Types of Companies

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Types of Companies

On the basis of ownership companies can be of four different types - Private Limited Company, Public Limited Company and Government Company and Multinational Company.

This chart showing types of companies

Types of Companies

This chart showing types of companies

Private Company : According to Indian Companies Act 1956 , Private “Company means a company which has a minimum paid-up capital of one lakh rupees or such higher paid up capital, as may be prescribed, and by its articles.” It has following features:

(a) Restricts the right of its members to transfer their shares.

(b) Limits the number of its members to fifty only.

(c) Prohibits any invitation to the public to subscribe for any shares or debentures of the company; and

(d) Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.

Public Company: According to Indian Companies Act 1956, Public Company is defined as a “company which is not a Private Company”. It has following features:

(a) Its shares can be transferred freely.

(b) Has a minimum paid up capital of five lakh rupees or such higher paid up capital, as may be prescribed.

(c) Whose members have limited liability.

(d) The number of shareholders can be up to the number of issued and subscribed shares or even more but the maximum number should not be less than seven.

Difference between Private Limited and Public Limited Companies:

  • In the case of a private company minimum number of persons required to form a company is two, while it is seven in the case of a public company.

  • A private company has to have a minimum paid up capital of 1 lakh rupees, whereas a public company has to have a minimum paid up capital of 5 lakh rupees.

  • In case of a private company the maximum number of members must not exceed fifty whereas there is no such restriction on the maximum number of members in case of a public company.

  • In private company the right to transfer shares is restricted, whereas in case of public company the shares are freely transferable.

  • A private company cannot issue a prospectus, while a public company may invite the general public to subscribe for its Shares or Debentures.

  • A private company must have at least two Directors, whereas a public company must have at least three Directors.

  • A private company can commence business immediately after receiving the certificate of incorporation, while a public company can commence business only when it receives a certificate to commence business from the Registrar of Companies.

  • A private company need not hold a statutory meeting but a public company must hold a statutory meeting and file a statutory report with the Registrar.

  • Two members personally present form the quorum in a private company but in a public company this number is five members.

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