Companies may be classified as private companies and public companies.
Private Companies: – A private company is defined as a company by whose Article of Association states:-
- Right to transfer share is prohibited.
- Maximum Number of Member is limited to 50
- Prohibited public issue of shares. No invitation can be made for public subscription of shares.
Public Companies: Companies Which are no such restrictions are known as Public companies
Distinction between private and public companies in India
|SR NO||PRIVATE COMAPNIES||PUBLIC COMPANIES|
|1||Minimum Number of Member should be two ( 2)||Minimum number of members should be seven ( 7)|
|2||Maximum Number of Member Should be fifty ( 50)||Maximum Number of Members is not limited in case of a Public company.|
|3||Minimum Paid-up capital must be INR 100000||Minimum Paid-up capital must be INR 500000|
|4||Minimum Number of Directors are two||Minimum Number of directors must have three (3)|
|5||Private Companies share transfer is not allowed||Shares are freely transferable.|
|6||No need of filing a consent to act as director||Consent must be filed with registrar of companies to act as director|
|7||A private company cannot issue prospectus and invite the public to subscribed for its shares or debentures.||Public companies on the other hand is required by the companies act to issue a prospectus or file a statement in lieu of prospectus.|
|8||No need to sign undertaking for qualification shares||Need to sign undertaking for qualification shares.|
|9||Business can be started immediately after incorporation||Starting business is restricted to obtaining certificate of commencement of business.|
|10||Can issue shares immediately after getting certificate of incorporation||Can allot shares only if they are assured of minimum subscription|
|11||Cannot issue a share warrants against fully paid-up shares||Can issue share warrants against fully paid-up shares|
|12||Need not call statutory meeting of its memebrs||It is compulsory to call statutory meeting of members and file a statutory report to Registrar of comapnies|
|13||The quorum for a meeting is two ( 2)||where as Quorum for a meeting is five ( 5)|