What are the special privileges of a private company?
Find the question and answer of Company Law only on Legal Bites.
Question: What are the special privileges of a private company?Find the question and answer of Company Law only on Legal Bites. [What are the special privileges of a private company?]AnswerSection 2(68) of the Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. A private company, as defined by the Companies Act...
Question: What are the special privileges of a private company?
Find the question and answer of Company Law only on Legal Bites. [What are the special privileges of a private company?]
Answer
Section 2(68) of the Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them.
A private company, as defined by the Companies Act 2013, is a company that has a minimum of two and a maximum of 200 members, and restricts the transferability of shares to its members. There are several privileges accorded to private companies under the Companies Act 2013, including:
Limited Liability: One of the most significant advantages of being a private company is limited liability protection for its members. This means that the members are not personally liable for the company's debts and liabilities.
Fewer regulatory compliances: Private companies have fewer regulatory compliances as compared to public companies. For instance, they do not need to file their financial statements with the Registrar of Companies (RoC) nor do they have to hold as many board meetings as public companies.
Greater Flexibility: Private companies have greater flexibility in their operations as compared to public companies. They are not required to have independent directors on their board, and they can have a maximum of 15 directors on their board as compared to 10 for public companies.
No Minimum Capital Requirement: The Companies Act 2013 does not require private companies to have any minimum capital. They can be incorporated with any amount of capital as per the requirements of their business.
Easy to Manage: As private companies have fewer members, they are easier to manage as compared to public companies, which have a large number of shareholders. Decisions can be taken quickly and with greater agility.
The Companies Act 2013 provides several special privileges to private companies that make them an attractive option for entrepreneurs who want to start a business. These privileges include limited liability protection, fewer regulatory compliances, greater flexibility, no minimum capital requirement, and ease of management.
Mayank Shekhar
Mayank is an alumnus of the prestigious Faculty of Law, Delhi University. Under his leadership, Legal Bites has been researching and developing resources through blogging, educational resources, competitions, and seminars.
