Readers are told in earlier post what a public limited company . There is another kind of company called private company limited by shares. A private company, in terms of section 3(1)(iii) of the Act, means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles :
- restricts the right to transfer its shares, if any;
- limits the number of its members to fifty;
- prohibits any invitation to the public to subscribe for any shares in, or debentures of the company;and
- prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.
For calculating the number of members as per (b) above, joint holders of shares are counted as single member and the members who are employees of the company including those who continue to be members after their employement ceased are excluded.
- It can be registered with a minimum number of 2 members and connot have more than 50 members (excluding employee and ex-emplyee members).
- It cannot invite the public to subscribe to its share capital and has to obtain capital by private arrangement.
- It cannot allow free transfer of its shares.
- Its shares are not quoted on a recognised stock exchange.
- It cannot invite or accept deposits from persons other than its members, directors or their relatives.
- Only two signatories to the memorandum of association are sufficient to form a private company.
- Any number of employees of a private company can beocme its members and their number is not counted for the pupose of maximum number of members even when the employees have left the company on retirement or otherwise.
- It can commence business immediately on incorporation.
- It shall have at least two Directors.
