{"id":16397,"date":"2020-09-16T15:38:01","date_gmt":"2020-09-16T10:08:01","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=16397"},"modified":"2020-09-21T18:32:15","modified_gmt":"2020-09-21T13:02:15","slug":"private-company-vs-public-company","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/private-company-vs-public-company\/","title":{"rendered":"Private Company Vs Public Company: A Complete Overview"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Private Limited and Public Limited Companies are the most popular forms of business in India. Both business forms carry distinctive identities and offer several pros and cons. Thus, an entrepreneur will have to select the company\u2019s type based on the funding plans. This article will unveil all possible detail regarding  Private Company Vs Public Company. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/private-company-vs-public-company\/#Overview_of_Private_Limited_Company\" >Overview of Private Limited Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/private-company-vs-public-company\/#Overview_of_Public_Limited_Company\" >Overview of Public Limited Company<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/private-company-vs-public-company\/#Private_Company_Vs_Public_Company_Differences\" >Private Company Vs Public Company: Differences<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/private-company-vs-public-company\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overview_of_Private_Limited_Company\"><\/span>Overview of Private Limited Company <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per Companies Act, 2013, the private company is referred to as a business entity that defies the fundamental of the transferability of the shares. It also means that members of the <a href=\"https:\/\/corpbiz.io\/company-registration\"><strong>private limited company<\/strong><\/a> are not allowed to issue shares and debentures to the general public.<\/p>\n\n\n\n<p>Also, the same act set out the provision on the number of members that can exist in such a business model. As of now, private limited companies are only allowed to retain a maximum of 200 members. Moreover, the privately-held business is liable to include the term \u201cprivate limited\u201d at the end of their company\u2019s name.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Overview_of_Public_Limited_Company\"><\/span>Overview of Public Limited Company <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The Companies Act, 2013 defines a &#8216;public company\u2019 which stick to the limited liability and may offer shares to the \u201cgeneral public\u201d by Initial Public Offer (IPO). An individual can also acquire the shares of such a company where the company is listed via the stock market. A public limited company is often referred to as a joint-stock company. Such a business model is regulated by the provisions of the Indian Companies Act, 2013.&nbsp; <\/p>\n\n\n\n<p>A <a href=\"https:\/\/corpbiz.io\/public-limited-company-registration\"><strong>public limited company<\/strong><\/a> can be set up by the group of volunteers (irrespective of their numbers). Unlike private business entities, this business model doesn\u2019t impose any limitation on the transferability of the shares. It means that the company can send an invitation to the general public for the issuance of shares and debentures.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/proprietorship-firm-vs-private-limited-company\/\">Proprietorship Firm vs. Private Limited Company: Key Differences<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Private_Company_Vs_Public_Company_Differences\"><\/span>Private Company Vs Public Company: Differences<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img decoding=\"async\" width=\"628\" height=\"466\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-62.png\" alt=\"Private Company Vs. Public Company: Differences\" class=\"wp-image-16398\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-62.png 628w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-62-300x223.png 300w\" sizes=\"(max-width: 628px) 100vw, 628px\" \/><\/figure><\/div>\n\n\n\n<p>The given section will illustrate the list\nof grounds that differentiate these business entities:-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Stock Exchange Listing <\/h3>\n\n\n\n<p>Public limited companies usually find their\nway to the popular stock exchange. Meanwhile, a private limited company, due to\nregulatory restrictions, doesn\u2019t reap such a benefit. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Minimum Number of\nMembers&nbsp;<\/h3>\n\n\n\n<p>A public limited company can be set up by a minimum of seven members. On the contrary, private limited companies can be formed by a minimum of two members.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Minimum Directors&nbsp;<\/h3>\n\n\n\n<p>Under a legal obligation, private limited\ncompanies are required to appoint two directors to run the company. On the\nother hand, the public limited company is required to be run by at least three\ndirectors.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Procurement of\nFunds&nbsp;<\/h3>\n\n\n\n<p>The Public Limited Company usually raise\ntheir funds by issuing an IPO in the general public.&nbsp; On the contrary, the\nprivate company approach to the private investors for the procurement of the\nfunds.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Disclosure of the\nFinancial Report<\/h3>\n\n\n\n<p>The public company is liable to manifest\nits financial reports on a quarterly and annual basis. Meanwhile, the private\ncompany is free from such a regulation. