The director of a private company may not be specifically qualified. A private company may have only one director who can also be the only shareholder.
● A public company must have at least 2 directors and 2 shareholders.
● A private limited company can use its resources to purchase the shares of the company when someone wishes to leave the company.
● A private company cannot offer any securities of the company to the public.
● Public companies are able to sell their shares to the public.
To differentiate public companies and private companies, the following factors are taken into consideration −
Minimum Number of Members
A minimum number of 7 members and a minimum number of 2 members are required for a public company and a private company respectively.
Maximum Number of Members
A private company can have 50 members at maximum whereas there is no limit for public companies.
Commencement of Business
A public company needs a Certificate of Commencement for commencement of business whereas, a private company can commence business after the certificate of registration is issued.
Invitation to the Public
A public company can invite the public to buy shares whereas a private company cannot sell its shares to the public.
Transferability of Shares
There is no restriction on a shareholder of a public company to transfer shares. Shareholders of private companies are restricted from transferring shares.
Number of Directors
A private company can have at least 1 director but a public company must have at least 2 directors.
A public company must hold a statutory meeting and file a statutory report with the registrar. There is no such obligation for a private company.
Restrictions on the Appointment of Directors
A director of a public company should file his consent with the registrar. He cannot vote or participate in any discussion on a contract on which he is interested.
For a public company, the remuneration payable to a manager cannot exceed 11% of net profits. A minimum of INR 50,000 can be paid at the time of inadequacy of profit. Private companies do not face these restrictions.
Further Issue of Capital
A public company must offer further issue of shares to its existing members. A private company on the other hand is free to allot new issue to outsiders.
Private companies are required to have the suffix ‘Private Limited’ at the end of their names. A public company is required to have the suffix ‘Limited’ at the end of its name.