Advertisements

A public company under the company act 2013 can offer its share to general public for subscription. In order to become a public company, the company need to offer its share to general public through IPO.
As per section 2(71), Companies act (amendment) Act 2015, a public company means a company which:
(a) is not a private company
(b) has a minimum paid up share capital, as may be prescribed;
(c) is a private company which is a subsidiary of a company which is not a private company.

A Private company cannot offer its share to general public, it is restricted. The share of private company is held by members or investors. According to section 2(68), as amended by the companies (amendment) Act, 2015 , a “private company” means a company which has a minimum paid up share capital, as may be prescribed, and by its articles of association:
(a) restricts the rights of the members to transfer its shares;
(b) limits the number of its members to 200, excluding members who are or were in the employment of the company;
(c) prohibits any invitation to the public to subscribe for any securities of the company.

DIFFERENCE BETWEEN PRIVATE AND PUBLIC COMPANY

The difference between private and public companies are as follows:-

1. Number of members – A private company must have minimum 2 members while a public company must have at least 7.
2. Minimum paid up capital- A private company must have a minimum 1 lakhs paid-up capital where as a public company need to have 5 lakhs as paid up capital at the time of incorporation.
3. Transfer of shares– A private company shares cannot be transferred freely, whereas public company shares can be transferred freely.
4. Name of the company – A private company ,need to add suffix “private limited” at the end of its name. In public company, the word “limited” is only added.
5. Prospectus- A private company cannot issue prospectus. Public company can issue prospectus.
6. Public subscription- A private company cannot invite public to purchase its shares or debentures but a public company can invite public through public offering to purchase its shares or debentures
7. Allotment of shares – A private company can proceed to allot shares even before the minimum capital is subscribed or paid. But a public company cannot allot shares without raising minimum capital.
8. Issue of share warrants– A private company cannot issue share warrants , but a public company can.
9. Quorum for general meeting– minimum requirement for the member for a valid meeting in private company is 2, where as in public company is 5 and the number also depend upon the number of members in the company.
10. Raising capital – A private company cannot raise capital through general public but the public company can do so.

COMPARISION CHART

Shubham Singh