Limited vs Private Limited Company


 

I receive a question on Quora which may interest readers of this Blog. The question is –

What is the difference between limited company & private limited company?

My reply is as under –

This question is interestingly related to question discussed earlier hereWhat is limited in private limited company?

First thing first, both private limited companies and limited companies may be in public sector (means major investment by governments) or in private sector (means investment by private sector which is anyone other than government).

Therefore, major difference must be privacy. This, ideally, must be of privacy of accounts, financial information and other affairs of company.

No, this is not the case. Different jurisdictions have different laws as per government wishes.

In India, major difference is limit on number of member. Any company other than private company is public company. A private limited company is a private company which has limited liability for its members as discussed in question earlier mentioned.

A private company may be private limited company or private unlimited company. According to clause (68) of section 2 of the Companies Act, 2013, a private company has –

  1. limit on maximum to two hundred members other than present and past employees;
  2. restrict the right to transfer its shares; and
  3. prohibits any invitation to the public to subscribe for any securities of the company.

A public company (or a public limited company) there is not such restriction, but it needs minimum seven members. A private company (or a private limited company) may have two members normally or single member in case such private company is a one person company (OPC).

A private limited company may have thousands of members who are present or past employees of such company.

Shares of private limited companies are not for investment due to restrictions on transfer, though these shares are still marketable.

one may read original reply here.

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