As per the Company Law, there are various points of distinction between a private and a public company. The simplified version of these points are given below:
- Minimum number of members : A Private Ltd. Co. needs only 2 members for its formation, while a Public Ltd. Co. requires minimum 7 members for its formation
- Maximum number of members : As per the latest law, a Pvt. Co. can have up to 200 members. But for public ltd., the number of members can be unlimited. It can have members equal to the number of shares issued.
- Invitation to public : A pvt.ltd. company cannot invite public to subscribe to its share capital. It need not issue a prospectus. But a public ltd. co., cannot proceed without issuing a prospectus or a statement in lieu of prospectus. It has a right to issue shares to the public.
- Formalities : Unlike a public ltd.co., a private company is not required to hold a statutory meeting or file a statutory report.
- Transfer ability of shares: Shares of a public ltd. Company are freely transferable, but not of a private company.
- Restrictions : There are many restrictions regarding managerial remunerations, directors, etc. for a public ltd.co., unlike a private company.
- A public ltd. Co., needs to have at least 3 directors, but private can have only 2.
- Name : The private company should have “private limited company” written at the end, in its name. But a public company, should have “limited company” written at the end of its name.
This is the difference between the two types of companies in a nutshell. It is easier to start a private limited company in India, as compared to a public limited company.