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Commercial Applications

Distinguish clearly between a private company and a public company.

Joint Stock Company

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Answer

The distinction between a private company and a public company is given in the following table:

S.No.Basis of DistinctionPrivate CompanyPublic Company
1.Number of MembersMinimum 2, Maximum 200.Minimum 7, Maximum no limit.
2.NameThe name must include the words "Private Limited".The name must include the word "Limited".
3.Number of DirectorsMinimum 2.Minimum 3.
4.Articles of AssociationMust prepare its own Articles of Association.May adopt Table A as given in the Companies Act.
5.Public SubscriptionCannot invite public to subscribe to its shares and debentures.Generally invites public to subscribe to its shares and debentures.
6.ProspectusNeed not issue and file a prospectus.Must issue and file a prospectus or a statement in lieu of prospectus.
7.Allotment of SharesNo restrictions on allotment of shares. No binding on further issue of shares.Cannot allot shares without raising minimum subscription and without complying with other legal formalities. Further issues of shares must, in the first instance, be offered to the existing members.
8.Commencement of BusinessCan commence its business immediately after getting the Certificate of Incorporation.Can commence business only after getting the Certificate of Commencement of Business.
9.Transfer of SharesRestriction on transfer of shares.The shares are freely transferable.
10.Share WarrantsCannot issue share warrants.Can issue share warrants to bearer.
11.Statutory Meeting and ReportNot required to hold statutory meeting or file a statutory report.Must hold a statutory meeting and file a statutory report.
12.Deferred SharesCan issue deferred shares with disproportionate voting rights.Cannot issue such shares.
13.Directors – Qualification SharesNo qualification shares.Qualification shares may be prescribed.
14.Directors – Retirement by RotationDirectors need not retire by rotation every year.One-third of the two-thirds of directors must retire by rotation every year.
15.Directors – AppointmentNo restrictions on the appointment and reappointment of managing/whole time directors.Appointment and reappointment may require approval of the Central Government.
16.Directors – Number of DirectorshipsNo limit on number of directorships.An individual cannot be a director of more than 15 companies.
17.Directors – BorrowingDirectors can borrow from their company.Directors cannot borrow without the approval of Central Government.
18.Directors – Office of ProfitA director can occupy any office of profit.Special resolution required for this purpose.
19.Directors – Voting at MeetingInterested director can vote in the board meeting.Interested director cannot vote in the meeting.
20.Minimum Paid-up CapitalOne lakh rupees.Five lakh rupees.

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