PRIVILEGES OF A PRIVATE LIMITED COMPANY

Section

Descripttion of the matter

3(1)(iii)

A Private Company need to have Minimum paid-up capital of Rs. 1 lakh as against Rs. 5 lakhs for Public Company.

12(1)

A Pvt. Co. can be formed by just two persons as against minimum seven persons required for incorporation of a Public Company.

58A

Deposits taken by Pvt. Co. from its members are exempt from the rigors of this section. As per the provisions of sec. 58A read with rule 2(b) of the Companies (Acceptance of Deposits) Rules, 1975 — amount received from its shareholders by a private company (provided the shareholder concerned furnishes at the time of giving the money to the company, a declaration that the amount is not being given out of funds borrowed or accepted from others) is not included in the meaning of deposit. If the depositor ceases to be a shareholder, the deposits made by him cease to qualify for exemption from the date of such cessation

70(3)

A Pvt. Co. need not file Statement in lieu of Prospectus with ROC.

77(2 & 3)

There is no prohibition on a Pvt. Co., which is not a subsidiary of a public company, to provide financial assistance to anyone for purchasing or subscribing for its own shares or of its holding company.

81

A Pvt. Co. can issue further shares in any manner; i.e. rights shares to the existing shareholders need not be offered.

85 to 90

The provisions of these sections requiring that there should be only two kinds of share capital and that voting rights should be proportional to the capital paid up and prohibiting and terminating disproportionately excessive voting rights are not made applicable to a private company which is not subsidiary of a public company and such company may issue share capital of such kinds, in such forms and with such proportionate or disproportionate or other voting rights as it may think fit.

111 (13)

The right of appeal to the Company Law Board against rejection of a transfer of shares is not available as long as the private company is only enforcing the provisions of its articles in rejecting a particular transfer. It appears from the new section 111(13) that a right of appeal will be available where the rejection is outside the provisions of the private company’s articles. The right of appeal is also available where there is transmission by court sale or sale by other public authority [s. 111(11)]

149

Procedures for obtaining certificate of commencement of business do not apply to Pvt. Co. A Pvt. Co. can commence its business as soon as the certificate of incorporation is issued.

165

Pvt. Co. is not required to hold statutory meeting or prepare any statutory report.

170 to 186

The provisions of these sections relating to general meetings, unless the provisions of any section are expressly made applicable by the company’s articles, do not apply to such a private company to the extent to which the company makes its own provisions by its articles. Relaxation in the length of Notice for calling General Meeting, contents and manner of Service of Notices, Explanatory Statements, Quorum for meeting, Chairman of meeting, Restrictions of voting rights etc. to the extent to which the company makes its own provisions by its articles..

192A

Passing of resolution by Postal Ballot not relevant for Pvt. Co.

198

Ceiling on overall managerial remuneration not applicable to Pvt. Co. A private company, which is not subsidiary of a public company, may remunerate those in management, by such higher percentage of profits or in any manner as it may think fit.

204

No restriction on appointment of any firm, body corporate to office or place of profit.

220

P & L A/c. of a Pvt. Co. is not open for inspection by Public.

224(1B)

The ceiling, on number of companies an auditor can audit, does not include audit of Pvt. Cos.

252 & 252A

Minimum Directors for Pvt. Co. is 2 (two) against 3 (three) in case of Public Co. Requirement of Independent Directors or Small Shareholders’ Directors not applicable to Pvt. Co.

255

Retirement of Directors by rotation not mandatory.

256

A Pvt. Co. need not adopt the procedure relating to appointment, retirement, re-appointment of directors etc. applicable to a public company.

257

The provision requiring the giving of 14 days notice by new candidates seeking election as directors and deposit of certain amount (Rs. 500) are not mandatory for Pvt. Cos.

259

Central Government approval for increasing number of directors beyond the permissible maximum (presently 12) not required.

262

The provision relating to manner of filling casual vacancy among directors and the duration of the period of office of those so appointed do not apply to Pvt. Co.

263(1)

Appointment of two or more persons as directors by a single resolution can be done by Pvt. Co.

264

No requirement of filing consent by the directors to be filed with the Registrar to act as a director.

266(5)

Restrictions on appointment of director and subscripttion to qualification shares not applicable to Pvt. Co.

268, 269

Central Government approval for amendment relating to appointment/reappointment of a whole-time director/ director not liable to retire by rotation.

270-273

Requirements of qualification shares holding by directors the time within which the qualification shares to be acquired and filing of a declaration by each director of the qualification shares held, is not applicable to Pvt. Co.

274(1)(g)

The disqualification u/s. 274(1) clause (g) does not include directorships of Pvt. Co..

275 to 279

The Directorships of Pvt. Cos. not to be considered for the limit on no. of companies a person can be director.

292A

Provisions relating to formation of Audit Committee not applicable.

293

Restrictions on certain powers of Board of directors regarding selling, leasing, remitting or giving time for payments of debts, investing or borrowing moneys, or contributing to charities other than for political purpose are not applicable to Pvt. Co.

295

Restriction on loans to directors/relatives etc. does not apply to Pvt. Co.

300

No restriction on interested directors from participating in the proceedings of the Board and exercising their votes.

309, 310, 311

A private company which is not a subsidiary of a public company, is free from restrictions on Payment of remuneration to the directors or increase in their remuneration.The Procedures like filing Form 25C not required in case of Pvt. Co.

316, 317

No restriction on period of appointment of managing director/manager for more than 5 years at a time.

349, 350

Provision relating to the determination of net profits and ascertainment of depreciation shall not apply.

372A

No restrictions on giving loans or guarantees to other companies or on making investment in the shares of the other companies.

386, 388

No. of companies on which a person may be appointed manager, the remuneration of a manager and the application of sections 269, 310 to 312 and 317 in relation to managers do not apply.

409(3)

Powers given to the Central Government to prevent change in the Board of directors not applicable to Pvt. Co.

416(1)

Restrictions on Contract by agents of the company in which the company is the undisclosed principal shall not apply.