A ‘Company’ is a business organisation registered under prevalent company law for doing business in a particular jurisdiction. For administrative and other requirements including compliance, a company is classified as primarily ‘private’ or ‘public’ company. Private company is further classified into OPC (One person company) and other companies. Other categories of companies under company law are usually sub-classifications of ‘private’ or ‘public’ companies. For compliance purpose companies are classified into Small Companies and other than small companies.
Private Limited Company
It is the most common form of company for doing business. A ’private company has the following features and restrictions (for registration purposes):
- The minimum and maximum numbers of shareholders are two and two hundred respectively.
- The minimum number of directors is Two.
- Share transfers can be restricted as per articles of the company.
- A private company cannot accept deposits from the public; only loans and deposits from the company’s shareholders, directors and their relatives.
- A private company cannot issue shares to public.
- Compliance and regulatory requirements under applicable company laws are fewer and simpler as compared to requirements prescribed for a public company.
- The name of the company should end with ‘Private Limited’.
Public Limited Company
Typically, large-sized businesses and/or stock exchange listed entities are incorporated as public companies. Public companies have the following features:
- The minimum number of directors is three; while the maximum number is twelve or other similar number as approved by the government.
- The name of a public company ends with ‘Limited’.
- A public company can issue shares to the public subject to Government Regulations.
- The minimum number of shareholders allowed is seven and there is no restriction on the maximum number of shareholders.
One Person Company
This category of company is a new creation after the introduction of Companies Act,2013. Basically OPC is a private company with one shareholder. The main features of OPC are;
- Single shareholder
- Board may have one or more directors
- Maximum share capital of an OPC is Rs.50 lakhs
- Maximum turnover allowed in OPC is Rs.200 lakhs
- Conversion to private limited is only possible after two years of existence.
Majority choice for doing business is Private Limited Company as this structure has minimum compliance requirements compared to Public Limited Company.