What is a Public Company?
According to the Companies Act, 2013 a public company is one which invites the general
public to subscribe to its share capital to raise funds. Applications are invited through the issue
of prospectus and shares are allotment is made subsequently. Such companies allow their
shareholders to transfer their shares easily without restrictions. The shares of a public company
are listed on stock exchanges and all the trading is handled there with the help of brokers.
Other characteristics of a public company include:
The minimum number of members required to incorporate a public company is 7 and there
is no limit on the maximum number of members.
It has a minimum paid-up capital of 5 lakhs.
Any private company which is the subsidiary of a public company is also a public
company.
What is a Private Company?
Contrary to a public company, a private company is one that does not offer its securities to the
general public for subscription through stock exchanges, rather such trading is done either
privately or over the counter. Such companies might also restrict the rights of their members
when it comes to transferring shares. A private company can also transition to a public
company subsequently at a point of time in its lifetime. Going public would give company
access to a number of other funding prospects as compared to a private corporate body. When
a private corporation goes public, all the privately owned securities become public ownership
and can now be listed on the stock exchange. Other characteristics of a private company
include:
The minimum number of members in a private company is 2 and the maximum is 200.
It has a minimum paid capital of 1 lakh.
Such a company does not invite the general public to subscribe to its deposits.
Difference between Public Company and Private Company
Basis Public Company Private Company
A private limited company refers
A public limited company means
to a company that is not listed on
a company that is listed on a
Meaning a stock exchange and the shares
recognised stock exchange and
are held privately by the members
whose shares are publicly traded.
concerned.
Number of Minimum 7 and there is no limit Minimum 2 and Maximum 200
Members for Maximum members. members.
Articles of It can draw up its own articles of They must draw up their own
Association association or adopt Schedule F. articles of association.
The shares of a publicly traded Shares of a private company are
Transfer of company are freely transferable, not freely transferable, as the
shares i.e., freely tradable in an open articles of association contain
market called the stock exchange. restrictions.
Public It may invite the public to Issuance of shares or bonds to the
subscriptions subscribe for its shares or bonds. public is prohibited.
Issuing a It may issue a prospectus or may
Issuing a prospectus is prohibited.
prospectus opt for a private placement.
The company cannot issue shares
Minimum The company may allot shares
unless it reaches the minimum
allotment without obtaining a minimum
subscription specified in the
amount subscription.
prospectus.
Basis Public Company Private Company
After incorporation, it requires a You can start a business
Starting a
certificate of commencement of immediately after receiving an
business
business. extract from the commercial
Statutory
Statutory meeting is mandatory Statutory meeting is optional.
meeting
A public company must A private company must include
Use of suffix compulsorily include the words “Private Limited” as a suffix in its
“Limited” in its name. name.
A public company must
Disclosing A private company does not have
compulsorily issue quarterly and
reports to the to disclose its financial results to
annual financial statements to the
public the public.
public.
