In India you will get two types of companies. One is the Private one and the other one is the public one. Each of these companies have different set of features and roles to play. A private company is the one that is formed under the Indian Companies Statue 2013. In a private company there should be about a maximum of 200 members. The name of the company must end with Private Limited. This is also mandatory for the organization.
On the other hand, a public company is the one that is formed and registered under Indian Companies Statue Act, 2013. These companies can offer their shares to the public. There are no such limitations as to the number of members in a public company. But you must remember that there exists a difference between a public and a private company. Let us try to explore it.
Difference Between Public And Private Company
| Feature | Public Company | Private Company |
|---|---|---|
| Ownership | Owned by shareholders who hold publicly traded shares | Owned by a small group of private individuals or entities |
| Number of Shareholders | Generally has a large number of shareholders | Typically has a limited number of shareholders |
| Listing on Stock Exchange | Listed on stock exchanges (e.g., BSE, NSE) | Not listed on stock exchanges |
| Disclosure Requirements | Subject to strict regulatory disclosure requirements | Less stringent disclosure requirements |
| Transferability of Shares | Shares are freely tradable in the stock market | Share transfer is restricted and requires approval |
| Minimum Capital Requirement | May have a higher minimum capital requirement | Generally has a lower minimum capital requirement |
| Management Control | Management control may be dispersed among shareholders | Management control is often concentrated in the hands of a few |
| Decision-Making Speed | Decision-making may be slower due to larger size and governance structures | Generally more agile decision-making |
| Access to Capital | Typically has easier access to capital through stock markets | May have more limited access to external capital |
| Regulatory Compliance | Subject to more rigorous regulatory compliance | Subject to relatively fewer regulatory requirements |
| Confidentiality | Information is more public, given regulatory requirements | Can maintain greater confidentiality |
| Initial Public Offering (IPO) | Can raise capital through an IPO | Cannot raise capital through a public offering |
=> 1. There is a difference as per the number of members in the private and public company. In the case of a private company there should be a minimum of seven members. This is the minimum number of members to be present during the formation of the company. However, a private company can be formed with two members. It is the minimum requirement to form a private company. It is found that a public company has more members than a private company.
=> 2. When it comes for the maximum number of members there is no such limitations. The maximum number of shareholders in a public company is unlimited. There are no such limitations in that. In the case of the private companies the maximum number of members should not exceed by 200. This is the limitation that the company must maintain under any situation. On the other hand, a private company can sell their shares to unlimited number of people.
=> 3. There is also a difference between the two companies to start a business. Before starting a business in public limited company, the organization must obtain two things. One is the certificate for the commencement of business and certificate for commencement of business. This is much essential for a public company. However, in the case of the private company the organization must obtain a certificate of incorporation for carrying out the business. This is one of the most important things to do for the commencement of the business.
=> 4. While issuing the shares the company must have a certain amount of capital. This is required in the case of the public company. On the other hand, there is no such restrictions for issuing shares in the case of the private companies. They have no such restrictions in that.
=> 5. There is a difference that exists between the two in respect of the issuing of the prospectus. A public company can issue shares to the public. They are free to do so. But there are some limitations in the case of the private companies. A private company cannot share the or issue the prospectus before the public in any way.
=> 6. A Public company may not have its Articles of Association. It depends on the company whether they will issue the same or not. On the other hand, a private company can issue the Articles of Association to the Public.
=> 7. There is also a difference in respect of the number of Directors for the company. In a Public company there must be at least three directors. But for a private company there must at least two Directors who will be engaged with the task of managing the company affairs or matters.
In a Public there is a requirement of a director’s approval in a written form. This is much more required for any kind of work. But in a Private company there is no such requirement of written approval from the Directors of the company. This is another noted difference that exists between the two types of company.
Parkash Singh is a PGT Teacher in Kendriya Vidyalaya Rohini, New Delhi. Parkash completed his starting education from Bihar Board and graduated from Babasaheb Bhimrao Ambedkar Bihar University. He regularly writes educational and informative articles at IndiasStuffs.com
