Features of public and private limited company

by • 06/01/2013 • GeneralComments (0)535

Q.3 Describes the main features of public and private limited company.

 

Ans: MAIN FEATURES OF PRIVATE LIMITED COMPANY

The main features of a private limited company are as follows:

1. It is formed under the Company’s ordinance 1984.

2. Its minimum members are two and maximum fifty.

3. The liability of its entire member is limited.

4. It cannot sell its shared in the open market to the general public.

5. Its shares are not transferable.

6. It has no need to issue prospectus.

7. It has no need to print annual report of its accounts.

8. The word limited is used at the end of the name of company.

9. Its members are either close relatives or known to each other.

10. It has no need to get certificate of commencement of business after its registration.

 

FEATURES OF PUBLIC LIMITED COMPANY

The main features of a public limited company are as under:

 

1. It is formed and registered under the Company’s ordinance 1984.

2. The liability of all its members is limited.

3. The minimum number of its members is seven and there is no maximum limit.

4. Its shares are sold in the open market to the general public.

5. Its shares are freely transferable.

6. The word limited is used with its name.

7. It has to get a certificate of commencement of business.

8. It has to print its annual report of account.

9. It has to issue prospectus for the sale of its shares.

10. When words only company is used, it indicates the public limited company.

 

7. Directors:

There must be at least seven directors to manage business affaires.

8. Statutory meeting

It is compulsory for public company to hold statutory meeting.

9. Written consent of directors:

In public company, directors have to give written consent that they are ready to act as the directors of the company.

10. Title:

Every public company has to use the word “Limited” after its name. –

Li. Promoters:

In public company, ‘there must be at least seven promoters.

12. Tax: — –

Public company has to pay double tax to the Govt. Firstly it pays tax on whole profit Secondly every shareholder will pay tax on his

individual income. – —-

PUBLIC COMPANY

PRIVATE COMPANY

1. Number of Members:There must be seven members for formation of a public company. There is no Maximum limit over the number of members. There must be at least two members to from a private company. The maximum limit is 50. 
2. Sale of Shares:Public limited company can sell its shares to public. Private Limited Company cannot sell its shares to public. 
3. Transfer of Shares:The shares of public limited company can be transferred easily. The shares of private limited company are not transferable. 
4. Allotment of Shares:In a public company, there is a restriction of minimum subscription for allotment of shares. In case of private company, there is not restriction for allotment of shares. 
5. Prospectus:It is compulsory for public company to issue prospectus after obtaining certificate of incorporation. There is no restriction on private company for issuing prospectus. 
6. Publication:Public company must publish its annual performance reports. There is no restriction for publication of annual report. 
7. Directors:There must be at least seven directors to manage business affaires. There must be at least two directors in private company.
8. Statutory meetingIt is compulsory for public company to hold statutory meeting. There is no compulsion for private company to call statutory meeting. 
9. Written consent of directors:In public company, directors have to give written consent that they are ready to act as the directors of the company. The directors of private company are not required to give their consent for directorship 
10. Title:Every public company has to use the word “Limited” after its name. Private company has to mention word “private” with its name.
11. Promoters:In public company, there must be at least seven promoters. There must be at least two promoters in case of private company. 
12. Tax: Public company has to pay double tax to the Govt. Firstly it pays tax on whole profit Secondly every shareholder will pay tax on his individual income. Private company only pays tax on its whole profit. 
13. Commencement of Business:Public company has to get certificate of commencement to start its business. Private company can start its business after obtaining certificate of incorporation.
14. Dissolution:Public company is dissolved according companies ordinance 1984. A separate legal procedure is adopted for the dissolution of private company.
15. Management:In public company shareholders elect the management by voting. In private company, management is run by the owners.
16. Size:Public company is suitable for both medium and large-scale business. Private company is only suitable for medium scale business.
17. Loan:Public company cannot obtain loan after its incorporation. Private company can obtain loan after incorporation. 
18. Legal Restrictions:Public company has to follow strict legal restrictions. Private company has to face less legal restriction as compared to public company. 
19. List of Stock Exchange:Public limited company can be listed in stock exchange. Private limited company cannot be listed instock exchange.
20. Quorum:In directors meeting, this minimum number of director is four or one-third. In directors meeting, this minimum number of director is two.

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