Private Limited Company
A private limited company is a body corporate incorporated by not less than two and not more than 200 members/ shareholders (earlier 50 members/ shareholders), whose liability is limited. The transfer of shares in a private limited company is restricted based on its articles of association and is ordinarily limited to its members. The company is not allowed to invite the general public to subscribe to its shares or debentures. The primary feature of privately held limited liability company are: :
a) It has an independent legal existence
b) it can own property in its own name
c) it can sue or be sued in its own name
d) it has got perpetual succession
The Registrars of Companies (ROC) are vested with the primary duty of registering companies in the respective states and the Union Territories. It is relatively less cumbersome to organize and operate, as it has been exempted from many regulations and restrictions to which a public limited company is subjected to. Some of them are :
- It need not file a prospectus with the Registrar.
- It need not obtain the Certificate for Commencement of business.
- It need not hold the statutory general meeting nor need it file the statutory report.
- It need not hold the statutory general meeting nor need it file the statutory report.
- The liability of its members is limited to the extent of unpaid money towards the subscribed capital of the company.
- The shares allotted to its members are not freely transferable and the existing members have first claim on the same.
- A private limited companies cannot invite public at large to subscribe to its shares and debentures.
- It enjoys continuity of existence i.e. it continues to exist even if all its members die or desert it.
- Hence, a private company is preferred by those who wish to take the advantage of limited liability but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business.
• Advantages
- Continuity of existence
- Limited liability
- Less legal restrictions
• Disadvantages
- Shares are not freely transferable
- Public issue of shares is not allowed
- Closely held, subject to lesser scrutiny
- Higher compliance cost as compared to LLP, Partnership Firm and Proprietary firms