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Types of Companies

Companies can be either public or private.

Private Company
A private company is one if it satisfies the following:
  1. restricts the right to transfer of shares by its members.
  2. it should have a minimum of two people and a maximum of 50 members which does not include the past and present employees.
  3. he public is not invited to subscribe to its share capital
  4. should have a minimum paid up capital of Rs 1 lakh or any amount that has been prescribed regularly.
The words private limited that is to be added after its name is a compulsory affair. A company loses its private company hold if any of the above mentioned provisions are not complied with.

The following are the advantages of private companies when compared to the public companies
  1. Two members are enough for the private company whereas seven people are required for a public company.
  2. Prospectus need not be issued because the public I not invited to subscribe the shares of a private concern.
  3. The minimum subscription is not mandatory for the allotment o shares.
  4. The private company an commence business as soon as it receives the certificate of incorporation whereas the public company has to wait till the certificate of commencement.
  5. The private company needs two directors whereas the public company requires a minimum of three.
  6. A directory of employees has to be maintained by the private company while this is not mandatory for a public company.
  7. The directors are not restricted with the amount of loan they can borrow in a private company. As a result of this, they nee not get permission from the Government which the public company has o follow.
Public Company
A company which is not a private company is called a public company. The Indian Companies Act defines a Public Company as follows
  1. which has a minimum paid up capital of Rs. 5 lakh or more an which can be recommended from time-to-time.
  2. a minimum of 7 members and without a limit for the maximum number
  3. transfer of shares is not restricted
  4. does not prohibit the public from subscribing to its public deposit or share capital

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