Private Company vs Public Company
A private company restricts the transfer of its shares and cannot invite the public to subscribe. A public company can raise capital from the public and is subject to substantially heavier compliance.
The quick answer
The defining test is whether the company can invite public subscription. A private company cannot, and restricts share transfer through its articles; a public company can, and is regulated accordingly.
Side-by-side comparison
| Basis | Private Company | Public Company |
|---|---|---|
| Minimum members | Two | Seven |
| Maximum members | Two hundred, excluding present and past employee members | No limit |
| Minimum directors | Two | Three |
| Transfer of shares | Restricted by the articles | Freely transferable |
| Public subscription | Prohibited | Permitted, subject to compliance |
| Name must end with | Private Limited | Limited |
| Compliance burden | Lighter, with several exemptions | Heavier, including additional governance requirements |
The exam angle
Note that a private company which is a subsidiary of a public company is treated as a public company for the purposes of the Act. This deeming provision is a favourite examination point.
Related comparisons
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Talk to usCan a private company become a public company?
Yes, through conversion by altering its articles and following the procedure prescribed under the Companies Act and the applicable rules.
Is a One Person Company a private company?
Yes. A One Person Company is a species of private company with a single member, and enjoys further procedural relaxations.
Does a private subsidiary of a public company keep its exemptions?
No. Where a private company is a subsidiary of a public company, it is treated as a public company for the purposes of the Act and loses the associated exemptions.
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