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PRIVATE LIMITED
A private limited company is a business entity that is held by private owners. This
type of entity limits the owner’s liability to their ownership stake, and restricts
shareholders from publicly trading shares.
PUBLIC COMPANY
Introduction:
The Companies Act of 2013 has done away with the relaxation to private
companies in several provisions. The concept of “not applicable to private
company” is no more in existence in the Act of 2013. Such a move in the
Companies Act of 2013 has taken away certain privileges enjoyed by private
companies. The privileges are of two types. One is for the directors and to their
interest and the second one is for the private company itself. The Directors
were hitherto enjoying certain pleasure from the application of certain
provisions are now withdrawn. Further, the Companies Act, 2013 have
mandated certain new requirement like that of internal audit to both public
and private companies.
Presence Continues: Even after the demise and exit of any investor, the
firm proceeds and its reality is protected.
Cannot be Listed: In stock trade shares can’t be cited, i.e., the posting of the
organizations for the first sale of stock isn’t conceivable.
Transparency: Private limited companies are strictly regulated and are required
by law to publish their complete financial statements annually to ensure the true
financial position of the company is made clear to their owners (shareholders)
and potential investors. This also helps to determine the market value of its
shares.
Capital: A public company can raise capital from the public by issuing shares
through stock markets. Public companies can also raise capital by issuing bonds
and debentures that are unsecured debts issued to a company on the basis of
financial performance and integrity of the company.
Transferable shares: A public limited company’s shares are purchased and sold
on the market. They are freely transferred among the members and the people
trading on stock markets.
Disadvantages of going public:
Prospectus: For a public company, issuing prospectus is mandatory because the
public is invited to subscribe for the shares of the company.
Loss of Management Control: Once a private company goes public, managing the
business becomes more complicated. The owner of the company can no longer
make decisions independently. Even as a majority shareholder, they are
accountable to minority shareholders about how the company is managed. Also,
company owners will no longer have total control over the composition of the
board of directors since SEBI regulations place restrictions on board composition
to ensure the independence of the board from insider impact.
Increased Regulatory Oversight: Going public brings a private company under the
supervision of the SEBI and other regulatory authorities that regulate public
companies, as well as the stock exchange that has agreed to list the company’s
stock. This increase in regulatory oversight significantly influences management
of the business.