WHAT IS A PRIVATE LIMITED COMPANY

“Private company” refers to a business that has a minimum amount of paid-up share capital as specified by its articles of incorporation.
  • 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 —
  • Schedule 1 of Companies Act 2013.
  • 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

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

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:

Shares of a publicly traded corporation may be sold to the general public on the open market. Conversely, with a private firm, the owner has the option to sell or transfer shares to third parties. The founders, management, or a group of private investors own shares in these businesses. Here, shares are not offered for sale on the open market. As a result, there will be fewer shareholders. As a result, management and decision-making will be simpler and less complicated.

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.