What is the difference between public and private company-00037
This subjective question is related to the book/course
vu acc501 Business Finance.
It can also be found in
vu acc501 Mid Term Solved Past Paper No. 2.
The main difference between public and private company is that in public limited companies there is no restriction on number of persons to be its members. There is one restriction. That there should be a minimum of three members to form a public limited company. Public limited company can offer its shares to general public.
While in private company two to fifty persons can form a company. Minimum two members are elected to form a board of directors. This board is given the responsibility to run day to day business of the company. Private limited company cannot offer its share to general public.
Private Limited Company
Number of members in a private limited company varies from 2 to 50.
Any 2 members can subscribe their names in memorandum and articles of association along with other requirements of the companies' ordinance 1984. They can also apply to security exchange commission for company's registration. The shareholders of the private limited company elect two members of the company as Directors. These directors form a board of directors to run the affairs of the company.
The head of board of directors is called chief executive.
Private limited company can not offer its shares to general public.
In case a investor decides to sell his/her/her shares, his/her shares are first offered to existing shareholders. If all existing shareholders decide not to buy these shares, then an outsider investor can buy.
Words and digression "(Private) Limited" are added at the end of the name of a private limited company.
Public Limited Company
Least number of members in a public limited company is 7 with no upper limit in number of members.
Any 7 members can subscribe their names in memorandum and articles of association along with other requirements of the companies' ordinance 1984. They can also apply to security exchange commission for company's registration. The shareholders of the public limited company elect seven members of the company as Directors and these directors form a board of directors to run the daily affairs.
The head of board of directors is called Chief Executive.
Public limited company can offer its shares to general public at large.
Word "Limited" is added at the end of the name of a public limited company.
Each subscriber of the memorandum shall write opposite to his name, the number of shares held by him/her.
On top of that there are two types of public limited company:
- Listed Company
- Non Listed Company
