7 Important differences between Pvt Company and Public Ltd company
Following are the important points of distinction between a private company and a public company:
1. Transferability of Shares: In a private company, the rights of the members to transfer their shares is restricted by its Articles of Association. But in a public company, the shares are freely transferable.
2. Maximum Number of Members: There cannot be more than 50 members in a private company excluding the past and present employees of the company. But for a public limited company, the maximum number of members in a public company, is virtually unlimited.
3. Issue of Prospectus: As per law, a private company has no authority to invite the public. They cannot get the public to subscribe for its share capital. So a private company cannot issue a prospectus. But a public company must issue a prospectus or file a statement in lieu of prospectus before issuing shares.
4. Use of the Word “Ltd”: It is mandatory for a pvt ltd company to add words “Private Limited” at the end of its name. But there is no such restriction for a public company. Simply adding the word “Limited” is enough.
5. Issue of Share Warrant: A private company cannot issue share warrants. But a public company can issue share warrants in case of fully paid up shares.
6. Annual Return: Together with the annual return, a private company has to file a declaration with the Registrar promising that the number of members does not exceed 50, that no share capital or debenture was raised from public and that other companies which are the members of the company holds less than 25% of the company’s shares. But a public company has to file only the annual return and not the above declaration.
7. Special Privileges of a Private Company: A private company enjoys several privileges and exemptions. Because of this, Dr. Edward Manson describes private company as
“an incorporated partnership, combining the advantages of both elements – the privacy of partnership and the permanence and origin of the corporate constitution”.
Private companies can keep their affairs to themselves.