The basic difference between a Public Company and a Private Company is the capacity to raise funds from the public. The Public company can raise funds from the public by issuing share capital in the share market but the private company can only raise funds by issuing capital to the new partners personally not by the issue it in the share market So, a private company cannot raise funds from the public. To know the difference between these two, we must clear the meaning of these terms and explained as follows:
Meaning of Public Company:
It is the one which:
- is not a private company
- has a minimum paid-up share capital as prescribed
- is a private company, having a public company as a holding company.
- It must have at least 7 members to incorporate a company.
- There is no restriction on the transfer of shares
- A prospectus is issued to invite the public to share capital subscription.
- It must have at least 3 directors but not more than 15.
- The shares can only be allotted if the minimum subscription has been received.
- It can invite and accept deposits from the public.
- The word ‘Limited’ is used as a part of its name.
Some of the examples:
- Indian Oil Corporation Limited
- Bharat Petroleum Corporation Limited
- Oil and Natural Gas Corporation Limited
- State Bank Of India
Meaning of Private Company:
It is the one that has the minimum paid-up share capital as prescribed in the Articles of Association.
Characteristics:
- Article of Association doesn’t allow the transfer of shares.
- It requires at least two members to incorporate a company.
- It limits the number of its members to 200, excluding its present or past employees.
- The shares held by two or more persons would be treated as single-member.
- As per Section 2(68) of the Companies Act, It cannot invite the public to subscribe to the share capital in the company.
- There should be at least 2 directors but not more than 15 directors.
- Shares may be allotted as per the decisions of Directors.
- It cannot invite and accept public deposits.
- The name of the company must end with ‘Private Limited’.
Some of the examples
- American Express (India) Private Limited
- Lifestyle International Private Limited
- Microsoft Corporation Private Limited
- PayPal Payments Private Limited
Chart of Difference Between Public Company and Private Company: –
Basis of Difference |
Public Company |
Private Company |
| Meaning | A Public company is the one that is registered in the share market of the country to issue shares for the public to subscribe to them. | A private company is the one that has the minimum paid-up share capital as prescribed in the Articles of Association. |
| Number of Owner/ Members | It has a minimum of 7 and no maximum limit on the number of owners/ members. | It has a minimum of 2 and a maximum of 200 owners/ members. |
| Share Capital | Rights of share capital and profits are distributed among all owners/members are per article of association and the number of shares owned by one person. | Rights of share capital and profits are distributed among all owners/members are as per the article of association. |
| Transfer of Share | Owners/Members are free to transfer their share to the other person in the market. | As per the terms and conditions decided in the article of association. many types of restrictions are imposed by the AOA. |
| Share Prospectus | The prospectus must be issued to invite the public to subscribe to shares of the company. | The prospectus does not need to be issued. |
| Number of Directors | It must have at least 3 Directors and it can have a maximum of 15 Numbers of Directors. | It must have at least 2 Directors and it can have a maximum of 15 Numbers of Directors. |
| Name of Company | The word ‘Limited’ is used as part of the name of the company. | The word ‘Private Limited’ is used as part of the name of the company. |
| Funds Raising |
For public companies, it is very easy to raise funds by issuing shares to the public in the share market. | Possible to raise funds by issuing shares of the company with the mutual consent of all members of the company. |
| Who can Subscribe the Share Capital | The public can easily subscribe to the share of the company. | The public can’t subscribe to the share of the company. |
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Conclusion:
Thus, both types of businesses are very different from each other one type i.e. Public Company has a lot of or uncountable numbers of the owner and another type i.e. The private company has a limited number of owners maximum 200.
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