What is a Private Company? What are the Privileges enjoyed by such a Company?

Private Company

As per Section 2 (68), of the Companies Act, 2013, a private company means a company which has minimum paid-up capital of rupees one lakh or such higher paid-up capital as may be prescribed, and by its Articles of Association :

  • Restricts the right of the members to transfer shares;
  • Limits the number of its members to 200 excluding its employees or ex-employees who continue to be its members;
  • Prohibits the company to invite public to subscribe to its shares or

However, if two or more persons hold shares in joint names, then they are regarded only as one single member. The minimum number of members required to form a private company is two. A private company shall add the words ‘Private Limited’ at the end of its name.

Exemptions and Privileges of Private Companies: The exemptions and privileges enjoyed by a private company, are as follows :

  • Only two persons (minimum) are required to form a private company.
  • Only two directors (minimum) are needed to run such a company.
  • It can be incorporated with a paid up share capital of one lakh only.
  • Private company is not required to issue a prospectus.
  • Condition of minimum subscription does not apply to it.
  • Only two members constitute the quorum for meeting of its
  • All directors can be permanent directors. They need not retire by
  • It need not have independent directors on the Board.
  • A person can be a director in 20 companies.
  • Rules regarding the overall or maximum limit for managerial remuneration do not apply to such companies.
  • It need not constitute an audit committee of the Board.
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