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Difference between Public and Private Company

Difference between Public and Private Company

The Key difference between public and private company are elaborated in the below given table.

Basis of Difference

Private Limited Company

Public Limited Company

incorporationprivate limited company  is incorporated under companies ordinance 1984public limited company is incorporated under companies ordinance 1984
Membersminimum number of members is 2 and the maximum is 50minimum numbers of members is 7 No maximum limit
Legal EntityPrivate Limited Company is a legal EntityPublic Limited Company is a legal Entity
Liabilityliability is limited to the value of the sharesthe liability of the share holder is limited to the value of the shares held by them
Capitalit raises required capital by private arrangement . not allowed  to invite public to buy its shares by  the issue of a prospectusmaximum amount of capital is laid down in the memorandum . it is allowed to invite public  to buy is shares by the issue of a prospectus.
Listing on stock exchangecannot be listed on stock exchangecan be listed on stock exchange
management the day to day affairs of the company are carried out by the directors . the minimum number of Directors is two.the management of the public company is entrusted to a board of Directors elected by and responsible to the general body of shareholders . the minimum number of directors elected should not be less than seven
books of accounts books of account are properly maintained and their audit by qualified auditors is compulsory once atleast in every year the auditor need not be a chartered accountant unless the paid up capital is Rs,3 million or more.proper books of account as well as statutory books must be maintained . they are audited by the qualified auditors appointed by the shareholders. the auditors must be chartered accountant.
transfer of Sharesthe transfer of shares of private company are restricted by its articles.each shareholder is entitled to transfer his shares of ownership without the consent of other member. in the case of death of a shareholder. the heir automatically becomes the member.
powersthe business which is covered by the object clause of the memorandum shall only be carried out.  no other business except that covered by the object clause of the memorandum shall be covered. 
statutory meetings there is no requirement to hold statutory meeting nor file the statutory report with the registrarmust hold statutory meeting and file statutory report with the registrar.
commencement businessa private company can commence business immediately after it receives the certificate of incorporation no certificate to commence business is requireda public company has to wait for starting of business till it receives another certificate from the Registrar known as the certificate for the commencement of business
number of directors there must be at least two director one as amended in companies ordinance 2002 for SMCthe numbers of directors should not be less than 7
profit and loss accounta private company is not required to send copies of its balance sheet and profit and loss account to the registrar. these documents are open to inspection only to the shareholders at registered office a listed public limited company is required to send copies of its balance sheet and  profit and loss account and other documents to the authority. stock exchange ad the registrar. these documents are open to inspection by the public at the registrar’s office.
winding upA private company can be wound up with the  consent of members and also through courtA public company can be wound up in any of the following three ways.

  1. compulsorily by court
  2. voluntary winding up
  3. voluntary winding up under the supervision of court.

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Salman Qureshi

Salman Qureshi is an Accountant by profession & he loves to write on Commerce & Management Sciences Subject to assist Students. Hope you guys will like his effort.

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