Private Limited Companies

Section 3(1) (iii) of the Companies act defines a Private limited Company. Private Company means a company which has a minimum paid up capital of one lac rupees or such higher paid up capital as may be prescribed and by its articles —

1) restricts the right to transfer its shares, if any;
2) limits the number of its members to 50; not including;
a) persons who are in the employment of the company, and
b) 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; and

3) prohibits any invitation to the public to subscribe or any shares in, or debentures of the company
4) Prohibits any invitation or acceptance of deposits from person other than its members, directors or their relatives.

Every private company existing on the commencement of the Companies (Amendment) act, 2000, i.e. on 13.12.2000 with a paid up capital of less than one lac rupees shall within a period of two years from 13.12.2000 enhance its paid capital to one lac rupees.

Where a private company fails to enhance its paid up capital to one lac rupees within the period of two years, such company shall be deemed to be a defunct company and its name shall be struck off from the register by the Registrar.

A company registered under section 25 shall not be required to have minimum paid up capital as specified above.

The above restrictions are mandatory provisions of a private limited company.

Where two or more persons hold one or more shares in a company jointly, they shall be treated as a single member. Any two persons or more persons can join hands to register a private limited company. However, its maximum membership should not exceed 50. Words Private Limited should be used at the end of the company’s name. A private limited company must have its own Articles of Association. A Private company is classified into:

1) Companies limited by shares and
2) Companies limited by guarantee (if it has share capital)
3) Unlimited Companies (if it has a share capital)
4) Producer Companies.

Producer Companies:

Secs 581 A to 581 ZT inserted by Companies (Amendment) Act, 2002 introduced the registration of producer companies limited by shares as if it is a private company.

Public Limited Companies

Section 3(1) (iv) states that all companies other than private companies are called public companies. A company which is not a private company is a public company. Any seven or more persons can join and to form a public company. Its maximum membership is unlimited. The above restrictions applicable to private limited companies do not apply to public companies. By companies (Amendment) act, 2000, a public company shall mean a company, which —

1) is not a private company;
2) has minimum capital of five lac rupees or such higher paid capital as may be prescribed
3) Is a private company which is a subsidiary of a company which is not a private company.

Every public company existing on 13.12.2000 with a paid up capital of less than five lac rupees shall within a period of two years from 13.12.2000 enhance its paid up capital to five lacs rupees.

Where a public company fails to enhance its paid up capital to five lac rupees within the period of two years, such company shall be deemed to be a defunct company and its name shall be struck off from the register by the Registrar.

A company registered under the section 25 shall not be required to have minimum paid up capital as specified above.

A public company is further classified into:

1) Companies limited by shares ;
2) Companies limited by guarantee
3) Unlimited companies.

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