subject: PRIVILEGES ENJOYED BY PRIVATE COMPANY-New amendments [print this page] PRIVILEGES ENJOYED BY PRIVATE COMPANY-New amendments
It is widely accepted that, private and public companies are regulated by the provisions of the Companies act, 1956. However certain provisions of the Act do not apply to a private company. These are the privileges which private company enjoys over the public company under the act. They are summarized below:
1) The minimum number of members in a private company can be two only as against seven in a public company.
2) Provisions regarding minimum subscription before allotment of shares do not apply to a private company.
3) A private company need not file a prospectus or a statement in lieu of prospectus with the Registrar
4) Further shares can be issued without passing special resolution o obtaining Central Government's approval and need not be offered other existing members
5) Private company may issue share capital of such kinds in such forms and with such voting rights as it may think fit. However, its paid up capital shall not be less than rupees one lakh.
6) Private company can commence business immediately on incorporation.
7) Private company need not keep an index of members.
8) Private company need not hold statutory meeting or file statutory report.
9) Provisions as to overall maximum managerial remuneration and remuneration to directors do not apply to a private company.
10) Minimum number of directors is only tow in a private company.
11) Provisions as to proportion of directors liable to retire by rotation do not apply to a private company.
12) Director's consent to act as such is not required.
13) Restrictions on appointment of directors as regards their consent and holding qualification shares do not apply to a private company.
14) Government approval to appointment or amendment of provisions relating to managing or whole tem or non rotational directors is not required.
15) Director's contract to take up qualification shares need not be filed with the registrar of companies,.
16) Provisions regarding loans to directors do not apply.
17) Provisions regarding interested directors not to participate or vote in Board's proceedings do not apply.
18) Provisions requiring government approval fro increasing remuneration of a director or managing director do not apply.
19) Prohibition regarding appointment of a managing director for more than five years at a time does not apply.
20) Restrictions on advancing loans to other companies do not supply
21) Provision relating to transfer of shares not to be registered except on production of instrument of transfer, transfer by legal representative application for transfer and power to refuse registration an appeal against refusal do not apply without prejudice to a power of a private company to enforce its restrictions against the right to transfer the shares f such company.
Private company may lose its privilege, When it fails to comply with the essential requirements of a private company (Sec 3(1) (iii)) Discussed default complying with the said provisions shall disentitle a private company from the privileges and exemptions it is entitled to. The Companies act shall apply to such a company as if it were not private company (Sec43).
