Public and Private Company

Author : VS Warrier

Public and Private Company

“A Company means, a company formed and registered under the Companies Act, 1956 or any preceding Acts.” the word company is used to denote an association of persons who have associated together to conduct or to carry on a business for gain. The persons associating together will contribute money for the conduct of the business and the total amount is known as Share Capital the company.

A company is a corporation aggregate. It will be known by a separate name. It will be having perpetual succession. It is a legal person, living only in the eyes of law. It can acquire properties in its own name. It can contract debts. The liability of the company will be of its own. A company which is registered under the Companies Act, may be a (1) Public Company or (2) Private Company. Section 3(1)(iii) of the Companies Act, 1956 defines a Private Company. Section 3(1)(iv) of the same Act defines a Public Company.

Private Company means a company which has a minimum paid up capital of one lakh rupees or higher paid up capital as may be prescribed and by its articles. Public Company means a company which –
(1) is not a Private Company,
(2) has a minimum paid up capital of five lakh rupees or such higher paid up capital, as may be prescribed,
(3) is a Private Company which is subsidiary to a company which is not a Private Company.
In a Private Company the Articles of Association (AoA) of the company should restrict, the right of its members to transfer its shares. It should also limit the number of members to 50 (fifty) excluding past and present employee members. AoA of the company should prohibit any invitation to the public to subscribe for the shares or debentures of the company. The AoA of the Company should prohibit any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
If two or more persons hold one share jointly in a company, they shall be treated as a single member. The minimum number of members required to form a Private Company is Two and that of a Public Company is Seven. The words “Pvt. Ltd.” are to be added at the end of its name.

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