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Question
State the essential features of a private company.
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Solution
Characteristics of the private limited company:- Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the companies act 2013.
- Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
- Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
- Index of members– A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
- A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
- Paid up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
- Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because in this public is not invited to subscribe for the shares of the company.
- Minimum subscription– It is the amount received by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
- Name– It is mandatory for all the private companies to use the word private limited after its name.
Characteristics of the private limited company:
- Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the companies act 2013.
- Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
- Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
- Index of members– A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
- A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
- Paid up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
- Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because in this public is not invited to subscribe for the shares of the company.
- Minimum subscription– It is the amount received by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
- Name– It is mandatory for all the private companies to use the word private limited after its name.
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