Private Limited Companies – An Introduction


Private Limited Companies – An Introduction

                An artificial judicial person is a common definition for Company form of business Constitution in India. There are different kinds of company viz. Limited Company, Government Company, Foreign Company, Private Company etc. A Private Company is defined in section 3(1)(iii) of the Companies Act.  The explanation of the section is given below:

Explanation:

»    The above section provides a meaning to the private company that a private company has private ownership.

»         Practically friends and relatives of the directors are the members of the private company.

»         No public issue is allowed so near relatives are preferred to be invited to purchase company’s shares.

»     There is a restriction on transfer of shares in a private company but not prohibition. Shares are transferable internally.


»         Investing in private company is less risky because the management is in the hands of friends and relatives only so they will work in the interest of company because wealth of many near ones are invested in such companies.

»         There are two number restrictions provided by the section for being a private company. They are:

1.       The company must have a minimum paid – up share Capital of Rs. 1,00,000 and

2.       Members are restricted to a maximum number of 200 (Earlier it was only 50).
Changes in The Companies Act 2013 as compared to 1956 with respect to private companies:

*        The Companies Act 2013 has replaced The Companies Act 1956. Due to these there has come been a change in the above definition. As per The Companies Act 1956, the number of members restricted for the private company was “50” while it has been increased to “200” with the introduction of The Companies Act 2013.

*        The Companies Act 2013 gave introduction to One Person Company (OPC) while the same was not in the case of The Companies Act 1956. Because as per The Companies Act 1956 the minimum number of members required to form a Private Company was ‘two’.




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