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Being able to access public markets to raise new money, as well as the benefit of
liquidity (being able to easily sell shares), is the biggest benefit for public companies.
When a business undergoes an Initial Public Offering (IPO) with the aid of investment
banking professionals, it becomes much easier to raise additional funds. The funds can
be used for growth, mergers and acquisitions, or other corporate purposes.
Once the company is listed, investors can easily move in and out of the stock by
buying and selling shares that trade on the stock exchange.
Reporting Requirements
Public disclosure requirements are another main difference between the two types of
businesses and a major drawback of being public.
As a publicly listed company in the U.S. (i.e., stock trades on a U.S.-based exchange),
you are required to file quarterly financial reports (10-Q) and annual reports (10-k)
and several other disclosure documents.
Publicly traded businesses are much easier for market analysts and investors to value
than their private counterparts. The main reason is due to the value amount of
information that’s readily available, thanks to the reporting requirements (discussed
above), as well as equity research reports and coverage by equity research analysts.
Both types of companies can be valued using the same three methods: comparable
company analysis, precedent transactions, and discounted cash flow (DCF) analysis.
Financial modeling via DCF analysis is the preferred method of valuing both types of
businesses. However, for a private company, it will be almost impossible without
access to internal company information.
A company is defined as an association of people which is formed to achieve a common goal and it
should be incorporated under the law. In India, companies are governed by the Indian Companies Act,
2013. The Companies Act is passed by the central government of the country to regulate the activities of
companies to provide protection to investors.
Indian Companies Act, 2013 defined company as “A Company formed and registered under this
Companies Act or under any previous company law”. Every company which is registered under Indian
Companies Act, exhibits certain special characteristics, such as it is regarded as an artificial person having
a separate legal entity and it should be incorporated with the Registrar of Companies and it contains a
Common Seal(Stamp) under its name, etc.
The companies are of various types and Based on Membership, it is divided into One Person
Company(OPC), Private Company (Pvt Ltd) and Public company (Ltd). There are several differences
between Private Company and Public Company which many of us don’t know, This article concentrates
on differentiating the Private and Public limited companies.
PRIVATE COMPANY
According to the Companies Act, 2013 “A Private company is a company which has a minimum paid-up
capital of 1 lakh rupees and which is restricted to have the right to transfer of share”. The Private Limited
company has “Pvt.Ltd” at the end of its name.
PUBLIC COMPANY
According to the Companies Act, 2013 “A Public company is a company which is not a private company
and has a minimum paid up capital of 5 lakh rupees and have the right to transfer of shares of
a company”. The Public Limited company has “Ltd” at the end of its name.
COMPARISON TABLE
PUBLIC COMPANY PRIVATE COMPANY
A Private company has "Pvt.Ltd" at the end of its name. A Public company has "Ltd" at the end of its name.
The minimum number of members needed to form a private The minimum number of members needed to form a Public Company
company is at least 2 members. is at least 7 members.
The Maximum number of members in a Private Company is The Public Company have no restriction on a maximum number of
restricted to 200. members.
Private Company should have a minimum paid up capital of Public Company should have a minimum paid up capital of 5 lakh
1 lakh rupees. rupees.
Commencement of Business
Number of Directors
A Private Company must have at least 2 directors to head A Public Company must have at least 3 directors to manage and lead
and supervise the affairs of the company. the affairs of the company.
Issue of Prospectus
Minimum Subscription
A Private Company can allot shares without waiting for the A Public Company cannot be able to allot shares before the minimum
completion of minimum subscription limit. subscription of shares is completed.
Transferability of shares
Quorum
A Private Company is obligated to have at least 2 members A Public Company is obligated to have at least 5 members personally
personally present for holding the company meeting. present to constitute the meeting.
Statutory meeting
Managerial remuneration