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Privileges of private limited company

Updated on November 11, 2013

Privileges of private limited company

As a public company has large numbers of investors, such companies are protected shareholders interests by framing and following strict rules.  But in a private company, the membership is usually restricted to the promoters, their friends and relatives.  It raises its capital privately from a limited number of members.  The members of the public are not substantially interested in such companies.  Therefore many of the provisions of the Companies Act are not applicable to a private company.  Thus, a private company is granted a number of exemptions or privileges.  These are as follows:

Exemptions and privileges

  1. Number of Members: Two members can form a private limited company
  2. Minimum Subscription: A private company need not wait till the receipt of minimum subscription.  It can allot shares as soon as it receives its subscription.
  3. Commencement of Business: Immediately after incorporation a Private Company can start its business operation.
  4. Subsequent Issue of Shares: A private company can issue shares to outsiders and need not offer its shares first to its existing share holders.
  5. Prospectus: A private company need not issue a prospectus or file with the Registrar of companies a statement in lieu of prospectus before allotment of its shares.
  6. Assistance for Purchase of Shares: For the purchase of its own shares, a private company can help its prospective members or members financially.
  7. Quorum: To form the quorum only tow members who are personally present at the general meeting of shareholders required, unless otherwise provided in the articles.
  8. Statutory Meeting and report:  There is no need of holding statutory meeting or file a report with the Registrar of Companies in the case of a  privatecompany.
  9. Provisions Regarding Directors: Directors need not possess qualifying shares.  A private company may have a minimum two directors.  They need not file their consent to act as such with the registrar.
  10. Managerial Remuneration: There is no restriction on the total managerial remuneration in private company as against the 11 percent of net profit applicable to a Public company.
  11. Demand for poll: A poll may be demanded by only one member, if a resolution is being discussed in a meeting and the number of its members is seven or less than seven.  If more than seven members are present, such a poll may be demanded by only two members.

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    • Cheeky Girl profile image

      Cassandra Mantis 6 years ago from UK and Nerujenia

      Interesting article on Private limited companies.

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      Besda 5 years ago

      Better love than every things

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