PRIVATE AND PUBLIC COMPANIES

Introduction:
One of the most important types of business entities in the commercial world today are
companies. In India, a company can be defined as any entity registered as a company under
the Companies Act 2013, or any such act before it or under any such act outside India.
The Companies Act further divides the term Company into two types- Public Company and
Private Company.

Difference between a Public and Private Company:

Private Company

Public Company

Minimum paid up capital of Rs. 1 Lakh.

Minimum paid up capital of Rs. 5 Lakh

(Section 2)

(Section 2)

Needs 2 to 200 members (Section 3)

Needs 7 or more members (Section 3)

Cannot invite or accept deposits from persons No such prohibition

other than its members, directors or their
relatives
(Section 23)
Requires minimum 2 directors (Section 149)

Requires minimum 3 directors (Section 149)

Must contain the words private limited at

Must contain public limited at the end of

the end of the name. (Section 4)

Entrenchment in the articles to be agreed and

the name (Section 4)

Entrenchment in the Articles to approved

approved by all members (Section 5)

The Quorum of meetings is 2 members

through a special resolution (section 5)

Quorum of meetings depends on the number

(Section 103)
An internal audit mandatory if the turnover is

of shareholders (Section 103)

Internal audit mandatory if paid up capital is

greater than 200 crore in the previous

greater than Rs. 50 Crore, Turnover is greater

financial year or loan from bank is greater

ro equal to than Rs. 200 crore or the public

than 100 crore (Section 138)

deposit is equal to or greater than Rs. 25

No Restriction on amount of managerial

Crores
Managerial remuneration restricted to 11% of

remuneration (Section 197)

net profit or at least Rs. 30 Lakh per annum,

depending upon the paid up capital.

Provisions applicable to public limited companies only:

Section 29: Public offer of Securities have to be in dematerialised form

Section 40: Securities offered in public offer must be listed in stock exchange
Section 152: Minimum of 2/3rds of total number of directors must be liable to retire

by rotation
Section 190: Contract of employment with managing or whole-time directors (this
section does not apply to private limited companies)

*All sections mentioned above refer to the Companies Act 2013.