Brief: Major differences between a Private Company and a Public Company as per various provisions contained in the Companies Act, 2013, relevant rules.
Introduction: The Companies Act of 2013 has done away with the relaxation to private companies in several provisions. The concept of “not applicable to private company” is no more in existence in the Act of 2013. Such a move in the Companies Act of 2013 has taken away certain privileges enjoyed by private companies. The privileges are of two types. One is for the directors and to their interest and the second one is for the private company itself. The Directors were hitherto enjoying certain pleasure from the application of certain provisions are now withdrawn. Further, the Companies Act, 2013 have mandated certain new requirement like that of internal audit to both public and private companies.
Statement showing Some key points of differences in applicability of various provisions of the Companies Act, 2013 between a Public Limited Company and a Private Limited Company:
| Sr. No. | Section | Brief Description |
Private Limited Company |
Public Limited Company |
| 1 | 2 | Meaning | Minimum Capital : Rs. 100000Right to transfer the shares: Restricted | Minimum Capital : Rs. 500000Subsidiary of a Public Co. is deemed to be a public Co. |
| 2 | 2 | Small Company | If Paid-up Share Capital does not exceed Rs. 50 Lakhs and Turnover as per Last Audited accounts does not exceed Rs. 2 Crore | Not Applicable |
| 2 | 3 | Minimum Members Required | 2 (Two),Maximum 200 (Two Hundred) | 7 (Seven) |
| 3 | 4 | Name of the Company | “Private Limited” as Last Word | “Public Limited” as Last Word |
| 4 | 5 | Provision of entrenchment in the Articles | To be agreed and approved by all the members | To be agreed and approved through a Special Resolution |
| 5 | 23 | Issue of Securities | By way of Right Issue or Bonus IssueThrough Private Placement | To Public through Prospectus (“Public Offer”)By way of Right Issue or Bonus IssueThrough Private Placement |
| 6 | 29 | Public Offer to be in Dematerialised Form | Not Applicable | In case of public offer of securities, the securities have to be in Dematerialised Form |
| 7 | 40 | Securities in Public Offer to be listed in Stock exchanges | Not Applicable | Securities offered in Public Offer, to be listed in Recognised Stock Exchanges |
| 8 | 67 | Purchase / Loan for Purchase of Own Shares | Not allowed to Purchase its own Shares | Not allowed to Purchase its own Shares;No Financial assistance to be given to purchase its own shares |
| 9 | 73 | Acceptance of Deposits | Not allowed to accept deposit | Allowed if Paid up share capital is Rs. 100 Crore or more orTurnover of Rs. 500 Crore or more |
| 10 | 103 | Quorum of Meetings | Two members personally present | Five in case of Members upto 1000;Fifteen in case of Members more than 1000, upto 5000;Thirty in case of Members exceed 5000. |
| 11 | 138 | Internal Audit | Applicable in case of :1. Turnover >= Rs. 200 Crore in preceding financial year,OR2. Loans from bank or NBFCs >= Rs. 100 Crore in preceding financial year | Applicable in case of :1. Paid Up Capital >= Rs. 50 Crore in the preceding financial year, OR2. Turnover >= Rs. 200 Crore in preceding financial year,OR
3. Loans from bank or NBFCs >= Rs. 100 Crore in preceding financial year, OR 4. Public Deposit >= Rs. 25 Crore in preceding financial year |
| 12 | 134 (3)(p) | Annual Evaluation in the Board’s Report | Not Applicable | If Paid up share capital is Rs. 25 Crore or more, the details of annual evaluation in the Board’s Report |
| 13 | 139 (2) | Rotation of Auditor | Applicable in case of Paid up Capital is Rs. 20 Crore or more | Applicable in case of Paid up Capital is Rs. 10 Crore or more |
| 14 | 149 | No. of Directors and Independent Directors | 2 (Two);Not required to appoint independent director | 3 (Three); andIn case of Listed Companies, at least One-Third as independent directors |
| 15 | 152 | Retirement by rotation – Appointment of Director | Not Applicable | At least two-third of total no. of directors be liable to retire by rotation and eligible of being re-appointed in AGM |
| 16 | 190 | Contract of Employment with Managing Director / Whole Time Director | Not Required (Optional) | Compulsorily Required |
| 17 | 197 | Restriction on Managerial Remuneration | No restriction on amount of managerial remuneration | Managerial Remuneration is:Restricted to 11% of Net profit (subject to conditions); ORat least Rs. 30 lakh p.a. depending upon paid up capital |
Conclusion: From the above discussion, it is evident that many provisions as applicable to Public Limited Companies are now made applicable to Private Limited Companies as well under the Companies Act, 2013. For MSMEs, earlier the Private Companies were preferable mode of entity for running business operations. However, with the new Companies Act, 2013, some major advantages enjoyed by Private Companies have been withdrawn. With the introduction of Limited Liability Partnership, a new form of entity is introduced through which the benefits of legal entity can be reaped without being tied up with the much legal formalities as enumerated in the case of Private / Public Limited Companies.
(Author can be reached at Mob: +91-9687559363 or on email sachindjain@icai.org)
Author Bio
waaaaaaaaaaaaaaaaaawwwwwwwwwww………i cant appreciate it in words, because these things, we actually wants to learn the basics, but forget when study our CA books, now it helps us very very nice.
thanks a lot
Pl clear the doubt about acceptance of deposits in pvt as well as public co.s concerned
Private companies can also accept deposits from its members upto the extent stated in Section 73(2) of the Companies act, 2013 read with Rule 3(3) of Companies (Acceptance of Deposits) Rules, 2014 as amended.
are these differences are good enough to be taught to classIX icsc board students?
Comparison is good but provision relating to inter corporate loans and related party transaction would also have been given.
Very Nice Analysis Sachin D Jain Ji
your efforts for doing analysis between a private and public limited company is very much appreciable.
vinod kumar gupta
Thanks Mr. Vineet.
As far as your comment on eligibility for acceptance of deposit by private company is concerned I would disagree because as per section 73(2) of the Companies Act, 2013 any company can accept deposits from its members provided it complies with the procedure prescribed. So these is no bar on private limited company accepting deposits from its members as long as the procedure of sending the circular to the members and filing the same with ROC before actual issue of the circular is complied with.
would appreciate any contrary view on the same.
Good analysis mr. sachin