Difference between public limited company and private limited company

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Difference between public limited company and private limited company

Meaning of Public Limited Company

Companies Act, 2013 defines Public limited company as a company which has limited liability and offers shares to the general public. Public limited companies offer shares to the public at large. Anyone can invest in a public limited company. Public Limited Companies have better chances for growth and expansion as the spreads among the public at large. It is required to publish its true financial report to its shareholders.

Features of Public Limited Company

  • A public limited company has limited liability and offers shares to the general public.
  • It is compulsory for all public companies in India to add the word ‘’Limited’’ after their name.
  • It required a minimum 3 directors and there is no restriction on the maximum number of directors.
  • Public limited companies have limited liability which means that the shareholders of a public limited company is not personally liable for any loss or debts of the company for any amount greater than the amount invested by them.
  • Public Limited Companies are required to have a minimum paid -up capital of Rs. 5 lakh or higher as prescribed under Companies Act, 2013.
  • There are some restrictions when it comes to payments and remunerations offered to the directors or managers. The remuneration should not exceed 11% of the net profits.

Meaning of Private Limited Company

Section 2(68) of the Companies Act, 2013 defines a private company as a company whose articles of association restrict the transferability of shares and prevents the public at large from subscribing to them.

Features of a Private Limited Company

  • A Private limited company can have both limited and unlimited liability but does not offer shares to the general public.
  • It is compulsory for all private companies in India to add the word ‘’Pvt. Ltd.’’ after their name.
  • It required a minimum of 2 directors.
  • Private Limited Companies are required to have a minimum paid -up capital of Rs. 1 lakh.
  • There are no restrictions when it comes to payments and remunerations offered to the directors or managers of a Private Company.

Differences between Public Limited Company and Private Limited Company

Basis Public Limited Company Private Limited Company
Suffix Ltd. Pvt. Ltd.
Minimum Members minimum 7 members minimum 2 members
Maximum Members Unlimited 50 members
Minimum Directors 3 Directors 2 Directors
Statutory Meeting Yes, Mandatory No, Voluntary
Transferability of Shares Freely Transferable Not Freely Transferable
Quorum 5 members personally present. 2 members personally present
Issue of Prospectus Yes No
Managerial Remuneration There are some restrictions when it comes to payments and remunerations offered to the directors or managers. The remuneration should not exceed 11% of the net profits. There are no restrictions when it comes to payments and remunerations offered to the directors or managers of a Private Company.
Certificate of Commencement On Receipt of Certificate of Commencement of Business. On receipt of Certificate of Incorporation.
Minimum paid-up capital Rs. 5,00,000/- Rs. 1,00,000/-

References
https://legaldocs.co.in/blog/private-limited-company-vs-public-limited-company

https://taxguru.in/company-law/company-law-compliances-private-limited-company.html#:~:text=Section%202(68)%20of%20Companies,large%20from%20subscribing%20to%2
0them.
https://www.toppr.com/guides/business-laws/companies-act-2013/private-companies/

Author: Shreya Rathor,
Bharati Vidyapeeth Deemed University, Pune, Final Year

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