Q.State the important privileges available to a private company.

The important privileges of a private company are:

• Can be formed by just two members (a public company needs seven).
• Need not issue a prospectus, since it does not invite the public to subscribe.
• Can allot shares without a minimum subscription and can start business as soon as it gets the certificate of incorporation.
• Needs only two directors (a public company needs three; maximum is fifteen for both). …

What a private company is

A private company restricts the transfer of its shares, has a minimum of 2 and a maximum of 200 members, and does not invite the public to subscribe to its securities. It uses the words "private limited" after its name. Because it does not deal with the general public's money, the law relaxes several requirements that a public company must meet.

Important privileges of a private company (over a public company)

• Fewer members to form: A private company can be started with just two members, whereas a public company needs at least seven.
• No prospectus required: Since it does not invite the public to subscribe to its shares, it need not issue a prospectus.
• Easier commencement of business: It can allot shares without receiving a minimum subscription and can begin operations as soon as it receives the certificate of incorporation — it does not have to wait for further formalities.
• Fewer directors: It needs only two directors, against a minimum of three for a public company (the maximum for both is fifteen).
• No index of members: It need not maintain an index of members, a record a public company is required to keep.

A caution …