Difference Between Private Limited and Public Limited Company

A private limited company is a closely held one and requires at least two or more persons, for its formation. On the other hand, a public limited company is owned and traded publicly. It requires seven persons for its setup.

What is a Company?

The company refers to that voluntary association of persons which is established with an aim of achieving common objectives. It is a separate legal entity, i.e. one should not confuse between the company and its members as both are different personalities in the eyes of law. Also, it is characterized by perpetual succession, common seal, capacity to sue and be sued, and capital that is divided into transferable shares.

Also Read: Difference Between Partnership Firm and Company

This post will enlighten you with all the differences between Private Limited Company and a Public Limited Company.

Content: Private Limited Company Vs Public Limited Company

1. Comparison Chart
2. Definition
3. Key Differences
4. Video
5. FAQs
6. Special Kinds of Private Company
7. Conclusion

Comparison Chart

Basis for Comparison	Private Limited Company	Public Limited Company
Meaning	Private Limited Company refers to the company which is not listed on a stock exchange and the shares are held privately by the members concerned.	Public Limited Company implies a company that is listed on a recognized stock exchange and whose shares are traded openly by the public.
Minimum number of members	2	7
Maximum number of members	200, except in case of one person company	Unlimited
Minimum number of directors	2	3
Articles of Association	It must frame its own articles of association.	It can frame its own articles of association or adopt Table F.
Transfer of Shares	The shares of a private company are not freely transferable, as there are restrictions in Articles of Association.	The shares of a public company are freely transferable, i.e. freely traded in an open market called a stock exchange.
Public Subscription	Issue of shares or debentures to the public is prohibited.	It can invite the public to subscribe to its shares or debentures.
Issue of prospectus	Prohibited from issuing a prospectus.	It can issue a prospectus or it can also opt for private placement.
Minimum amount of allotment	The company can allot shares, without obtaining minimum subscription.	The company cannot allot shares unless the minimum subscription stated in the prospectus is obtained.
Commencement of Business	It can start a business just after receiving a certificate of incorporation.	It requires a certificate of commencement of business after it is incorporated.
Appointment of Director	Two or more directors can be appointed by a single resolution.	One Director can be appointed by a single resolution.
Filing of Consent to act as Director	Directors need not require the filing of their consent to act as a director.	Directors must file their consent to act as a director, within 30 days of appointment with the Registrar.
Retirement of Directors by rotation	The directors are not required to retire by rotation. The directors can be permanent.	2/3rd of the total number of directors must retire by rotation.
Place of Holding AGM	AGM can be held anywhere.	AGM is held at the registered office or any other place where the registered office is situated.
Statutory Meeting	Optional	Compulsory
Quorum	2 members who are personally present at the meeting, constitute a quorum, irrespective of the number of members.	5 members are required to present in person when the number of members as on the date of the meeting is 1000 or less.
		15 members are required to present in person when the number of members as on the date of the meeting is more than 1000 but less than 5000.
		30 members are required to present in person when the number of members as on the date of the meeting is more than 5000.
Exemptions	Enjoys many privileges and exemptions.	No such privileges and exemptions.

Definition of Private Limited Company

A private limited company is a company that is created and incorporated under the Companies Act, 2013, or any other act being in force. It is a company that is not listed on a recognized stock exchange and whose shares are not traded publicly. It restricts the right to transfer shares the liability of the company is limited to the number of shares held by them

There is a limit on the maximum number of members, i.e. the number of members cannot be more than 200, excluding current employees and ex-employees who were members of the company when they were employed and continued to become members even after they left the company. Further, one should take note of the fact that joint holders of shares are treated as single members.

Further, in a private company, any sort of invitation to the public to subscribe for shares is prohibited.

Also Read: Difference Between Members and Shareholders

Registration Requirements

• At least two adults are required to act as the Director of the Company.
• It can have a maximum of 15 Directors
• At least one director has to be an Indian Citizen and Resident, while the others can be foreign nationals.
• Two persons must act as a shareholder.

