Difference between Public and Private Companies: One of the best forms of an entity is a company, especially the ones having a limited liability. Unlike proprietorship, limited liability companies have their own advantages. Unlike proprietorship where the entity is the same as the promoter, in the case of a company, the promoters and the company are treated to be different people. Certain features that distinguish a company from other entities is that it has a perpetual succession…
Companies limited by shares are divided into two broad types in India – Public Ltd. Companies and Private Ltd. Companies. Just like the name suggests, it is very easy to distinguish between the two of them. Private companies have certain restrictions, while public companies are a bit more lenient. The minimum paid up share capital of a private limited company should be Rs. 100,000. Also, the minimum number of members is 2 in the case of a Private Ltd. company. The maximum number of members is 50 people in a Private Ltd. Company.
In the case of a Public Ltd. Company, the minimum no. of members is 7. However, unlike private companies which have a limit to their no. of members, a public company does not limit the no. of its members.
Also, it is a mandatory requirement for all Private Limited companies, to have the post scrip of ‘Pvt. Ltd.’ suffixed to their names.
Difference between Public and Private Companies
Definition of Private Ltd. Co.: A company incorporated under The Indian Companies Act, 2013 or any other previous act, having a minimum paid up capital of Rs. 1,00,000/- and the no. of members restricted to 50, excluding their current employees or previous employees who were the members during their employment or still continue to be the members. These members are restricted to transfer their shares and also, such companies cannot give a public invitation for subscription of shares and their debentures. It also has to use the words ‘ Pvt. Ltd.’ at the end of its name.
Definition of Public Ltd. Co: A company incorporated under The Indian Companies Act, 2013 or any other previous act, having a minimum paid up capital of Rs. 5,00,000/- and there is no restriction as to the no. of members. These members are free to transfer their shares and also, such companies can issue a public invitation for subscription of shares and their debentures. It also has to use the words ‘ Public Ltd.’ at the end of its name.
The following table will help to better understand the differences between the two:
| Feature | PVT. Company | Public Limited Company |
|---|---|---|
| Minimum Members | There should be at least 2 members. | There should be at least 7 members. |
| Maximum Members | There can be a maximum of 50 members. | There is no limit so as to the number of members. |
| Minimum Directors | There should be minimum 2 Directors. | There should be minimum 3 Directors. |
| Suffix | Pvt. Ltd. | Ltd. |
| Statutory Meeting | Voluntary | Mandatory |
| Public Subscription | Not Allowed | Allowed |
| Share Transferability | Restricted. Not freely transferable. | Freely Transferable. |
| Quorum Requirements | 2 members personally present. | 5 members present personally. |
| Commencement of Business Operations | On receipt of Certificate of Incorporation. | On Receipt of Certificate of Commencement of Business. |
| Minimum Paid Up Capital | Rs. 1,00,000/- | Rs. 5,00,000/- |
The above points show us how the two types of companies are different from each other. In general, the legal requirements of a Private Company are lesser as compared to those of a Public Company. A Public Company being owned and traded publicly faces a large no. of legal compliances as compared to a Private Company because Private Companies are owned and traded privately.
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