Q.Distinguish between a private company and a public company (any four points).

Private and public companies differ mainly in how many members they may have, how they raise capital, and how freely their shares change hands.

Private and public companies are both registered companies under the Companies Act, 2013, but the Act (Sections 2(68) and 2(71)) attaches different rules to each, reflecting the more closely held nature of a private company versus the wider public participation expected in a public company.

1. Minimum and maximum members: A private company needs a minimum of 2 members, capped at a maximum of 200 (excluding present and past employee-members). A public company needs a minimum of 7 members, with no maximum limit.

2. Invitation to the public: A private company's articles must prohibit any invitation to the public to subscribe for its securities. A public company, by contrast, may issue a prospectus and invite the general public to subscribe for its shares or debentures.

3. Transferability of shares: A private company's articles restrict a member's right to transfer shares to outsiders, keeping ownership within a known circle. A public company's shares are freely transferable, subject only to its articles' general provisions, which supports trading and liquidity.

4. Minimum number of directors: A private company must have at least 2 directors, while a public company must have at least 3 directors.

An additional point worth noting is that a private company that is a subsidiary of a public company is deemed, for the purposes of the Act, to be a public company — showing that the classification looks at substance and control, not just the label in the articles.

Answers that give only one point when the question asks for 'any four' lose marks — always count and number the points explicitly, and avoid repeating the same point in different words.