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Privileges and exemptions enjoyed by a private company

(Privilege and Exemption Enjoyed by a Private Company) Under the Companies Act 2013, a private company has some privileges and exemptions over a public company which are as follows 1. Share Capital – The paid-up share capital of a private company is at least one should be in lakhs


– Whereas the paid-up share capital of a public company must be at least ? five lakhs. 2. Minimum number of members For its creation, at least 2 members are required


Whereas a public company needs at least 7 members. 3. Statement- A private company cannot and is not required to issue a prospectus whereas a public company has to issue a prospectus if it invites the public to purchase its securities. 4. Minimum subscription – A private company can subscribe to securities without obtaining minimum subscription.


can allot securities to the public until the public company


till it attains the minimum subscription amount.


5. Minimum number of directors in every private company except one person company


It is necessary to have at least 2 directors, but in the case of a public company, it is necessary to have at least 3 directors. In case of a one person company, it is necessary to have at least 1 director. 6. Independent Directors – At least one-third of the total directors of the board of directors of every listed company and public companies of the class or classes determined by the government should be independent directors, but private companies should have independent directors.


is not mandatory.


7. Director of Small Shareholders It is not necessary for any private company to appoint a director from among the small shareholders, but all listed companies are required to appoint a director from among the small shareholders, if there are at least 1000 small shareholders or total small At least 10% of the shareholders give notice to appoint directors from amongst them.


8. Financial assistance for the purchase of its own shares Any private company can provide financial assistance to anyone for the purchase of its own shares, but the public company can provide such financial assistance within the limits prescribed under this Act. can.


9. Acting number If there is no other provision in the Articles of a private company, then if 2 members of the company are personally present in the meeting of the company, then the acting number of that meeting is considered to be fulfilled but for the meeting of the public company, the acting number The number of members present in the meeting is determined according to the total number of members of the company. In the case of a meeting of a public company, the acting number will be


10. Report of the Annual General Meeting Every listed public company has to prepare a report in the prescribed manner in respect of each of its annual general meeting and file it with the Registrar, but no private company has to do so.


11. Retiring Director- Retiring in any private company


By rotation) it is not mandatory to appoint operators, but every public


At least two-third of the total directors of the company must have been retiring.


Need. One-third of such directors retire every year at the time of annual general meeting. 12. Disqualifications of Directors – Any private company can also add some additional disqualifications for operators in its Articles whereas no public company can do so. A public company can remove directors only on the ground of such disqualifications as are specified in the Companies Act.


Mode of Conversion of a Private Company into a Public Company


The following is the legal method for converting a private company into a public company


1. To convene and organize a meeting of the Board of Directors- In order to convert a private company into a public company, the first meeting of the Board of Directors is called.


The following decisions are taken


(a) The decision to convert the company into a public company.


(b) Decision to remove the terms of section 2(68) from the Articles on account of such change (c) A decision of at least ₹5 lakh if ​​the paid-up share capital of the company is less than ₹5 lakh.


(d) to suggest to the general assembly to pass a resolution appointing at least one director if the number of directors in the company is less than 3




(c) Decision to convene a general meeting or unusual general meeting of the company. 5. Approval from the Tribunal- Thereafter the company shall send the special resolution for the approval of the Tribunal. It is to be noted that the special resolution passed to amend the Articles of Association shall have effect until the Tribunal approves the special resolution for such alteration, if the Tribunal deems fit, it shall approve the special resolution for such alteration.


6. Existence of public company – When the Tribunal approves the resolution of such alteration of the Articles, then the existence of the public company shall cease to exist and the company shall come into existence.


7. Changes in Articles – After the approval of the Tribunal, the Company shall amend its Articles and add all necessary restrictions, limitations and prohibitions to comply with section 2(68). Wherever it is necessary in the Articles of Association and the Memorandum, ‘Pvt.’ will also add the word, after that the company will get its changed Articles printed afresh


8. Submission of documents to the Registrar. Thereafter, the company shall file a printed copy of the amended Articles of Association and a copy of the order of the Tribunal to the Registrar within 15 days of the receipt of the approval from the Tribunal. The registrar will register them and he will issue a fresh amalgamation certificate stating that the company is a private company.


9. Adding the word private The name of the company wherever written, printed and patented is ‘Pvt.’ word and publish a public notice of change in the name of the company


there with name


Will happen. 10. Informing the Inventory Exchange Center – If the company is listed, then all the concerned Inventory Exchange Centers will have to be informed and action will be taken to delist the shares of the company.


Conversion of public company into private company


(Conversion of a Public Company into Private Company) A public company can be converted into a private company in the following manner


(1) Decision to be taken by the Board of Directors – First of all, the Board of Directors of the company will decide that the company should be changed from a public company to a private company and the company


This decision should be placed in the Assembly as a special motion. (2) Sending notice of the meeting- After this, a duly informed notice of the meeting is sent to each member for holding the meeting of the members of the company. Along with this the program of the meeting was also sent.




(3) Passing a special resolution The decision to convert the company is placed in the form of a special resolution in the general meeting of the company. Also, in this meeting, permission is obtained from the members to change the articles of the company. Apart from this, a special resolution is also passed to add the word ‘private’ with the name of the company.


(4) Making changes in Articles- After passing a special resolution, changes are made in the Articles of the company according to the special resolution.


(5) Sending copies of amendments to the Articles to the Stock Exchange Center Immediately after the resolution of the amendment to the Articles is passed, 6 copies of that amendment proposal have to be sent to the Stock Exchange Center where the shares of the company are listed. One copy of these is attested. (6) Obtaining the approval of the Central Government in case of change in the Articles of Association of a private company.


But a public company is converted into a private company, but the central


Permission has to be obtained from the government.


(7) Copy to be sent to the Registrar- It shall be necessary to send a notice of the change in the private company by the public company to the Registrar along with a printed copy of the amended Articles within a period of one month from the date of obtaining the permission of the Central Government.


(8) Obtaining a fresh certificate of amalgamation After submission of all the changed documents, an application is sent by the company to the Registrar for a fresh certificate of amalgamation. The Registrar shall register the changed Articles and make necessary changes in the name of the company. Finally, the company will issue a fresh certificate of amalgamation.

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