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Difference Between Private Limited and Public Limited Company

A private limited company is a closely held one and requires at least two or
more persons, for its formation. On the other hand, a public limited
company is owned and traded publicly. It requires seven persons for its
setup.

What is a Company?

The company refers to that voluntary association of persons which is

established with an aim of achieving common objectives. It is a separate
legal entity, i.e. one should not confuse between the company and its
members as both are different personalities in the eyes of law. Also, it is
characterized by perpetual succession, common seal, capacity to sue and
be sued, and capital that is divided into transferable shares.

Comparison Chart

BASIS
PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY
COMPARISON

Meaning Private Limited Company refers to Public Limited Company implies a

the company which is not listed on company that is listed on a recognized
a stock exchange and the shares stock exchange and whose shares are
are held privately by the members traded openly by the public.
concerned.

Minimum number 2 7
of members

Maximum number 200, except in case of one person Unlimited

of members company

Minimum number 2 3
of directors

Articles of It must frame its own articles of It can frame its own articles of
Association association. association or adopt Table F.

Transfer of Shares The shares of a private company The shares of a public company
are not freely transferable, as there are freely transferable, i.e. freely

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BASIS
PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY
COMPARISON

are restrictions in Articles of traded in an open market called a

Association. stock exchange.

Public Subscription Issue of shares or debentures to It can invite the public to subscribe to
the public is prohibited. its shares or debentures.

Issue of prospectus Prohibited from issuing a It can issue a prospectus or it can also
prospectus. opt for private placement.

Minimum amount The company can allot shares, The company cannot allot shares
of allotment without obtaining minimum unless the minimum subscription
subscription. stated in the prospectus is obtained.

Commencement It can start a business just after It requires a certificate of

of Business receiving a certificate of commencement of business after it is
incorporation. incorporated.

Appointment of Two or more directors can be One Director can be appointed by a

Director appointed by a single resolution. single resolution.

Filing of Consent to Directors need not require the Directors must file their consent to
act as Director filing of their consent to act as a act as a director, within 30 days of
director. appointment with the Registrar.

Retirement of The directors are not required to 2/3rd of the total number of
Directors by retire by rotation. The directors can directors must retire by rotation.
rotation be permanent.

Place of Holding AGM can be held anywhere. AGM is held at the registered office or
AGM any other place where the registered
office is situated.

Statutory Meeting Optional Compulsory

Quorum 2 members who are personally 5 members are required to present in

present at the meeting, constitute person when the number of members

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BASIS
PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY
COMPARISON

a quorum, irrespective of the as on the date of the meeting is 1000

number of members. or less.

15 members are required to present

in person when the number of
members as on the date of the
meeting is more than 1000 but less
than 5000.

30 members are required to present

in person when the number of
members as on the date of the
meeting is more than 5000.

Exemptions Enjoys many privileges and No such privileges and exemptions.

exemptions.

Definition of Private Limited Company

A private limited company is a company that is created and incorporated under the Companies Act, 2013, or
any other act being in force. It is a company that is not listed on a recognized stock exchange and whose shares
are not traded publicly. It restricts the right to transfer shares the liability of the company is limited to the
number of shares held by them

There is a limit on the maximum number of members, i.e. the number of members cannot be more than
200, excluding current employees and ex-employees who were members of the company when they were
employed and continued to become members even after they left the company. Further, one should take
note of the fact that joint holders of shares are treated as single members.

Further, in a private company, any sort of invitation to the public to subscribe for shares is prohibited.

Registration Requirements

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 At least two adults are required to act as the Director of the Company.
 It can have a maximum of 15 Directors
 At least one director has to be an Indian Citizen and Resident, while the others can be foreign nationals.
 Two persons must act as a shareholder.

Documents Required for Incorporation of Private Limited Company

1. Proposed Directors who are Indian Nationals need to submit a copy of PAN as their ID proof and
passport or Driving License or Voter ID or Adhar Card as their proof of address. They are also required
to submit their bank statement or electricity/phone bill as their proof of residence.
2. Proposed Directors who are Foreign Nationals need to submit a copy of their passport as their ID proof
which can also act as a proof of address. They are also required to submit a copy of their bank
statement or electricity/phone bill as their proof of residence.
3. If the registered office is set up in a rented property, a rental agreement and no objection certificate
by the landlord are required.
4. If a registered office is set up in an owned property, ownership property documents are needed.
5. Utility bills of the business place

Definition of Public Limited Company

A Public Limited Company or PLC is a joint-stock company that is created and incorporated under The Indian
Companies Act, 2013 or any other act being in force previously. It is listed on a recognized stock exchange to
raise capital from the general public.

It is a company with limited liability and is permitted to issue registered securities i.e. shares or debentures to
the public, by inviting them to subscribe for its shares through IPO and is traded openly on at least one stock
exchange. The liability of the shareholders is limited to the extent of the amount contributed by them.

