down the rules for the appointment, powers, and duties of the board of directors, and the procedure for holding board meetings.
  4. Annual General Meeting: The act lays down the rules for holding annual general meetings and the rights of shareholders to attend and vote at such meetings.
  5. Financial Statements: The act lays down the rules for preparing and auditing the financial statements of a private limited company, and the rights of shareholders to access such statements.
  6. Appointment of Auditors: The act lays down the rules for the appointment and removal of auditors and the rights of auditors to access the books and records of the company.
  7. Winding Up: The act lays down the rules for the winding up of a private limited company, including the procedures for voluntary winding up and compulsory winding up.
  8. Restrictions on Transfer of shares: The shares of a private limited company are not freely transferable.
  9. No Public Offer: A private limited company can not make a public offer of its shares or debentures to raise capital.

Public Limited Company

A public limited company in India is a type of business entity that is publicly owned and has a large number of shareholders. Some key characteristics of a public limited company in India include:

  1. Limited Liability: The liability of the shareholders of a public limited company is limited to the amount of capital they have invested in the company. This means that shareholders are not personally liable for the company’s debts.
  2. Separate Legal Entity: A public limited company is considered a separate legal entity from its shareholders. This means that the company can enter into contracts, sue or be sued in its own name, and own assets in its own name.
  3. Minimum Shareholders: A public limited company must have at least seven shareholders and there is no maximum limit on the number of shareholders.
  4. Minimum Capital: The minimum capital requirement for a public limited company in India is Rs.5 Lakhs.
  5. Board of Directors: A public limited company must have at least three directors and a maximum of 15 directors.
  6. Annual Filing: A public limited company must file annual returns with the Registrar of Companies (ROC) and file financial statements with the ROC.
  7. Transfer of Shares: The shares of a public limited company are freely transferable, subject to certain regulatory approvals.
  8. Public Offer: A public limited company can make a public offer of its shares or debentures to raise capital.
  9. Listing: A public limited company can list its shares on a stock exchange and raise capital through the capital market.

In India, Public Limited companies are governed by the Companies Act, 2013 and the rules made there under, and are regulated by the Ministry of Corporate Affairs (MCA) through the Registrar of Companies (ROC).

Public Limited Company laws and acts

A public limited company in India is governed by the Companies Act, 2013 and the rules made thereunder. The Companies Act, 2013 is the primary legislation that regulates the incorporation, management, and winding up of companies in India.

Additionally, public limited companies are also subject to regulations and oversight from other government agencies and regulatory bodies, such as the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), and the Ministry of Corporate Affairs (MCA).

The Companies Act, 2013 lays down the rules and regulations for the formation, management and winding up of public limited companies in India. Some of the key provisions of the act that are relevant to public limited companies include:

  1. Incorporation: The act lays down the procedure for incorporating a public limited company, including the requirements for minimum capital, minimum number of shareholders, and minimum number of directors.
  2. Share Capital: The act lays down the rules for issuing and allotting shares, and the rights and obligations of shareholders.
  3. Board of Directors: The act lays down the rules for the appointment, powers, and duties of the board of directors, and the procedure for holding board meetings.
  4. Annual General Meeting: The act lays down the rules for holding annual general meetings and the rights of shareholders to attend and vote at such meetings.
  5. Financial Statements: The act lays down the rules for preparing and auditing the financial statements of a public limited company, and the rights of shareholders to access such statements.
  6. Appointment of Auditors: The act lays down the rules for the appointment and removal of auditors and the rights of auditors to access the books and records of the company.
  7. Winding Up: The act lays down the rules for the winding up of a public limited company, including the procedures for voluntary winding up and compulsory winding up.
  8. Listing: A public limited company is required to comply with the listing agreement and the rules of the stock exchange, where the company is listed.

Important Differences between Private Limited and Public Limited Company

A private limited company and a public limited company are two types of business structures that are commonly used in many countries, including the UK and India. While both types of companies are incorporated and are separate legal entities from their owners, there are some important differences between the two structures.

Feature Private Limited Company Public Limited Company
Definition A private limited company is a type of business structure in which the shareholders have limited liability for the company’s debts and the number of shareholders is restricted. A public limited company is a type of business structure in which the shareholders have limited liability for the company’s debts and the company can offer shares to the public.
Ownership The number of shareholders is restricted to a maximum of 200 shareholders. There is no limit on the number of shareholders.
Shareholding Shares are not available for the public to buy. Shares are available for the public to buy.
Disclosure of financial information Less disclosure requirement than public limited companies. More disclosure requirement than private limited companies.
Minimum capital requirement No minimum capital requirement in some countries A minimum capital requirement typically is required
Listing on stock exchange Not allowed Allowed

It’s worth noting that the rules and regulations for private and public limited companies may vary depending on the country and jurisdiction. In general, private limited companies are suitable for small and medium-sized enterprises, while public limited companies are suitable for larger enterprises that intend to raise capital through the sale of shares to the public.

A private limited company and a public limited company are both legal entities that can conduct business and enter into contracts, but there are some key differences between the two types of companies.

  1. Ownership: A private limited company is owned by a small group of individuals, while a public limited company is owned by a larger group of shareholders who have purchased shares in the company.
  2. Stock: A private limited company cannot issue shares to the public, while a public limited company can issue shares to the public.
  3. Reporting requirements: A private limited company has less stringent reporting requirements than a public limited company, which is required to disclose financial information to the public.
  4. Transferability of shares: The shares of a private limited company are not freely transferable, while the shares of a public limited company are freely transferable.
  5. Minimum number of directors: A private limited company must have at least 2 directors, a public limited company must have at least 3 directors.
  6. Minimum number of shareholders: A private limited company must have at least 2 shareholders, a public limited company must have at least 7 shareholders.

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