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Define a private company. Differentiate between private and public company.

Meaning and definitions of private or alok company


(Meaning and Definition of Private Company) Private company means a company which is amalgamated under the Companies Act 2013, the number of members is not less than 2 and maximum is 200, to buy its shares one debentures. It does not invite the public and imposes restrictions on the transfer of its shares. Its paid-up capital is at least one lakh or more. Apart from this, private companies have ‘Private Ltd.’ in front of their names. (Private Ltd.) as mandatory.


According to section 2 (68) of the Companies Act, 2013, private company means a company having a paid-up capital of not less than one lakh rupees or more of such amount and which by its articles:


(i) prohibits the transfer of its shares, if so.

(ii) limits the number of its members (other than a one person company) to 200. These members do not include the following members (a) persons who are employees of the company and are also members/shareholders of the company and


(b) Persons who, being an employee of the company, were members of the company and are now members of the company, not being an employee. In addition to these, if 2 or more persons are jointly shareholders of the company, then the members


While computing the amount, those joint shareholders will be counted as one member only. (iii) Prohibits the invitation to the public for the purchase of its securities. Thus a private company means a company whose minimum paid-up capital is fixed at ₹ 1 lakh or more, the transfer of its shares (if any) is prohibited.


The maximum number of members is limited to 200 and who can buy their shares and debentures.


Prohibits the invitation to the public to do so. Such company shall be governed by its members, directors


and also to invite or accept deposits from persons other than their relatives


forbids. The liability of the members of a private company is limited. Characteristics or Characteristics of Private Company


(Characteristics or Essentials of a Private Company)


Following are the important features of a private company 1. Minimum paid-up share capital As per the Companies Act, 2013, a private company should have a paid-up share capital of not less than ` one lakh. But if the government sets a new amount by increasing this minimum amount of paid-up share capital, then the private company will also have the same paid-up amount.


Must have share capital. 2. Restrictions on Transfer of Shares One of the main features of a private company is that it imposes restrictions on the right of its shareholders to transfer shares. This does not mean that the shareholders of a private company can never transfer their shares.


3. Restrictions on the number of members The minimum and maximum number of members of a private company


The number is mentioned in the Companies Act. But this provision of the number of members


Not applicable to private companies which are registered as one person company


are. In a one person company (private company) then the minimum and maximum number of members is only one.




Except one person company, all private companies must have minimum 2 members. In these, the maximum number of members has to be limited to 200. But while counting this number of 200 members, the following members will not be included


(i) Current employees of the company who are also members (shareholders) of the company. (ii) Ex-employees of the company who were members of the company while still working in the company


(Shareholders) These and now continue to be members (shareholders) of the company even after leaving their jobs. It is to be mentioned here that if 2 or more persons together have bought shares of a company in joint name, then while counting the members, those joint shareholders will be considered as one member (the first joint shareholder). It should also be noted that the directors of the company are not the employees of the company. Therefore, all the operating shareholders will be included in the • counting of the company’s member numbers.


4. Prohibition on inviting public for shares and debentures – The third important feature of a private company is that the private company cannot invite the public to subscribe to its shares and debentures. A private company can get capital only from the following sources

(i) by issue of rights shares to its existing shareholders.

(ii) By issuing bonus shares.

(iii) By offering shares on private basis to a maximum of 200 persons. Such offer cannot be given to more than 200 persons in each financial year.

5. Prohibition on Public Deposits – Public Deposits by Advertisement on Private Companies


Prohibition has also been imposed on accepting and renewing them. Private companies can accept deposits only from their members, directors or their relatives. Is.

6. Non-issuance of return- Private company does not have the right to issue return

7. Use of the word Private Limited with the name Private company is also added the word Private Limited with its name. These words can also be written in abbreviated form.

8. Articles of Association – Every private company has to make its own Articles of Association. This is because every private company has to compulsorily include certain restrictions, limitations and prohibitions in its articles.


9. Minimum number of members For the amalgamation of any private company (except one person company) it is mandatory to sign the memorandum by at least 2 persons. After the amalgamation of the company, both these subscribers become the first members of the company. In the case of a one person company, only one person signs the memorandum. After amalgamation, the same subscriber of that one person company shall be deemed to be the sole member.


10. Minimum and Maximum Directors- Every private company (except one person company) must have minimum 2 directors. In the case of a one person company, at least one


Being a director is a must. But all types of private companies can have a maximum of 15 directors including one person company.

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