Difference between Private Company and Public Company.

Q. Distinguish between a private and a public company.

Ans. Though both private and public companies are incorporated according to the provisions of the Indian Companies Act, there are basic differences between the two which are listed in the following table:

Sr. No.	Basis	Private Company	Public Company
1.	Number of Members	The minimum number of members is 2, and the maximum excluding the present and past employees is 200.	The minimum number of members is 7 and the maximum can be as many as the number of shares of the company.
2.	Invitation to the Public	A private company cannot invite the public to invest in its shares. It needs to arrange the required capital from its own sources.	A public company arranges the total capital requirement from the public. To do that, it invites the public to invest in its shares and debentures.
3.	Allotment of Shares	A private company can allot shares immediately on the receipt of the incorporation certificate.	A public company cannot allot its shares to the public.
4.	Commencement of Business	A private company can commence its business immediately on the receipt of the certificate of incorporation.	A public company cannot commence its business so long as it gets an official letter of commencement to do so.
5.	Issue of Prospectus	A private company cannot issue a prospectus or a statement in lieu of a prospectus.	It is mandatory for a public company to issue a prospectus. In the absence of a prospectus, it is necessary to issue a statement in lieu of a prospectus.
6.	Transfer of Shares	The transfer of shares (if any)is restricted to specified limitation.	The transfer of share is not restricted and is at the will of shareholders.
7.	Preparation of Articles	Preparation of Articles is mandatory for a private company.	Preparation of Articles is not compulsory in a public company. In case the Articles are not registered, the provisions of Schedule 1A Table shall be applicable.
8.	Issue of Bearer Share Warrant	A private company cannot issue bearer share warrants.	A public company may issue bearer share warrants if the shares of the company are fully paid-up.
9.	Number of Directors	There must be at least two directors.	There must be at least three directors.
10.	Qualification Shares	It is not mandatory for the directors to have qualification shares in a private company.	It is mandatory for the directors of a public company to have qualification shares.
11.	Increase in Number of Directors	A private company can increase its number of director without the permission of Government.	A public company cannot increase the number of its directors without the permission of the Central Government.
12.	Loan to Directors	It is not necessary for a private company to get prior permission of the Central Government to give loan to its directors.	Prior permission of the Central Government is necessarily required for a public company to give loan to its directors.
13.	Retirement of Directors by Rotation	It is not required by law for the directors of a private company to retire by rotation.	One-third of the directors of a public company are required to retire by rotation.
14.	Filing of Documents	A private company need not submit the following documents to the Registrar of Companies: (a) list of directors (b) consent of directors (c) copy of any contract with the directors.	For the incorporation of a public company, it is compulsory to file these documents with the Registrar of Companies.
15.	Share-Capital	The minimum paid-up Share-Capital should be ₹1,00,000.	The minimum paid-up Share-Capital should be ₹5,00,000.

Q. Difference between Private Company and Public Company.