Difference Between Private and Public Company – Are you looking to understand the key differences between private and public companies in India? Then you’ve come to the right place! This guide will provide you with a comprehensive overview of the key differences between private and public companies in India, including the advantages and disadvantages of each type of company.
By the end of this guide, you’ll have a better understanding of the key differences between private and public companies in India, and how to make an informed decision when it comes to investing.
Table of Content
- Table of Content
- Definition of a Public and Private Company
- Overview of the Difference Between Private and Public Company
- The Introduction of Private Company Vs Public Company
- Taxes And Raising Capital
- Difference Between Private Company and Public Company
- Legal Requirements for Private and Public Companies in India
- Advantages and Disadvantages of Public and Private Company
- Company Category Definitions
- Conclusion
Definition of a Public and Private Company
A public company is a company whose shares are traded on a public stock exchange, such as the New York Stock Exchange or the NASDAQ. Public companies are owned by shareholders, who have the right to vote on certain corporate matters, such as the election of board members and the approval of mergers and acquisitions. Public companies must adhere to certain regulations, such as filing quarterly and annual financial reports with the Securities and Exchange Commission (SEC).
A private company, on the other hand, is a company that is not publicly traded and is owned by a small group of shareholders. Private companies are not required to file financial reports with the SEC and are not subject to the same regulations as public companies. Private companies can be closely held, meaning that the majority of the company’s stock is owned by a small number of shareholders, or widely held, meaning that the company’s stock is owned by a larger group of shareholders.
The main difference between public and private companies is the level of transparency. Public companies are required to disclose certain information to shareholders and the public, while private companies are not. This means that private companies can keep certain information confidential, such as financial information and strategic plans. Additionally, private companies can be more flexible in terms of decision-making, since they are not subject to the same regulations as public companies.
Overview of the Difference Between Private and Public Company

Aspect | Private Company | Public Company |
---|---|---|
Ownership Structure | Owned by a group of individuals or family | Owned by shareholders |
Number of Shareholders | Minimum 2 and maximum 200 shareholders | Minimum 7 and no maximum limit |
Transferability of Shares | Restricted, generally not freely transferable | Freely transferable through stock exchanges |
Capital Requirement | The Minimum authorized capital of INR 1 lakh | The Minimum authorized capital of INR 5 lakhs |
Disclosure Requirements | Less stringent | More stringent |
Listing on Stock Exchanges | Not Permitted | Permitted on recognized stock exchanges |
Registration | Private Limited Company (Pvt. Ltd.) | Public Limited Company (Ltd.) |
Examples | Jaquar & Company Pvt Ltd, Parle Products Pvt Ltd | Reliance Industries, HDFC Bank |
The Introduction of Private Company Vs Public Company
Private companies are those that are owned by single individuals, families, or groups of individuals public companies are those that are by the public at large.
Private companies in India by the Companies Act, 2013. These companies must be registered with the Registrar of (RoC) and must adhere to the Act. The main advantage of private companies is that they are required to disclose financial information publicly, allowing them to maintain a degree of privacy.
Public companies, on the other hand, are regulated by the Securities Board of India (SEBI). These companies must be listed on a recognized stock exchange and must comply with the regulations of SEBI.
For Example, HDFC, and Hindustan Unilever. Public companies are required to disclose financial information to the public, allowing investors to make informed decisions about their investments.
Taxes And Raising Capital
- Taxation – Private companies in India are subject to the same tax rates as individuals. Public companies, however, are subject to different tax rates depending on their size and turnover. Additionally, public companies are required to pay dividend tax, while private companies are exempt from this.
- Raising Capital – Private companies can do so through debt or equity. Public companies, however, can raise capital through the issuance of stocks and bonds.
Difference Between Private Company and Public Company
Difference Between | Private Company | Public Company |
---|---|---|
Ownership Structures | Private companies are owned by a small number of shareholders, usually family members, friends, or business associates. These shareholders have the right to vote on major decisions and are typically the only ones who can buy and sell shares. | Public companies, on the other hand, are owned by a large number of shareholders. These shareholders are not usually related to each other and they do not have the right to vote on major decisions. |
Funding | Private companies are usually funded through private investments, such as venture capital or angel investors | Public companies, on the other hand, are usually funded through public offerings of stock. These offerings are regulated by the Securities and Exchange Board of India (SEBI). |
Legal Requirements for Private and Public Companies in India
India is home to a wide variety of private and public companies, each of which is subject to different legal requirements. Understanding the legal requirements for private and public companies in India can be a complex process, but it is essential for any business owner or investor.
Private Company | Public Company |
---|---|
1. Private companies in India are subject to the Companies Act of 2013, which outlines the requirements for setting up and running a private company. | 1. Public companies in India are subject to the Securities and Exchange Board of India (SEBI) Act of 1992. This act outlines the requirements for setting up and running a public company. |
2. These requirements include filing a memorandum of association and articles of association, obtaining a certificate of incorporation, and registering with the Registrar of Companies. | 2. These requirements include filing a prospectus, obtaining a certificate of registration, and registering with the SEBI. |
Advantages and Disadvantages of Public and Private Company
Company | Advantages |
---|---|
Public Company | – Public Companies have access to a larger pool of capital. – Public companies also have a higher degree of transparency – Public companies are required to release financial information to the public |
Private Company | – Private companies have more flexibility than public companies – They are not subject to the same level of scrutiny and can make decisions quickly without having to consult shareholders – Private companies also have more control over their operations, – Private companies are not required to disclose financial information to the public |
Company | Disadvantages |
---|---|
Public Company | – public companies are subject to greater scrutiny from the public and regulators. – Public companies also have to comply with more stringent regulations, which can be costly and time-consuming |
Private Company | – Limited access to capital compared to public companies – Difficulty in attracting top talent |
Company Category Definitions
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Conclusion
In conclusion, The bottom line is that understanding the differences between public and private companies is essential for anyone interested in investing or doing business with either type of organization. Knowing the differences between public and private companies can help you make informed decisions about where to invest or who to partner with. With this knowledge, you can make the most of your investment opportunities and ensure that you are working with the right type of company for you.