Difference Between Private and Public Company in India

difference between private and public company

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

Definition of a Public and Private Company

What is A Public 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).

What is A Private Company?

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.

A Simple Difference Between Private And Public Company

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

AspectPrivate CompanyPublic Company
Ownership StructureOwned by a group of individuals or familyOwned by shareholders
Number of ShareholdersMinimum 2 and maximum 200 shareholdersMinimum 7 and no maximum limit
Transferability of SharesRestricted, generally not freely transferableFreely transferable through stock exchanges
Capital RequirementThe Minimum authorized capital of INR 1 lakhThe Minimum authorized capital of INR 5 lakhs
Disclosure RequirementsLess stringentMore stringent
Listing on Stock ExchangesNot PermittedPermitted on recognized stock exchanges
RegistrationPrivate Limited Company (Pvt. Ltd.)Public Limited Company (Ltd.)
ExamplesJaquar & Company Pvt Ltd, Parle Products Pvt LtdReliance 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

  1. 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.
  2. 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 BetweenPrivate CompanyPublic Company
Ownership StructuresPrivate 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.
FundingPrivate companies are usually funded through private investments, such as venture capital or angel investorsPublic 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).

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 CompanyPublic 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

CompanyAdvantages
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
CompanyDisadvantages
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

DefinitionsOverview
How to Pronounce Entrepreneurs in IndiaAre you looking for help with pronouncing the word ‘Entrepreneur’ in India? 
What is COOAre you curious about the role and meaning of a Chief Operating Officer (COO)?
What is Philanthropistwhat does it really mean to be a philanthropist? 
What is OccupationAre you curious about the definition and meaning of occupation?

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.

Ads Blocker Image Powered by Code Help Pro

Ads Blocker Detected!!!

We have detected that you are using extensions to block ads. Please support us by disabling these ads blocker.

Powered By
100% Free SEO Tools - Tool Kits PRO
Pricemint
Logo
close button