ASSIGNMENT ON PRIVATE

COMPANY VS PUBLIC
COMPANY IN E.D

SUBMITTED BY,

RUTH LITHESIAL. A,

II M.A Economics,

Reg. no: 161292.

Definition of Public Ltd. Company

A Public Limited Company or PLC is a joint stock company formed and registered under The
Indian Companies Act, 2013 or any other previous act. It is an association of persons formed
voluntarily, having a minimum paid up capital of Rs. 5,00,000.

There is no defined limit on the number of members the company can have. Also, there is no
restriction on the transferability of the shares. The company can invite the public for the
subscription of shares or debentures, and that is why the term Public Limited gets added to
its name.

Definition of Private Ltd. Company

A Private Limited Company is a joint stock company, incorporated under The Indian
Companies Act, 2013 or any other previous act. It is an association of persons formed
voluntarily, having the minimum paid up capital of Rs. 1,00,000. The maximum number of
members is 50, excluding the current employees and the ex-employees who were the
members during their employment or continues to be the member after the termination of
employment in the company.

The company restricts the transfer of shares and prohibits invitation to the public for the
subscription of shares and debentures. It uses the term private limited at the end of its name.

Private Versus Public Company

Private Company
A private company can be a corporation, a limited liability company, a partnership, or
a sole proprietorship, as long as the shares are privately held and not traded publicly.
Although private companies are legally required to file certain documents with their
state and follow required compliance laws for shareholders, public companies must
follow strict government regulations.
Private companies are not required to publicly disclose financial information, while
public companies are required by the Securities and Exchange Commission to file an
annual report documenting their performance in detail.
Because private companies don't have to disclose financial information, they can
focus on long-term growth instead of making sure shareholders are getting their
quarterly dividends.
Private companies don't need shareholder approval for operational and growth
strategy decisions made by the company, as long as that is stated in their corporate
documents.

Public Company
Public companies must inform shareholders about and get approval for the company's
operations, financial performance, management actions, and other decisions.
Going public is expensive, and there is unlimited liability for a company's owners.
Public companies may have an easier time raising large amounts of capital by selling
securities. Investors are more likely to invest in a public company because there is
less risk and more potential to reap large rewards.
Public companies can return to the stock market and raise more capital via a
secondary stock offering or by issuing a bond.
 Public companies must comply with the rules established by the Sarbanes-Oxley Act,
which was enacted to protect investors. The act contains a myriad of regulations
concerning board responsibilities and requires the Securities and Exchange
Commission to administer rules that comply with the law. For more information on
the rules and steps to going public.
Public companies can go private by having the owners buy back shares from the
shareholders, whether they are members of the public, another company, an
individual, or a small group of investors.

Comparison Chart
Basis for Comparison Public Company Private Company

A public company is a company
Meaning
which is owned and traded publicly
A private company is a
company which is owned and
traded privately.

Minimum members 7 2

Maximum members Unlimited 200

Minimum Directors 3 2

Minimum paid up
5,00,000 1,00,000
capital

Suffix Limited Private Limited

After receiving certificate of

After receiving certificate of
Start of business incorporation and certificate of
incorporation.
commencement of business.

Statutory Meeting Compulsory Optional

Issue of prospectus /
Statement in lieu of Obligatory Not required
prospectus

Public subscription Allowed Not allowed

2 members must present in

Quorum at AGM 5 members must present in person.
person.

Transfer of shares Free Restricted

Key Differences Between Public and Private Ltd. Company

The difference between public and private company can be drawn clearly on the following
grounds:

1. The public company refers to a company that is listed on a recognised stock

exchange and traded publicly. A Private Ltd. the company is one that is not listed on
a stock exchange and is held privately by the members.
2. There must be at least seven members to start a public company. As against this, the
private company can be started with minimum two members.
3. The is no ceiling on the maximum number of members in a public company.
Conversely, a private company can have a maximum of 200 members, subject to
certain conditions.
4. A public company should have at least three directors whereas the Private Ltd.
company can have a minimum of 2 directors.
5. It is compulsory to call a statutory general meeting of members, in the case of a
public company, whereas there is no such compulsion in the case of a private
company.
6. In a Public Ltd. Company, there must be at least five members, personally present at
the Annual General Meeting (AGM) for constituting the requisite quorum. On the
other hand, in the case of a Private Ltd. Company, that number is 2.
7. The issue of prospectus/statement instead of the prospectus is mandatory in case of
a public company, but this is not the case with the private company.
8. To start a business, the public company needs a certificate of commencement of
business after it is incorporated. In contrast, a private company can start its business
just after receiving a certificate of incorporation.
9. The transferability of shares of a Pvt. Ltd. company is completely restricted. On the
contrary, the shareholders of a public company can freely transfer their shares.
10. A public company can invite the general public for subscribing shares of the
company. As opposed, a private company has no right to invite public for
subscription.

Conclusion

After discussing these two entities, it is very clear that there are so many aspects which
distinguish them. Apart from the above-mentioned differences there are many other
differences like, a public company can issue share warrant against its fully paid share to the
shareholders, which a private company cannot.

The scope of a Private Ltd. The company is limited, as it is limited up to a few number of
people, and enjoys less legal restrictions. On the other hand, the scope of a Public Ltd.
company is vast, the owners of the company can raise capital from the general public and
have to abide by several legal restrictions.
References
Reifman, Shlomo; Murphy, Andrea D., eds. (6 Nov 2008). "America's Largest Private
Companies". Forbes.
Loewen, Jacoline (2008). Money Magnet: Attract Investors to Your Business. Canada:
John Wiley & Sons. ISBN 9780470155752.

"Introduction to Private Companies". Private Company Knowledge Bank. PrivCo.