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Public Ltd Company And Private Ltd Company

Q. Define a public Ltd company and a private ltd company and draw a distinction
between the two. (1998) (2007/A)

Q. Define a private company. how does a private company differs from a public
company. (2001)

1. Introduction:

A company is an association of a number of individuals formed for some common purpose. most
of the present day companies are incorporated under companies ordinance 1985. a company is
capable of holding property, incurring debts, and suiting and being sued in the same manner as
an individual.

2. Definition:

According to companies ordinance 1948. See 2 (1) 9:

Company means a company formed and registered under the ordinance.

According to Lord Justice Lindley:

"A company is a artificial person created by law with a perpetual succession a common seal. it
has legal entity, separate from persons composing it. it can sue and be sued in its own name."

S. E Thomas:

According to S. E Thomas

"A company is an an incorporated association of persons formed usually for the pursuit of some
commercial purrpose."

3. Kinds of company:

According to companies ordinance following are different kinds.

a) Company Limited by shares.

b) Company Limited by Guarantee

c) Un-limited company

d) Holding company

e) Subsidiary company

f) Private company
g) Insurance company

h) Company not for profit

i) Single member private company (SMC)

Through amendment in companies ordinance (2002)

4. Private company :

Private company means a company which its articles.

(i) Restrict the rights to transfer its shares, if any.

(ii) Limits the number of its member two fifty not including person who are not employ of the
company and as a single member.

5. Public company:

According to sec 2 (30) of the companies ordinance public company means a company which is
not a private company. it is required to have at least seven members and seven directors
appointed accordingly.

Distinguish between private company and public company:

I. As to member:

In private Ltd company minimum 2 partners maximum 50.

In public Ltd Company minimum 7 members but maximum no limited but according to their
shares.

II. As to sale shares:

Private company can not sell it share.

public company can sell its share to public.

III. As to transfer of shares:

Shares of private Ltd company are not transferable.

Shares of public Ltd company are easily transferable.

IV. As to books of Accounts:

Books of accounts are maintained in private company.

Books of accounts must be maintained in public company.


V. As to statutory meeting:

In private Ltd company there is no need to hold statutory meeting. It is compulsory to hold
statutory meetings in public Ltd company.

VI. As to payment of tax:

In private Ltd company tax is paid by the company on whole profit.

In public company double tax is paid first by the company and second by the individual on its
income.

VII: As to dissolution:

There is separate procedure for dissolution of private Ltd company.

Public Ltd company can easily dissolved under the companies ordinance 1948.

VIII. As to title:

Private company uses the word private limited with its name.

Public company uses the word public limited with its name.

6. Conversion of a public limited company into a private limited company:

A public company may be converted into a private company by suitable in the articles of
association.

7. Main features of company:

(i) A company has legal separate legal entity.

(ii) Property of a company belongs to its company and not to its individual.

(iii) A member of a company is never deemed to be an agent of company.

(iv) Company's shares are transferable.

(v) The liability of shareholders of company is limited.

(vi) profit is distributed according to the article of association.

(vii) It possesses a long life.

(viii) Authorized capital is mentioned in the memorandum of association.

8. Conclusion:
To conclude I can say that a company is voluntary association for profit with capital divisible into
transferable share limited liability having a corporate body and common seal. if such association
is incorporated according to law, it become a legal person, an entity distinct and separate from
its members.

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