Q.Distinguish between a Private Company and Public Company.

A private company (Pvt Ltd) restricts share transfer, limits membership to 200, needs 2 members and 2 directors and cannot approach the public for funds. A public company (Ltd) allows free transfer of shares, needs a minimum of 7 members with no upper limit and 3 directors, and can raise capital from the public by issuing a prospectus.

The following table brings out the main points of difference, as expected in the AP Intermediate 1st-year Commerce Paper-I.

A private company and a public company differ mainly in minimum and maximum membership, number of directors, the right to invite public subscription for shares/debentures, the transferability of shares, and the issue of a prospectus. A private company is a closely held, restricted concern; a public company is a widely held one that may raise capital from the general public.

Distinction between a Private Company and a Public Company