Question

What do you mean by 'Private Company' and 'Public Company'? Distinguish between Private Company and Public Company.

Hint:

Private: max 200 members, restricted transfer, no public invitation. Public: no cap, free transfer, can invite public.

Answer 1

Step 1: Define Private Company:
As per Section 2(68) of the Companies Act, 2013, a private company is one whose Articles restrict the right to transfer its shares, limits its members to 200 (excluding present/past employees), and prohibits any invitation to the public to subscribe for its securities.

Step 2: Define Public Company:
As per Section 2(71), a public company is one that is not a private company — it places no restriction on the transfer of its shares, has no upper limit on membership, and may invite the public to subscribe for its shares/debentures through a prospectus.

Step 3: Distinguish them on key points:

Basis	Private Company	Public Company
Minimum members	2	7
Maximum members	200	No limit
Transfer of shares	Restricted	Freely transferable
Invitation to public	Not allowed	Allowed, via prospectus
Minimum directors	2	3
Name suffix	‘Private Limited’	‘Limited’

Final Answer:
A private company restricts share transfer and caps membership at 200 with no public invitation, while a public company allows free share transfer, has no membership ceiling, and can invite the public to subscribe — differing on minimum members, maximum members, transferability, and ability to raise capital from the public.