Private company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles -
restricts the right to transfer its shares ;
Except in case of One Person Company, limits the number of its members to two hundred :
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 ;
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 ;
prohibits any invitation to the public to subscribe for any securities of the company ;
CHARACTERISTICS OF PRIVATE LIMITED COMPANY
Members – To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
Limited Liability – The liability of each member or shareholders is limited unless specifically incorporated as unlimited company. It means that if a company goes into winding up under any circumstances then its shareholders
are not liable to sell their own assets for payment. The personal, individual assets of the shareholders are liable to pay off the debts of the company .
Perpetual succession – The Company keeps on going concern in the eyes of law irrespective of the death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of
the company keeps on existing forever.
Index of members – A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
Number of directors – When it comes to directors a private company needs to have Minimum two directors. With the existence of 2 directors, a private company can come into operations.
Paid-up capital – Private company may be incorporated with Rs. 2 only.
Name – The name of the private company must end with the word “Private Limited or Pvt. Ltd.
SECTIONS/REGULATIONS/RULES APPLICABLE TO PRIVATE LIMITED COMPANY
Section 2(68) of the Companies Act, 2013 ;
Companies Incorporation Rules, 2014 ;
ADVANTAGES OF A PRIVATE COMPANY
Ownership : In a public company, regulation and ownership of shares can be sold to the public on an open market. On the other hand, in a private company, shares can be sold or transferred to other people by the choice of
the owner. Shares of such companies are owned by founders, management or a group of private investors. Shares here are not sold in the open market. Thus, there will be a smaller number of shareholders. This means less complexity
and confusion in decision making and management.
Minimum number of Shareholders : There shall be minimum two subscriber, to subscribe the memorandum of the Private Company.
Legal formalities : For the private companies, the Government has provided various relaxations in terms of legal compliances.
Management and decision making : Since private companies are generally closely held companies, complex procedure relating to management and decision making is generally minimal or eliminated .
Focus of Management : private company are more flexible in the short term and long-term business decisions.