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Issuance\nof Prospectus <\/h3>\n\n\n\n<p>The public limited entities are under the\nobligation to issue the statement and prospectus on the periodic basis as per\nthe bylaw. However, the private company doesn\u2019t have to address such a\nrequirement. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Commencement\nCertificate<\/h3>\n\n\n\n<p>Each and every Public Company seeks a commencement certificate post incorporation to initiates its operation. Alternatively, a private limited company can commence its operation after its incorporation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Transferability of Shares <\/h3>\n\n\n\n<p>The notion of transferability of shares is\nnot applicable to private limited companies. Meanwhile, in the public limited\ncompany, the shareholders can transfer their share without any legal\nobligation. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Scope of Operating <\/h3>\n\n\n\n<p>The privately held companies have a limited\nscope when it comes to the procurement of funds. Meanwhile, the Public Limited Companies\nare relatively more versatile and profitable on this front. The Public Limited\nCompanies are under the constant pressure of regulatory bodies like SEBI for\ngenerating periodic reports and disclosures for the general public.&nbsp; To serve this purpose, these companies invest\na considerable amount of money every year. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Employment of Company Secretary<\/h3>\n\n\n\n<p>Public companies are liable to employ a\ncompany secretary. On the other hand, the Pvt. Ltd. company under no obligation\nto follow such a statutory requirement. However, From 01\/04\/2020, every listed company, be it public company and private company having a paid-up share capital of INR ten crore or\nmore shall have a whole-time\/regular company\nsecretary<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Ease of Transferring<\/h3>\n\n\n\n<p>The ease of transferring the share is one of the critical reasons for selecting the public limited company. However, that advantage comes with many compromises, mainly in the form of privacy loss and powerful compliances. The transferability of shares is controlled completely in private limited companies, while the shareholders of a public company can transfer their shares without restraint.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">A Note on Conversion <\/h3>\n\n\n\n<p>A public limited company can turn into a private limited company if they intend to do so. To serve this purpose, the entity needs to purchase the entire outstanding shares from the existing shareholders. As soon as the entity completes such action, it will be delisted from the stock exchange and eventually transform into a Private Limited Company.<\/p>\n\n\n\n<p>The latest finance bill encloses a new\nclause related to the asset\u2019s value held by private companies. As per the said\nbill, the entity converted into the private limited company need to maintain\nthe maximum threshold of asset\u2019s value i.e. Rs 5 Cr. in their account book only\nif the transformation was held three years ago. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>After enacting the <strong><em>Company Act, 2013<\/em><\/strong><sup><a href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong><em>[1]<\/em><\/strong><\/a><\/sup>, most entrepreneurs rush towards a private limited business model. Since it allows the entities to better exercise better control due to relaxed provisions and less compliance, it has become an obvious choice for most of the start-ups in the country.  Also, the incorporation of the private limited companies doesn\u2019t attract any paid-up capital which ultimately helps start-ups to incorporate the business without financial burden. Public limited companies are good at maintaining transparency due to consistent exposure to the general public.  Make sure to share your concerns regarding this topic i:e Private Company Vs Public Company through the comment section. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/comparison-between-llp-and-private-limited-company\/\">Comparison between LLP and Private Limited Company<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Private Limited and Public Limited Companies are the most popular forms of business in India. Both business forms carry distinctive identities and offer several pros and cons. Thus, an entrepreneur will have to select the company\u2019s type based on the funding plans. This article will unveil all possible detail regarding Private Company Vs Public Company. [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":16453,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[154,156],"tags":[1001],"acf":{"service_id":"2"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":37281,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16397"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=16397"}],"version-history":[{"count":12,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16397\/revisions"}],"predecessor-version":[{"id":16511,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16397\/revisions\/16511"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/16453"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=16397"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=16397"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=16397"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}