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    Saturday, 14 March 2015

    Public and Private company and its difference

    The term “company” is very ancient one. Since its origin, this term has passed through various stages of evolution. In this present world, company is considered an association of a number of individuals, which is formed for some common purpose. Under companies Ordinance, various kinds of company have been described. Out of these kinds of company, one kind is public company and other kind is private company.

    Definition of Public company
    Public company can be defined as that company, which is not private company. Here important point is that such company consists of at least seven members and its seven directors.

    Definition of Private Company
    Private company means a company which by its articles restricts the rights to transfer it shares, if any, limits the number of its members to 50, not including persons who are in the employment of the company, and prohibits any invitation to the public to subscribe for the shares if any or debentures of the company Provided when two or more person s hold one or more shares in a company, jointly, they shall, for the purposes of definition of private company, be treated as a single member. (Section 2(28)).

    Difference between Private and Public company

    Following are the difference between private and public company

    i. As to members
    In private company minimum 2 member’s maximum 50 members. In public company minimum 7 member but maximum no limit.

    ii. Name
    Private company makes use of private limited after its name while public company makes use of limited after its name.

    iii. Commencement of Business
    Private company can commence its business after getting of certificate of incorporation where as public company requires both the certificate of incorporation and the certificate of commencement for its commencement.

    iv. Membership
    In private company, minimum number of its members its two and maximum number of its members is fifty. On the other hand, minimum number of members is seven and maximum number of members is unlimited in public company.

    v. Memorandum of Association and Articles of Association
    Memorandum of association and articles of association of private company are signed by at least two persons, but memorandum of association and articles of association of public company are signed by at least seven persons.

    vi. Payment of tax
    As far as private company is concerned, tax is paid on the whole profit. On the other hand, both public company and individual pay tax.

    vii. Statutory Meeting
    It is not necessary for private company to hold statutory meeting where as it is compulsory for public company to hold such meeting.

    viii. Filling of prospectus or statement-in-lieu of prospectus
    Private company is not required to file prospectus or statement-in-lieu of prospectus. Contrary to this, public company is required to should file prospectus or statement in lieu of prospectus.

    ix. Transfer and Sale of Shares
    Private company cannot sell its hares and even its shares are not transferrable. Contrary to this, public company can sell its shares and even its shares are transferrable.

    x. Dissolution
    Under companies ordinance, separate and different procedures have been provided for dissolution of private company and public company.


    I say, I include that there are some admitted principles as far as company is concerned. Among these principles, most prominent are that a company is an artificial person and its legal entity is separate from its members. These principles are applicable to all kinds of company including private company and public company. 
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    Item Reviewed: Public and Private company and its difference Rating: 5 Reviewed By: Usman Ali
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