Documents Required for Incorporation of Private Limited Company

1. Proposed Directors who are Indian Nationals need to submit a copy of PAN as their ID proof and passport or Driving License or Voter ID or Adhar Card as their proof of address. They are also required to submit their bank statement or electricity/phone bill as their proof of residence.
2. Proposed Directors who are Foreign Nationals need to submit a copy of their passport as their ID proof which can also act as a proof of address. They are also required to submit a copy of their bank statement or electricity/phone bill as their proof of residence.
3. If the registered office is set up in a rented property, a rental agreement and no objection certificate by the landlord are required.
4. If a registered office is set up in an owned property, ownership property documents are needed.
5. Utility bills of the business place

Definition of Public Limited Company

A Public Limited Company or PLC is a joint-stock company that is created and incorporated under The Indian Companies Act, 2013 or any other act being in force previously. It is listed on a recognized stock exchange to raise capital from the general public.

It is a company with limited liability and is permitted to issue registered securities i.e. shares or debentures to the public, by inviting them to subscribe for its shares through IPO and is traded openly on at least one stock exchange. The liability of the shareholders is limited to the extent of the amount contributed by them.

Also Read: Difference Between IPO and FPO

Incorporation Requirements

• Minimum number of 3 directors are required to form a public company.
• Minimum 7 shareholders are required to form a public company.
• Digital Signature Certificate (DSC) of any one director is required, in case self-attested copies of identity proof and address proof are submitted.
• Director Identification Number (DIN) is a must.
• An application containing the object clause of the company is to be made.

Also Read: Difference Between Executive and Non-Executive Director

Documents Required for Incorporation of Public Limited Company

1. Digital Signature Certificate (DSC) and Directors Identification Number (DIN) of all Directors
2. Copies of identity proofs such as Adhar Card, Voter ID, PAN Card or passport of all directors
3. Passport size photograph of all Directors.
4. If the registered office is set up in a rented property, a rental agreement and no objection certificate by the landlord are required.
5. If a registered office is set up in an owned property, ownership property documents are needed.
6. Utility bills of the business place

Points to be noted

• As per Section 185 of Companies (Amendment) Act, 2017, there is a complete ban on providing loans, guarantees, or advances to the Directors or its holding company, or any partner of the Director or any firm wherein the Director or relative is a partner.
• The maximum number of Directors that a company can appoint is 15. However, a company can appoint more than 15 Directors by passing a special resolution at the general meeting.

Video: Private Limited Company Vs Public Limited Company

Frequently Asked Questions (FAQs)

Is it compulsory for companies to follow the SPICe+ process for incorporation of the company?

W.e.f. 23rd Feb 2020, every company must make an application for name reservation and incorporation of the company by way of web service SPICe+. One can reserve the unique name of the company in Part A of the SPICe+ form. It has the facility to apply for name, incorporation, and various integrated services at the same time by filling in the required details in Part A and Part B.

After filling the form in full, it has to be converted into pdf form, for affixing digital signatures. Once it is done, the digital applications can be uploaded with the linked forms i.e. eMOA, eAOA, etc.

Also Read: Difference Between MOA and AOA

What is Part A of web form SPICe+?

It is a section of the SPICe+ form, which contains details relating to name reservations for a new company. It can be submitted individually or combinedly with Part B. Part B offers services like incorporation, allotment of Directors Identification Number (DIN), mandatory issue of PAN, TAN, EPFO registration, etc.

What is SPICe+ form?

It is a unified form and a part of government initiative towards Ease of Doing Business (EODB).

Special Kinds of Private Limited Company

There are two special kinds of Private Limited Company, these are:

One Person Company

A company with just one person as a member is a one-person company and so the name of that person is entered in the company’s memorandum who acts as a director as well. Such a company can be formed for any lawful purpose by one person. He has to be a natural person who is a resident of the country. Further, the company can be formed under a company limited by shares or a company limited by guarantee.

Also Read: Difference Between Authorized Capital and Issued Capital

Small Company

A company can be regarded as a small company when:

• Its paid-up capital does not exceed Rs. 50 lakh, and
• Its turnover as per the previous income statement should not be more than 20 crores.

Both the clauses must be satisfied i.e. if the company’s paid-up capital is 38 lakhs but the turnover is more than Rs. 2 crores, then the company won’t fall in the category of a small company for the year in which it crosses the limits specified and all the exemptions given to that company will not apply.

It is to be noted that the hitherto clause is not applicable to holding companies or subsidiary companies, companies registered under section 8 (charitable institutions), company governed by any special activities such as banking or insurance companies.

Conclusion

While a private company needs to add the words ‘Private Limited (Pvt. Ltd.)” at the end of its name, as a suffix, a public limited company needs to add the words ‘Limited’ at the end of its name.