Different Between Private Company and Public Company

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* The distinction between a public company and a private company are explained in the following manner: 1. Minimum number of members
The minimum number of person required to form a public company is seven, whereas in a private company their number is only two. 2. Maximum number of members
There is no limit on the maximum number of member of a public company, but a private company cannot have more than fifty members excluding past and present employees. 3. Commencement of Business
A private company can commence its business as soon as it is incorporated. But a public company shall not commence its business immediately unless it has been granted the certificate of commencement of business. 4. Invitation to public

A public company by issuing a prospectus may invite public to subscribe to its shares whereas a private company cannot extend such invitation to the public. 5. Transferability of shares
There is no restriction on the transfer of share In the case of public company whereas a private company by its articles must restrict the right of members to transfer the share. 6. Number of Directors

A public company must have at least three directors whereas a private company may have two directors. 7. Statutory Meeting
A public company must hold a statutory meeting and file with the register a statutory report. But in a private company there are no such obligations. 8. Restrictions on the appointment of Directors

A director of a public company shall file with the register a consent to act as such. He shall sign the memorandum and enter into a contact for qualification shares. He cannot vote or take part in the discussion on a contract in which he is interested. Two-thirds of the directors of a public company must retire by rotation. These restrictions do not apply to a private company. 9. Managerial Remuneration

Total managerial remuneration in the case of public company cannot exceed 11% of net profits, but in the case of inadequacy of profit a minimum of Rs. 50, 000 can be paid. These restrictions do not apply to a private company. 10. Further Issue of Capital

A public company proposing further issue of shares must offer them to the existing members. A private company is free to allot new issue to outsiders. 11. Name
A private company has to use words ‘private limited’ at the end of its name. But a public company has to use only the word ‘Limited’ at the end of its name.

* The distinction between a public company and a private company

Private Company|
Public Company|
| |

1. Section 3(1) (iii) defines a private company;|
1. The Company defined under section 3(1)(iv) of the Companies Act, 1956 is a public company;|
2. has a minimum paid-up share capital of Rs.1 Lakh or such higher capital as may be prescribed;| 2. has a minimum paid-up capital of Rs. 5 lakhs or such higher capital as may be prescribed;|

3. Minimum number of members required to form a private company is 2;| 3. Minimum number of members required to form a public company is 7;|
4. Maximum number of members in a Private Company is restricted to 50;| 4. There is no restriction of maximum number of members in a Public Company;|
5. There is complete restriction on the transferability of the shares of a Private Company through its Articles of Association;| 5. There is no restriction on the transferability of the shares of a Public company;|

6. A Private Company is prohibited from inviting the public for subscription of its shares;| 6. A Public Company is free to invite public for subscription;|
7. It may have 2 directors to manage the affairs of the company;| 7. It must have atleast 3 directors;|

8. The Directors of a Private Company need not sign an undertaking to acquire the qualification shares;| 8. The Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the Public Company;|

9. A Private Company can commence its business immediately...
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