Private Company | Privileges of Private Company | Benefits of Private Company | B.Com, CA, CMA, CS, LLB

PRIVATE COMPANY [SEC.2(68)]

Private company means a company having a minimum paid up share capital as may be prescribed, and which by its articles - 

(i) restricts the right to transfer its shares;

(ii) except in the case of one person company, limits the number of its members to 200.

(iii) prohibits any invitation to the public to subscribe for any securities of the company.

EXPLANATION OF SEC.2(68)

In case of Section 8 company, the requirement of having minimum paid up  share capital  under section 2(68) shall not apply

Provided that where two or more persons hold one or more shares in a company. Jointly,  they  shall for the purposes of this clause be treated as a single member.

Provided further that -

Persons who are in the employment of the company; and

Persons who, having been formerly in the employment of the company, were members of the company. while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members.

[In simple words, Present and Past employees are excluded from the limit of the number of its members.]

PRIVILEGES | BENEFITS OF PRIVATE COMPANY

1. Two or more persons may form a company. [Sec. 3(1)(b)]
2. Kinds of share capital [Sec.43] and voting rights [Sec.47] can be provided by making a clause in memorandum and articles of association.
3. Passing of ordinary resolution is sufficient for offering of further shares to employees. [Sec.62(1)(b)]
4. Financial assistance can be given to its employees for purchase of or subscribing to its shares or shares in its holding company. [Sec.67(2)]
5. Restrictions (conditions)  for acceptance of deposits from members is not applicable. [Sec.73(2)]
6. Resolutions to be passed only at the meeting of the board of directors are not required to file with the registrar. [Sec.117(3)(9)]
7. Need not prepare a report on the Annual General Meeting. [Sec.121(1)]
8. Need not prepare a statement by the board of its own performance and that of its committees and individual directors. [Sec.134(3)(p)]
9. Private companies [OPC/Small/Dormant] having paid up share capital of less than 100 crore ₹ are excluded from the limits of audits by an auditor which is required to number 20. [Sec.141(3)]
10. Need not have more than two directors. [Sec.149(1)(a)]
11. Not required to have independent directors. [Sec. 149(4)]
12. Not required the retirement of directors by rotation. [Sec. 152(6)]
13. Requirement of deposit of ₹ 1,00,000 is not required to stand for directorship other than retiring directors. [Sec.160]
14. More than one director can be appointed through a single resolution. [Sec. 162]
15. The directorship of a private company /  small company /  one person company  which is either a holding or a subsidiary company of a public company will not be included in  determining the maximum number of directorships that a person may hold in public companies which is restricted to 10. [Sec. 165(1)]
16. Additional grounds for disqualification, for appointment [Sec.164(3)],  for vacation [Sec. 167(4)]  of office of a director may be provided in the articles.
17. Exempt from the provisions of having an audit committee constituted by the board of directors. [Sec. 177(1)]
18. Exempt from the constitution of a nomination and remuneration committee [Sec.178(1)]  as well as stakeholders relationship committee. [Sec. 178(5)]
19. The company sells, leases or otherwise disposes of or owns more than one undertaking then special resolution is not required to exercise such power of the board. [Sec. 180]
20. Interested director can participate in the meeting after disclosing his interest. [Sec.184(2)]
21. If certain conditions are fulfilled under section 185 then give a loan to its director or whom the director is interested. [Sec.185]
22. Company shall enter into any contract or arrangement with a related party and can vote on such resolution as a member of the company. [Sec. 188(1)]
23. Provisions relating to contracts of employment with managing or whole time directors do not apply to private limited companies. [Sec. 190(4)]
24. Approval of Central Government on variation of terms of appointment of managing director, whole time director or manager from Schedule V is not required. [Sec. 196(4) & (5)]
25. Total managerial remuneration may exceed 11% of the net profits. [Sec. 197(1)]
26. The central government may grant further privileges /  exemptions to private companies by issuing a notification. [Sec. 462(1)]

Public Limited Company