In order to understand the key difference between Public Company and Private Company, one must know the main features both.
A private company means a company, which has a minimum paid up share capital of Rs. 1 lakh or such higher capital as may be prescribed and which by its articles provides the following-
- restricts the transfer of shares by its members
- limits the maximum number of members to 200
A public company refers to a company which has a minimum paid up share capital of Rs. 5 lakh or higher as prescribed by its memorandum and articles and which is not a private company.
Difference between Public Company and Private Company
The key difference between a public company and a private company can be understood with help of the following chart:
PRIVATE COMPANY | PUBLIC COMPANY |
It can be started with a Minimum Paid up Capital of Rs. 1 lakhs | Its Minimum Paid up Capital requirement is Rs. 5 lakhs |
Minimum number of Members – 2 members | Minimum number of Members – 7 members |
Max. number of members – 200 members excluding employed members | Max. number of members – No limit |
Min. number of directors – At least 2 | At least 3 |
Transferablity of Shares – The right to transfer is restricted by Articles of Association, it requires prior permission of the Board Of Directors of the company. | Shares can be transferred freely |
Public subscription is restricted | They can invite public for subscription |
Acceptance of public deposits – The articles prohibit a private company from accepting deposits. | A public company can accept deposits from public |
Commencement of business – It can Commence its business immediately after getting the certificate of incorporation | It can only commence business after getting certificate of commencement of business |
Issue of prospectus – Not compulsory | Compulsory |
Statutory meeting – Not required | It must hold a statutory meeting after one month or before 6 months from the date of obtained certificate of commencement of business |
Managerial remuneration not fixed | Fixed at 11% of annual net profits |
Index of members is not required | It is required |
Provisions regarding directors – It is free to appoint directors | It requires the prior approval of Central Govt. to appoint directors |
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