Private Limited Company

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What is a Private Limited Company ?

A private limited company is a voluntary association of not less than two and not more than 200 members / shareholders, whose liability is limited, the transfer of whose shares is limited to its members and company is not allowed to invite the general public to subscribe to its shares or debentures. Its main features are : 1. It has an independent legal existence, 2. it can own property in its own name, 3. it can sue or be sued in its own name, 4. 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 organise 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  :-
  1.  It need not file a prospectus with the Registrar.
  2.  It need not obtain the Certificate for Commencement of business.
  3.  It need not hold the statutory general meeting nor need it file the statutory report.
  4. restrictions placed on the directors of the public limited company do not apply to its directors.
  • 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 can not 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

1. Continuity of existence
2. Limited liability
3. Less legal restrictions

Disadvantages

1. Shares are not freely transferable
2. Public issue of shares is not allowed
3. Scope for promotional frauds
4. Undemocratic control