Private Limited Companies - An Introduction
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An artificial
judicial person is a common definition for Company form of business
Constitution in India .
There are different kinds of company viz. Limited Company, Government Company,
Foreign Company, Private Company etc. A Private Company is defined in section
3(1)(iii) of the Companies Act. The explanation of the section is given below:
Explanation:
» The above section provides a meaning to the
private company that a private company has private ownership.
»
Practically friends and relatives of the
directors are the members of the private company.
»
No public issue is allowed so near relatives
are preferred to be invited to purchase company’s shares.
» There is a restriction on transfer of shares
in a private company but not prohibition. Shares are transferable internally.
»
Investing in private company is less risky
because the management is in the hands of friends and relatives only so they
will work in the interest of company because wealth of many near ones are
invested in such companies.
»
There are two number restrictions provided by
the section for being a private company. They are:
1. The company
must have a minimum paid – up share Capital of Rs. 1,00,000 and
2. Members are
restricted to a maximum number of 200 (Earlier it was only 50).
Changes in The Companies Act 2013 as compared to 1956 with respect
to private companies:
*
The Companies Act 2013 has replaced The
Companies Act 1956. Due to these there has come been a change in the above
definition. As per The Companies Act 1956, the number of members restricted for
the private company was “50” while it has been increased to “200” with the
introduction of The Companies Act 2013.
*
The Companies Act 2013 gave introduction to
One Person Company (OPC) while the same was not in the case of The Companies
Act 1956. Because as per The Companies Act 1956 the minimum number of members
required to form a Private Company was ‘two’.
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