Distinguish between a Private Company and a Public Company on any four points.

Exercises · Q7

Q. Distinguish between a Private Company and a Public Company on any four points.

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Private Company vs. Public Company — four distinguishing points:

Number of members — a Private Company needs a minimum of 2 members and can have a maximum of 200 (excluding certain employee/former-employee categories); a Public Company needs a minimum of 7 members with no maximum limit.
Transferability of shares — a Private Company's articles restrict the right of members to transfer their shares; a Public Company's shares are freely transferable.
Invitation to the public — a Private Company is prohibited from inviting the general public to subscribe to its shares/debentures; a Public Company may invite the public to subscribe, typically through a prospectus. …

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Q. Distinguish between a Private Company and Public Company.

›Reveal solution

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.

Basis	Private Company	Public Company
Minimum members	2	7
Maximum members	200 (except OPC)	No limit
Minimum directors	2	3
Transfer of shares	Restricted by the Articles	Freely transferable
Invitation to public	Cannot invite the public to buy shares/debentures	Can invite the public through a prospectus
Name ending	'Private Limited'	'Limited'
Prospectus	Need not issue a prospectus	Must issue a prospectus or a statement in lieu
Commencement of business	Can start soon after incorporation	Must also satisfy the capital / declaration requirement
Suitability	Small and family-controlled concerns	Large-scale businesses needing huge capital
…

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CBSE 2023Set ANNUAL10 marks

Q. Distinguish between a private company and a public company.

›Reveal solution

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

Basis	Private Company	Public Company
Minimum members	2	7
Maximum members	200 (excluding employee-members)	No maximum limit
Minimum directors	2	3
Transfer of shares	Restricted by the Articles	Freely transferable
Invitation to public	Cannot invite the public to subscribe to its shares or debentures	Can invite the public through a prospectus
Issue of prospectus	Not required	Required (or a statement in lieu) when raising capital from the public
Name	Must use the words 'Private Limited'	Uses the word 'Limited'
Commencement of business	Can start soon after incorporation	Earlier required a certificate of commencement; now needs a declaration before starting
Suitability	Suitable for family and small businesses	Suitable for large-scale businesses needing large capital
…

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Q.Distinguish between a Private Company and a Public Company on any four points.

Concept understanding — Private Company and Public Company

Q.Distinguish between a Private Company and a Public Company on any four points.

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