question_answer

State the important privileges available to a private company.

Answer:

Ans.     A company can be registered as a private company or a public company. When a company is incorporated as a private company, it enjoys certain privileges and exemptions when compared to a public company.

Some of the privileges enjoyed by a Private Company are:

1. The minimum number of members required to form a Private Company is only 2, whereas it is 7 in case of a Public Company.

2. A Private company can start its business immediately after its incorporation. It does not need to obtain the Certificate of Commencement of Business.

"Certificate of Commencement of Business is issued by the Registrar of Companies to Public Companies. Once a Company has been registered or formed, it shall apply for the Certificate of Commencement of Business in the prescribed form to the ROC (Registrar of Companies). Only after this certificate has been obtained it can commence its business. This certificate has to be obtained within 6 months from the date of incorporation of a Company.'

3. No qualification shares and consent of the Director to act as a Director is required to be filed with the ROC at any time during the tenure of the company, as in the case of a Public company.

4. A Private Company is not required to issue or file a prospectus or statement in lieu of prospectus with the Registrar of Companies.

"Prospectus, is an important document for a public company. It is nothing but an invitation to the public to subscribe for the shares of the Company. In case a public company does not intend to invite the public to subscribe to the shares, it has to file a statement in lieu of prospectus.

5. It is not required to have an index of members, as in case of a public company. The reason being the Companies Act limits the maximum number of members required for a Private Company to 50.

6. It is not required to hold a statutory meeting or file a statutory report.

"Statutory meeting is a general meeting of the shareholders of the Company, which has to be held within a period of not less than one month and not more than 6 months from the date, on which it is entitled to commence its business”.

7. It is not required to offer new shares to existing shareholders in proportion to their shareholdings.

In case of a Public Company further issue of capital shall be made to the persons who at the date of the issue are holders of the equity shares of the Company in proportion to their holding.

8. A Private Company needs to have a minimum of two directors only, whereas a Public Company needs to have a minimum of three directors.

9. All the Directors may be appointed by a single resolution in case of a Private Company.

10. The Directors of a Private Company need not to retire by rotation, i.e., they can be Permanent Directors.