Public Company vs Private Company

Difference between Public Company vs Private Company

The company is an association of people who want to do certain business activities with having a legal existence. There are multiple types under which a company can be formed under company laws like Statutory Companies, Single Person Company, Companies Limited by shares, a company limited by guarantee, Public Limited Company, Private Limited Company. Company formation type is completely based on the liability of members, the number of members, incorporation mode. Among these types, Private companies and Public companies are the most popular.

What is a Private Company?

A private company cannot offer its share to the general public as it is restricted, in a private company the shares are privately held by the members or investors. The private company the suffix after its name Private Limited (PVT LTD), the main advantage of a private company is they don’t need to disclose their financials to the general public. The public company is only answerable to its members/investors only.

What is a Public Company?

A public company under the companies act 2013 means a company that is listed on a stock exchange and can sell its securities to the general public. To become a public company; the company needs to offer an IPO to the public. A publicly listed company means their shareholders can sell securities freely on a stock exchange. A public company needs to disclose its annual report to all the stakeholders. A public company can expand its business by issuing more shares to the general public.

Head to head comparison between Public Company and Private Company (Infographics)

Below are the top 15 differences between Public Company vs Private Company:

Key differences between Public Company vs Private Company

Let us discuss some of the major key differences between Public Company vs Private Company

1. A public company is a company that is listed in the well-known stock exchange and can be traded freely. Where a private limited company is not listed on a stock exchange and it is held privately by the member of the company.
2. In a private company, it is not mandatory to call a statutory meeting of members, whereas it is mandatory to have a statutory meeting in the case of a public limited company.
3. There must be a minimum of seven members to form and start a public company, on the other side a private company has a limit of a minimum of two members to start the business.
4. There is no capping for the maximum number of members in a public limited company. But a private company cannot have more than 200 members, subject to some conditions.
5. To start a public company there should be at least 3 directors and is a privately held company, the minimum number of directors should be 2.
6. In a public company, at least 5 members must be present personally at the Annual general meeting (AGM) for the formation of the requisite quorum, whereas in the private limited company at least 2 members should present in the AGM.
7. General Public can be invited by the company for the subscription of shares of the public limited company. On the other hand, there is no such thing in a private limited company to invite the general public for the subscription of share
8. The issuance of the prospectus is compulsory in the public limited company and for the private limited company, there is no such instance.
9. In a private limited company transferability of shares is fully restricted; In contrast, the shareholders of a public limited company can easily and freely transfer their shares.
10. A Private Limited Company requires the only certificate of incorporation to start the business, on the other side a public company requires a certificate of incorporation and then the certificate of commencement to start a business.

Public Company vs Private Company Comparison Table

Let’s discuss the top comparison between Public Company vs Private Company:

Conclusion

We have seen both the types of companies and both types of companies have their advantages and disadvantages. A private company cannot issue its share and a public company can raise capital from the general public by issuing the securities. Majorly, the size of the public company is relatively higher as compared to private companies. A public can transform into a private company or a private company can also be transformed into a public company by offering an IPO.

This is a guide to Public Company vs Private Company. Here we discuss the Public Company vs Private Company key differences with infographics and a comparison table. You can also go through our other suggested articles to learn more:-

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