What is a Private Company?
A Private Company 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 at a later point of time in its lifetime. Going public would give the company access to several other funding prospects as compared to a private corporate body. A Private Company cannot invite the general public to subscribe to their shares or debentures. Shares of Private Companies are not freely transferable, and these shares can’t be transferred. A Private Company should have private limited as a suffix in its name. When a private corporation goes public, all the privately owned securities become public property 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-up capital of ₹1 lakh.
- Such a company does not invite the general public to subscribe to its deposits.
- As per the Companies Act, 2013, every private company is required to use the suffix “Pvt. Ltd.” in its registered name. For example, XYZ, being a private company, must disclose that through the suffix XYZ Pvt. Ltd.
Differences between a Private Limited Company and Section 8 Company
Section 2(20) of the Companies Act, 2013 states the meaning of a company as “Company means the incorporation of a company by an association of different persons under the laws established by the Companies Act, 2013 or any other previous company act.” The Companies Act has provided for different types of business arrangements that can be initiated by an individual or a group of people, like public companies, private companies, one-person companies, etc.
A Private Company, as mentioned under Section 2(68) of the Companies Act 2013, has a minimum of 2 members and a maximum of 200 members. Private companies can’t invite the general public to subscribe to their shares and securities.
Section 8 Companies, also known as companies formed with charitable objects, According to Section 8 of the Companies Act, 2013, these companies are formed to promote the charitable objects of commerce, art, science, sports, education, research, social welfare, religion, charity, environmental conservation, etc.
Table of Content
- What is a Private Company?
- What is a Section 8 Company?
- Conclusion
- Frequently Asked Questions (FAQs)