Question

Distinguish between private companies limited by shares and public companies limited by shares. in extensive detail.

Answer 1

Meaning of Private Companies Limited by Shares: Company Limited by shares means a company that has the liability of its members limited by the memorandum to the amount, if any unpaid on the shares respectively held by them is termed as company limited by shares.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.

For example: A shareholder who has paid 60 on a share of facevalue 100 called be call upon to pay balance 40

Meaning of Public Limited By shares:Public Limited means company has offered shares to general public.The buyers of those shares have Limited Liability. Main Purpose is to grant ability to raise capital by issuing public shares.

Difference Between Public And Private Company Limited by Shares

1)Meaning: Private Company means shares are held by individual and not listed on Stock exchange. Pubic Company means Shares are listed on stock exchange and its shares are held by public.

2)Name: Public Company is not required to use the private but in private Limited Company it is mandatory to use the word private limited its end of name.

3)Number of Directors: Public Company minimum 3 directors are require but in Private Company minimum 2 directors.

4) Number of Members: There must be 7 memebers to start a Company but in Private minimum 2 numbers of members are required.In public Company there is no maximum limit of members but in private Company there is limit of 50 members.

5) Quorum: 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 Private Ltd. Company, that number is 2.

6) Prospectus: The issue of Prospectus in mandatory in case of Public company but in private company it is not mandatory.

7) Transfer of Shares: There is restricition in case of private Company to transfer of shares but in public Company they it can freely transfer.

8) Qualification share: A person should possess certain minimum number of shares to qualify himself as a director in a public limited company. This condition does not apply to the directors of a private limited company.

9) Annual Report: Public company has to file its Annual Report with registrar of Directors. It is not necessary for Private Company.

10) Directors remuneration: There are certain restrictions on the payment of remuneration to Directors in a Public limited company. There is no such restriction in a Private limited company.

11) Consent of Directors: Consent of Directors is necessary in case of Public company but in Private Company it is not necessary.

12) Articles of Association: A public Company may or may not have its articles but in rivate company it must have Articles of Association.

Conclusion: After distinguish into two entities it is very clear there are so many aspects whih distinguish them. The scope of Private company is very limited on the other hand public company's scope is very vast and can raise capital through public.