What is private Limited Company?

“Private Company” means a company having a minimum paid-up share capital as may be prescribed, and which by its articles:–

(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that –

(a) persons who are in the employment of the company; and

(b) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company.

(Section 2(68) of the Companies Act, 2013)

Points to be noted

  • Definition of private limited company specifies the restrictions, limitations and prohibitions must be expressly provided in the articles of association of a private limited company.
  • Only the number of members that is limited to two hundred. A private company may issue debentures to any number of persons, the only condition being that an invitation to the public to subscribe for debentures is prohibited.
  • if a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, such company shall, as from the date of such alteration, cease to be a private company.( Section 14 (1) of the CA 2013)
  • The words ‘Private Limited’ must be added at the end of its name by a private limited company.
  • A private company may be formed for any lawful purpose by two or more persons, by subscribing their names to a memorandum and complying with the requirements of this Act in respect of registration. (Section 3(1), of CA 2013)
  • A private company shall have a minimum number of two directors. (Section 149(1) of the CA 2013 ) . The only two members may also be the two directors of the private company.

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