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Distinguish between private and public companies.

A private company runs the business for it's own profit. Whereas, a public company does not much care about profit as it is providing the goods or service for the public. If a private company does not make money then they will have to sell their possessive things to pay off the debts and whereas the public companies will not have to marry whether making profit or not because they are public companies so they are providing a service to the public. Private companies tend to the big. However, they are not so the are liable for their debts.

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  1. The distinction between a public company and a private company are explained in the following manner:

    1. Minimum number of members

    The minimum number of person required to form a public company is seven, whereas in a private company their number is only two.

    2. Maximum number of members

    There is no limit on the maximum number of member of a public company, but a private company cannot have more than fifty members excluding past and present employees.

    3. Commencement of Business

    A private company can commence its business as soon as it is incorporated. But a public company shall not commence its business immediately unless it has been granted the certificate of commencement of business.

    4. Invitation to public

    A public company by issuing a prospectus may invite public to subscribe to its shares whereas a private company cannot extend such invitation to the public.

    5. Transferability of shares

    There is no restriction on the transfer of share In the case of public company whereas a private company by its articles must restrict the right of members to transfer the share.

    6. Number of Directors

    A public company must have at least three directors whereas a private company may have two directors.

    7. Statutory Meeting

    A public company must hold a statutory meeting and file with the register a statutory report. But in a private company there are no such obligations.

    8. Restrictions on the appointment of Directors

    A director of a public company shall file with the register a consent to act as such. He shall sign the memorandum and enter into a contact for qualification shares. He cannot vote or take part in the discussion on a contract in which he is interested. Two-thirds of the directors of a public company must retire by rotation. These restrictions do not apply to a private company.

    9. Managerial Remuneration

    Total managerial remuneration in the case of public company cannot exceed 11% of net profits, but in the case of inadequacy of profit a minimum of Rs. 50, 000 can be paid. These restrictions do not apply to a private company.

    10. Further Issue of Capital

    A public company proposing further issue of shares must offer them to the existing members. A private company is free to allot new issue to outsiders.

    11. Name

    A private company has to use words ‘private limited’ at the end of its name. But a public company has to use only the word ‘Limited’ at the end of its name.

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