CompanyCompany

PrivatePrivatecompanycompany

PublicPublicCompanyCompany

On the basis of the transferability of shares, On the basis of the transferability of shares, companies are of the following two types:-companies are of the following two types:-

A Private company is a company which:-A Private company is a company which:-• Restricts the right of members sharesRestricts the right of members shares• Restricts the number of its members Restricts the number of its members

upto 2 to 50upto 2 to 50• Puts a ban on inviting the public to Puts a ban on inviting the public to

subscribe its shares and debentures.subscribe its shares and debentures.• Puts ban on inviting the public to Puts ban on inviting the public to

subscribe its public deposits.subscribe its public deposits.• Must have a minimum paid up share Must have a minimum paid up share

capital one lakh rupeescapital one lakh rupees

A public company is one which:-A public company is one which:-• Has no restriction on the transfer of the Has no restriction on the transfer of the

shares.shares.• Has no maximum limit on the number of Has no maximum limit on the number of

its members;its members;• Has no restriction on inviting the public Has no restriction on inviting the public

to subscribe to its shares and debenturesto subscribe to its shares and debentures• Has no restriction on inviting the public Has no restriction on inviting the public

to subscribe to its public depositsto subscribe to its public deposits• Has a minimum paid-up share capital of Has a minimum paid-up share capital of

five lakh rupeesfive lakh rupees

It is important for this company to It is important for this company to add the words ‘Private limited’ add the words ‘Private limited’ after its name. A Private company, after its name. A Private company, under the Act, enjoys some under the Act, enjoys some privileges, and concessions. The privileges, and concessions. The names of some main private names of some main private companies of India are as followscompanies of India are as follows

• TATA SONSTATA SONS• HYUNDAI MOTOR INDIAHYUNDAI MOTOR INDIA• HERO CYCLESHERO CYCLES• LG ELECTRONIC INDIALG ELECTRONIC INDIA• GITANJALI GEMSGITANJALI GEMS

For the establishment of a public For the establishment of a public company there should be a minimum company there should be a minimum number of 7 members. It has to add number of 7 members. It has to add the word ‘Limited’ after its name and the word ‘Limited’ after its name and not the ‘Private Limited’. The names of not the ‘Private Limited’. The names of some main public companies of India some main public companies of India are as follows:-are as follows:-

• TATA IRON & STEELTATA IRON & STEEL• RELIANCE INDUSTRIESRELIANCE INDUSTRIES• TATA TEATATA TEA• RAYMOND WOLLENRAYMOND WOLLEN• ESCORTSESCORTS

Basis of Basis of differencedifference

Private Private CompanyCompany

Public CompanyPublic Company

No. of No. of membersmembers

Minimum-2Minimum-2Maximum-Maximum-

5050

Minimum-7Minimum-7Maximum-no Maximum-no

limitlimitNo. of No. of

directorsdirectorsTwoTwo ThreeThree

Minimum paid-Minimum paid-up share up share capitalcapital

Rs. 1 lakhRs. 1 lakh Rs. 5 lakhRs. 5 lakh

Invitation to Invitation to PublicPublic

Can’t inviteCan’t invite Can inviteCan invite

Index of Index of membersmembers

Not Not compulsorycompulsory

CompulsoryCompulsory

Transfer of Transfer of SharesShares

Restriction Restriction on the on the

transfertransfer

No restrictionNo restriction

1. The maximum number of the members in a private company is

a) 7 b) 10a) 7 b) 10c) 20 d) 50 c) 20 d) 50 2. The minimum amount of paid-up capital for

a public company is determined;a) Rs. 5 lakh b) Rs. 1 lakha) Rs. 5 lakh b) Rs. 1 lakhc) Rs. 10 lakh d) None of the c) Rs. 10 lakh d) None of the

aboveabove3. In which type of company there is no

restriction on transfer of sharesa) Public Company b) Private Companya) Public Company b) Private Companyc) Both of the above d) None of the c) Both of the above d) None of the

aboveabove

QueriesQueries

4.4. Which document is to be issued Which document is to be issued by a public company for giving by a public company for giving invitation to the public?invitation to the public?

5.5. Classify the following as Classify the following as Public/Private Company-Public/Private Company-

RAYMOND WOLLENRAYMOND WOLLEN HYUNDAI MOTOR INDIAHYUNDAI MOTOR INDIA RELIANCE INDUSTRIESRELIANCE INDUSTRIES GODREJ APPLIANCESGODREJ APPLIANCES GITANJALI GEMSGITANJALI GEMS