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Public company v/s Private company under The Companies Act, 2013

Section 2(71): Public Company means a company which— 
(a) is not a private company; 
(b) has a minimum paid-up share capital 1 *** as may be prescribed.

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles.

Advantages of Public limited companies

Following are the advantages of forming a public limited company:

  • More capital

Shares are offered to the general public at large i.e. anyone can invest in a public limited company. Hence, improves capital of the company.

  • More attention

Being listed on a stock market ensures that mutual funds, hedge funds and other traders take note of business of the company. This may result in better business opportunities for the Public Limited Company.

  • Spreading risk

Since the shares are sold to the public at large the unsystematic risk of the market is spread out.

  • Growth and expansion opportunities

Due to less risk, there is a perfect opportunity for growing and expanding the business by investing in new projects from the money raised through shares.

Section 2(68) ―Private Company means a company having a minimum paid-up share capital  as may be prescribed, and which by its articles,— 
(i) restricts the right to transfer its shares; 
(ii) 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— 
(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, shall not be included in the number of members; and 

(iii) prohibits any invitation to the public to subscribe for any securities of the company.

Disclaimer: 

The contents of this article are solely for informational purpose. It does not constitute any professional advice. The author does not represent that the contents of the article are accurate or complete. Neither the Site/Blog 'Your Instasolv' and the author accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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