Distinction Between A Public Company And a Private Company Following are the main points of difference between a Public

c Company and a Private Company :-

1. Minimum Paid-up Capital : A company to be Incorporated as a Private Company must have a minimum paid-up capital of Rs. 1,00,000, whereas a Public Company must have a minimum paid-up capital of Rs. 5,00,000.

2. Minimum number of members : Minimum number of members required to form a private company is 2, whereas a Public Company requires atleast 7 members.

3. Maximum number of members : Maximum number of members in a Private Company is restricted to 50, there is no restriction of maximum number of members in a Public Company.

4. Transerferability of shares : There is complete restriction on the transferability of the shares of a Private Company through its Articles of Association , whereas there is no restriction on the transferability of the shares of a Public company

5 .Issue of Prospectus : A Private Company is prohibited from inviting the public for subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus.

6. Number of Directors : A Private Company may have 2 directors to manage the affairs of the company, whereas a Public Company must have atleast 3 directors.

7. Consent of the directors : There is no need to give the consent by the directors of a Private Company, whereas the Directors of a Public Company must have file with the Registrar a consent to act as Director of the company.

8. Qualification shares : The Directors of a Private Company need not sign an undertaking to acquire the qualification shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the public Company .

9. Commencement of Business : A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.

10. Shares Warrants : A Private Company cannot issue Share Warrants against its fully paid shares, Whereas a Private Company can issue Share Warrants against its fully paid up shares.

11. Further issue of shares : A Private Company need not offer the further issue of shares to its existing share holders, whereas a Public Company has to offer the further issue of shares to its existing share holders as right shares. Further issue of shares can only be offer to the general public with the approval of the existing share holders in the general meeting of the share holders only.

12. Statutory meeting : A Private Company has no obligation to call the Statutory Meeting of the member, whereas of Public Company must call its statutory Meeting and file Statutory Report with the Register of Companies.

13. Quorum : The quorum in the case of a Private Company is TWO members present personally, whereas in the case of a Public Company FIVE members must be present personally to constitute quorum. However, the Articles of Association may provide and number of members more than the required under the Act.

14. Managerial remuneration : Total managerial remuneration in the case of a Public Company cannot exceed 11% of the net profits, and in case of inadequate profits a maximum of Rs. 87,500 can be paid. Whereas these restrictions do not apply on a Private Company.

15. Special privileges : A Private Company enjoys some special privileges, which are not available to a Public Company.

PRIVATE COMPANY Vs PUBLIC COMPANY:

There has been a general confusion among corporate managers about whether to have the status of their company as private or public. Well, it basically depends on the requirement it needs to be. Notably, many companies prefer it to be private considering the kind of privileges they enjoy being private. Heres a brief list of concessions and privileges which favour formation of private limited companies: Privileges: - Limited liability, - Simple and easy formation, - Immediate commencement of business upon incorporation, - Liberal payment of remuneration and loans to directors without any restrictions, - Easier inter-corporate loans - Lesser disclosure requirements - Tremendous ease in operation - Two directors are enough - Two Shareholders are adequate - Need not declare dividend - Listing of shares not mandatory - Directors need not hold qualification shares These continue to be the dominating factors for carrying on trade and industry through the medium of private limited companies. Limitations: Nevertheless, there are limitations too. Under the Companies Act, a private limited company is: - prohibited to issue any invitation to the public to subscribe to any shares or in debentures of the company - to limit the number of its members to 50 - to restrict the right of its members to transfer shares. - restrained from inviting public deposits (however, a number of companies have managed to obtain public deposits from the relatives and friends of the directors/members) Thus, private limited companies are run mostly as family concerns without any direct involvement of the public in their activities. However, in spite of the restrictions in the matter of raising finance through issue of shares / debentures, many private limited companies have been managing large projects and have huge turnover. The Corporate personality of the private companies also enables them the freedom to enjoy the facility of institutional finance, and proven fact that they being managed like a family concern do not stand in the way of their benefiting from the public companies.

The difference between a private company and a public company is that the latter is traded on the stock market, or offers its securities for the public to buy. Private companies are neither government owned, nor traded publicly. Typically, private companies are owned by a small group of individuals

Privately Owned Companies

Privately owned companies do not sell their company securities to the public, and are owned within a set amount of individuals privately. The majority of these ownerships are held by families, including Mars, Inc., the candy company; and Meijer retail stores.

Publicly Owned Companies

Publicly owned companies are those that trade their securities publicly, so anyone can buy stock in the company, as a way to finance the business. Publicly owned companies can be found trading in The New York Stock Exchange, Standard & Poor or NASDAQ. Larger public corporations include the likes of Proctor & Gamble and Google.

Size
A private limited company must have at least two members and no more than 50, whereas a public limited company must have at least seven members. No maximum number of members exists for public limited companies. Private companies must have at least two directors, and a public limited company is required to have three.

Benefits
Private limited companies have fewer legal formalities to follow than a public limited company; for example, public limited companies must hold statutory meetings and file reports to the Registrar of Companies, whereas a private company does not. Public companies can freely transfer to subscribe to shares, whereas the transfer of shares is restricted by the articles of association of a private company.

Function
A private limited company can start up the business immediately, whereas a private company is required to obtain a certificate to commence business. The public company must also collect a minimum subscription and at least 5 percent of the nominal amount of shares applied for on the application.

Investment
Investors will give their money to public companies easily because the production details must be published to the public. Private companies do not have to publish their data, and have a harder time recruiting new money. The stock of private companies is held by a few individuals who are intimately involved in its operations. This is the opposite of the stock situation for a public company; anybody can purchase shares of a public stock.

Stock Market
Private companies do not have to worry about the stock market. Public companies are subject to the stock market's downswings.

Outsourcing
Private companies can outsource their operations anywhere without a public backlash. Public companies are always under the watchful eye of the newspapers.

Shareholders And The Board

Public companies answer to shareholders, who do not always know what is best for the business. Private companies only answer to their board of directors, which is usually a very informed group of leaders.

Raising Capital
Public companies may sell the company's stocks and bonds on the public market, which makes it easier to raise money for expansion and to meet existing obligations. A private company cannot look to public financial markets as a way to sell the company's stock. Instead, a private company must seek financing from private sources, which may increase the cost of financing the company's operations.

Disclosure
Public companies are required to register and file annual reports with the U.S. Securities and Exchange Commission. Furthermore, public companies are required to make information about the company's finances available to the public. A private company does not have to divulge information about the company to the public. However, a private company will have to provide information about the company's finances to potential investors.

Stock Incentives
Public companies have the ability to attract employees by offering shares of the company's stock as compensation. Private companies are not able to offer significant shares of the company's stock as compensation for employment, according to the Forbes website. For this reason, private companies may be forced to pay higher salaries as a means of attracting talented employees.

Buying and Selling

Shares of a public company are bought and sold freely. Furthermore, the ability to buy and sell the stock of a public company in a swift manner makes it easier for investors to adapt to sudden changes. It may be difficult and more time-consuming to buy and sell the stock of a privately held company. In many cases, the stock of a privately held company may not be bought or sold without consent from the company's existing shareholders.