Secretarial Practice · Ch 2 — Joint Stock Company
Private Company vs Public Company
5
Private Company vs Public Company
5. Private Company vs Public Company
Of all the classifications in Section 4, the private vs public distinction is the one nearly every later Secretarial Practice chapter (Formation of a Company, Members of a Company, Company Meetings) will assume you already understand cleanly — a private company and a public company follow genuinely different rules at almost every later stage.
| Basis | Private Company (Section 2(68)) | Public Company (Section 2(71)) |
|---|---|---|
| Minimum members | 2 | 7 |
| Maximum members | 200 (excluding present/past employee-members) | No maximum |
| Minimum directors | 2 | 3 |
| Transferability of shares | Restricted by the company's own Articles | Generally freely transferable |
| Invitation to the public | Prohibited from inviting the public to subscribe for its securities | May invite the public to subscribe, through a prospectus |
| Name suffix | Must end with "Private Limited" | Must end with "Limited" |
| Minimum paid-up capital | No statutory minimum (the earlier ₹1 lakh requirement was removed by the Companies (Amendment) Act, 2015) | No statutory minimum (the earlier ₹5 lakh requirement was similarly removed) |
| Index of ownership spread | Typically closely held — a small, known group of members (often family or a few promoters) | Ownership can spread very widely across the general investing public |
Conversion of a Private Company into a Public Company, and vice versa:
- Private to Public: the company alters its Articles of Association to remove the private-company restrictions (on share transfer and on inviting the public), passes a special resolution to that effect at a general meeting, and files the required forms with the Registrar of Companies — while also ensuring it now satisfies the public company's minimum member and director requirements.
- Public to Private: requires a special resolution to alter the Articles and, because this conversion takes away rights (like free transferability) that the public may have relied on, the additional approval of the Tribunal (National Company Law Tribunal, NCLT) under Section 14 — a deliberate extra safeguard the Companies Act, 2013 builds in specifically for this direction of conversion, and one that has no equivalent requirement going the other way. …
Definition 1Private Company (Section 2(68))
Minimum 2, maximum 200 members; restricts share transferability; prohibits any invitation to the public to subscrib …
Definition 2Public Company (Section 2(71))
A company that is not a private company; minimum 7 members, no maximum; may invite the public to subscrib …