Difference between Public Company and Private Company
Public Company
Membership and Ownership
a)Public Company must have minimum of 7 members and there is no upper ceiling on the number of members. It is typically unlimited.
b)The shares of public company are open to all of the General public.
c)Public company carries the suffix "Limited".
Shares and Raising Capital
a)Shares of public company are listed on stock exchanges
b)Shares of public company are freely transferable.
c)Fund for capital is raised through IPOs, FPOs and rights issues.
d)The company must issue a prospectus when offering securities to the public, as per Section 26 of the Companies Act 2013.
Compliance and Governance.
a)Public company is subjected to SEBI regulations,rules laid down by the concerned stock exchange where the company is listed and Companies Act 2013.
b)in case of public company, there should be minimum 3 directors.
Public companies must form board committees like audit and nomination committees, which need a minimum number of directors to function properly.
c)Appointment of Independent directors is mandatory when it meets certain thresholds.
d) atleast 2/3rd of directors in a public company (excluding independent and nominee directors) must retire by rotation annually.
Private Company
Membership and Ownership
a)Private Company must have minimum of 2 members and maximum of 200.
b)Shares of a private company are closely held ie by family, founders and few investors
c)Private companies carries suffix "Private Limited" as part of their name.
Shares and Raising Capital
a)Private limited cannot be Listed in stock exchange.
b)Transfer of shares is restricted by AOA,in case of private company (note: not prohibited).
c)Capital is raised through private placements.
d)Since the question of fund raising through public issue is not applicable, there is no question of prospectus in private limited.
Compliance and Governance.
a)Private limited company is primarily governed by companies act 2013.
b)Private company must have Minimum 2 directors. Having board committees is optional optional for private companies, unless they meet specific thresholds.
c)Appointment of independent directors is not mandatory in case of private limited.
d)Private companies are exempt from the director rotation requirement.