Also Read: Difference Between IPO and FPO

Incorporation Requirements

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 Minimum number of 3 directors are required to form a public company.

 Minimum 7 shareholders are required to form a public company.
 Digital Signature Certificate (DSC) of any one director is required, in case self-attested copies of identity
proof and address proof are submitted.
 Director Identification Number (DIN) is a must.
 An application containing the object clause of the company is to be made.

Documents Required for Incorporation of Public Limited Company

1. Digital Signature Certificate (DSC) and Directors Identification Number (DIN) of all Directors
2. Copies of identity proofs such as Adhar Card, Voter ID, PAN Card or passport of all directors
3. Passport size photograph of all Directors.
4. If the registered office is set up in a rented property, a rental agreement and no objection certificate
by the landlord are required.
5. If a registered office is set up in an owned property, ownership property documents are needed.
6. Utility bills of the business place

Points to be noted

 As per Section 185 of Companies (Amendment) Act, 2017, there is a complete ban on providing loans,
guarantees, or advances to the Directors or its holding company, or any partner of the Director or any
firm wherein the Director or relative is a partner.
 The maximum number of Directors that a company can appoint is 15. However, a company can
appoint more than 15 Directors by passing a special resolution at the general meeting.

Key Differences Between Private and Public Limited Company

After learning about the meaning of the two types of companies, let us understand the difference between a
private limited company and a public limited company:

1. The public limited company refers to a company that is listed on a recognized stock exchange and its
securities traded publicly in an open market. On the other hand, a private limited company is one that
is not listed on a stock exchange, as its stock is held privately by the members.
2. A private limited company has to frame its own articles of association, whereas a public limited
company has two choices, i.e. either it can frame its own articles or it can adopt Table F.

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3. When it comes to the transfer of shares, there are restrictions in the articles of association regarding
the transferability of the shares of a private company. Further approval of the Board of Directors is
needed for such transfer. In contrast, there is no restriction on the transfer of shares in the case of a
public limited company i.e. freely traded in an open market called a stock exchange.
Also Read: Difference Between Bombay Stock Exchange and National Stock Exchange
4. A private limited company is strictly prohibited from inviting the public to subscribe for its shares or
debentures, whereas a public limited company can go for a public subscription to raise capital, through
an IPO.
5. A private limited company cannot issue a prospectus. It may issue shares by way of private placement
by following the procedure given in Part II of Chapter III. Conversely, a public limited company can
issue a prospectus by following the procedure given in part I of Chapter III or it can also opt for private
placement by following the procedure contained in Part II of Chapter III.
Also Read: Difference Between Private Placement and Preferential Allotment
6. A private company can allot shares, even when it has not received a minimum subscription. Oppositely,
a public company is restricted from alloting shares to the public unless the minimum subscription
stated in the prospectus is received.
7. To form a private limited company minimum of two members are required, whereas in the case of a
public limited company at least seven members must be there for its formation.
8. A private limited company can have a maximum of 200 members, except in the case of one person
company, where there is one member. In contrast, in a public limited company, there can be unlimited
members.
9. At least two adults who act as a director are required at the time of incorporation of a private limited
company. As against, a minimum of three directors is required in the case of a public limited company
for its incorporation.
10. A private limited company can start its business just after receiving the certificate of incorporation,
whereas a public company needs a certificate of commencement of business after it has received a
certificate of incorporation, to commence business.
11. In a private limited company, two or more directors can be appointed by a single resolution, which is
not in the case of a public limited company.
12. In the case of a private company, directors need not require to file their consent to act as a director.
On the other side, in the case of a public company, directors must file their consent with the registrar
to act as a director within 30 days of their appointment as a director.
13. 2/3rd of the total number of directors of a public limited company must retire by rotation. Conversely,
the directors of a private company are not required to retire by rotation, they can be permanent.
14. In the case of a private company, 2 members who are present physically at the general meeting,
constitute a quorum, irrespective of the number of members. On the other hand, in the case of a
public company, to form a quorum:
 5 members are required to present in person when the number of members as on the date of
the meeting is 1000 or less
 15 members are required to present in person when the number of members as on the date
of the meeting is more than 1000 but less than 5000
 30 members are required to present in person when the number of members as on the date
of the meeting is more than 5000.
15. Talking about the place of holding Annual General Meeting (AGM), in case of a private company AGM
can be held anywhere, whereas in the case of a public company AGM can be held at the registered
office of the company or any other place within the city, village or town where the registered office is
situated.
Also Read: Difference Between AGM and EGM

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16. While a private company is not required to organize a statutory meeting, a public must organize a
statutory meeting and deliver the report of such meetings to the shareholders and file the same with
Registrar.
17. Private Limited Company has greater operational flexibility, as compared to Public Limited Company
in carrying out affairs of the company. There are a number of requirements and restrictions from which
a private company is exempted that apply to a public company.

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