Private Limited Company

It is the most common incorporated business organisation in India. It is generally called as a 'Private Company'

A private limited company is registered with the below mentioned features and restrictions:

  • Minimum and maximum number of shareholders in a private company is 2 and 200, respectively.
  • Minimum paid-up capital is Rs.1,00,000
  • Minimum number of directors are 2
  • Share transfer can be restricted as per Articles of the company.
  • Cannot accept deposits from the public and it can take loans only from shareholders, directors and relatives of directors.
  • Cannot issue shares to the public.
  • Less compliance with respect to company laws.
  • Name of the company should end with the words 'Private Limited'.

A Private Limited Company is more flexible than a Public Limited Company as many of the restrictive provisions of Companies Act are not applicable to Private Limited Companies.

Public Limited Company

As the name reveals, public limited company has a wider coverage than a private limited company. It is generally called as a 'Public Company'.

A public limited company has the following features:

  • Minimum number of shareholders is 7. There is no restriction on maximum number of shareholders.
  • Minimum number of directors is 3
  • Subject to the compliance of the Companies Act, the Company can issue shares to public.
  • Subject to the compliance of the Companies Act, it can accept deposits from public.
  • Operations of public limited companies are subject to compliance of many of the restrictive provisions of Companies Act.

Generally companies requiring huge capital investment are opting for registering as Public Limited Company.

Section 8 Companies

  • Generally companies are promoted with an object of making profit by carrying commercial transactions. But a company can be registered with charitable motive with the object not to make any profit also.

The registration of such company is subject to the provisions of Section 8 of the Companies Act. 2013. So, these companies generally called as Section 8 Company. These companies must be formed with an object to promote of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object

The name of a Company registered under Section 8 of the Act, the name shall include the words foundation, Forum, Association, Federation, Chambers, Confederation, council, Electoral trust etc.

A Section 8 Company shall not pay any dividend to its members but apply its surplus of receipts over payments for promotion of its objects. These companies need not use the words Limited or Private Limited after the name

The registration process of a Section 8 company is slightly different from a regular limited company. A license for registration must be obtained from the Ministry of Corporate Affairs for registration as a Section 8 Company.

These companies are generally registered as Guarantee Company with limited liability with or without capital. This company can be private or public in nature depends on the number of persons involved in it.

Guarantee Company

  • Guarantee Company is a sub classification of Private and Public Companies. Usually it does not have share capital but instead has members who act as guarantors. The guarantors give an undertaking to contribute a nominal amount (typically very small) in the event of the winding up of the company. This type of company may also have capital and in that case, members are liable to pay the capital amount taken as well as the guarantee amount.

Usually these companies are formed for Clubs and associations wherein members are not looking for profit.

Producer Company

  • Producer Company is another classification of Private and Public Company. These types of companies have the features of co-operative societies. Only 'primary producers' or 'producer institution' can form a producer company and participate in the ownership of such companies.
  • 'Primary Producers' means people engaged in the process of Primary Produce. Primary produce means produce of farmers arising from agriculture including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products: produce of persons engaged in handloom, handicraft and other cottage industries: by - products of such products; and products arising out of ancillary industries.

    Producer Company shall deal primarily with the produce of its Members for carrying out any of any of the following objects:

    • production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit and may carry on any of the activities specified in this clause either by itself or through other institution;
    • processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its Members;
    • manufacture, sale or supply of machinery, equipment or consumables mainly to its Members;
    • providing education on the mutual assistance principles to its Members and others;
    • rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members;
    • generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce;
    • insurance of producers or their primary produce;
    • promoting techniques of mutuality and mutual assistance.
    • welfare measures or facilities for the benefit of Members as may be decided by the Board;
    • any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
    • financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) which include extending of credit facilities or any other financial services to its Members.

The main features of a Producer Company are:

  • The registered producer company will be treated as a private limited company.
  • Ten or more 'Primary Producers' are required to form a producer company. As in the case of private company, Minimum of two persons cannot get them registered.
  • The maximum number of members can exceed 50.
  • Maximum number of Directors shall be 5.
  • Minimum Authorised and paid-up capital should of Rs.5 Lakhs.
  • It shall never become a public limited company.
  • The liability of the members is limited to the unpaid amount of the shares held by them.
  • Profit share will be in the ratio of business contribution and investment

Benefits of Incorporated Business

An incorporated business means a business entity registered and incorporated under any Law. In India, 'Limited Company' and 'Limited Liability Partnership' are the incorporated business forms. Limited Companies are classified as One Person Company (OPC), 'Private Limited Company' and 'Public Limited Company'.

Limited Company is registered and administered under the provision of Companies Act, 2013 and Limited Liability Partnership is registered and administered under the provision of Limited Liability Partnership Act 2008.

Benefits of Incorporated Business

An incorporated business ('Limited Company' and 'Limited Liability Partnership') has the following advantages:

  • Acceptance:

    An incorporated business is the most accepted business organization the structure and is well known to the public

  • Limited Liability:

    The owner's liability is limited to the extent of agreed capital contribution to the business and ends once he pays agreed capital.

  • Protection of Personal Assets of owners:

    As the liability of owners is limited, their personal assets are protected against the business risk as the company's liability is not the liability of its owners.

  • Perpetual existence:

    Assets and liabilities of an incorporated business belongs to itself and do not belong to the share owners. Hence, an incorporated business will continue to be in existence even if the owner changes.

  • Can sue and be sued

    An incorporated business is an artificial person created by law. Like any other person, it can sue and be sued before the court of law. This means that if an incorporated entity defaults, others can take legal action against the entity and likewise the business can take legal action against defaulters

Table of Contents