Types of CompaniesCompanies can be either public or private.
A private company is one if it satisfies the following:
- restricts the right to transfer of shares by its members.
- it should have a minimum of two people and a maximum of 50 members which does not include the past and present employees.
- he public is not invited to subscribe to its share capital
- should have a minimum paid up capital of Rs 1 lakh or any amount that has been prescribed regularly.
The following are the advantages of private companies when compared to the public companies
- Two members are enough for the private company whereas seven people are required for a public company.
- Prospectus need not be issued because the public I not invited to subscribe the shares of a private concern.
- The minimum subscription is not mandatory for the allotment o shares.
- 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.
- The private company needs two directors whereas the public company requires a minimum of three.
- A directory of employees has to be maintained by the private company while this is not mandatory for a public company.
- 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.
A company which is not a private company is called a public company. The Indian Companies Act defines a Public Company as follows
which has a minimum paid up capital of Rs. 5 lakh or more an which can be recommended from time-to-time.
a minimum of 7 members and without a limit for the maximum number
transfer of shares is not restricted
does not prohibit the public from subscribing to its public deposit or share capital