Highly Elegant Is A Private Or Public Limited Company For Desired Growth & Boom In India!

By Author: kavita123
Total Articles: 2
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In India, for two and more principal shareholders seeking to start a legally recognized business in any economic field, the two most preferred types of companies limited by shares, are the private limited company (Pvt. Ltd Company) and the Public Limited Company. Basically, both these two types of companies are forms of the joint stock companies, each of which holds multiple owners. These hugely popular private and public limited companies are duly defined in the clause 68 and clause 71 respectively, of the Section 2 of the new Indian Companies Act, 2013. Again, the property of limited liability which is enjoyed by each of these two companies, offers the advantages of financial security, pass through taxation, and maximization of tax-free income, etc., to the shareholders & directors of the company. In case, when such a company is ever sued (caused by a massive and unmanageable debts incurred by the company), then the whole company (as a separate legal entity) is ultimately responsible for repaying its debts and other liabilities; and any shareholder or director of the company is liable only for paying the amount equal to ...
... the investment (in the share capital) made by him or her in the company.
According to the extant Companies Act of 2013, there are essentially required at least two shareholders and two directors for incorporating a private limited company anywhere in India. On the other hand, for a public limited company incorporation, mandatory are a minimum of seven shareholders and three directors. The Registrar of Companies (ROC) of the concerned State is the immediate Government authority for registration of a private or public limited company in India. Again, the Companies (Amendment) Act, 2015, has eliminated the requirement of the minimum prescribed paid-up share capital for incorporation of each of these companies, as well as the need for obtaining the certificate of business commencement. However, the authorized share capital of a private or public limited company in India must be sufficient, and should be not less than ₹ One Lakh and ₹ Five Lakh for the private and public limited company, respectively. The authorized share capital of a company is the maximum amount of the share capital for which shares can be issued by the concerned company. The incorporation too of a private or public limited company in India, has now also been made rather swift and convenient under the auspices of the Ministry of Corporate Affairs (MCA), Government of India, and its many new Government Process Re-engineering (GPR) initiatives taken recently, which are stipulated below separately. Also, to promote further the ease of doing business in India, the Central as well as State governments have been ensuring many new and lavish facilities to the Indian and foreign investors. Currently, as per the World Bank’s 2020 Ease of Doing Business report, India ranks in the 63rd place among 190 countries across the world.
A private limited company in any desired economic field is highly suitable under the following situations ----
• When its stakeholders are limited in number, and cherish to run the business privately and grow steadily. The new Indian Companies Act of 2013 has increased the maximum permissible members in a private limited company to 200 (from just 50 allowed by the earlier Companies Act, 1056).
• When the paid-up share capital is moderate. However, increase in the number of permissible members in a private limited company shall be very beneficial in this respect also, for gathering bigger funds within the company, for the purposes of business expansion and diversification. Here, it must be noted that, a private limited company is not entitled to transfer its shares to outside public investors, nor can trade on the stock exchanges.
• When the company prefers to disclose only the mandatory pieces of information related with its administration and business, to the legal and regulatory authorities or the public. A private limited company enjoys much lesser disclosure requirements, mandatory compliances, and legal restrictions as compared to a public limited company.
On the other hand, a public limited company is utmost suitable for meeting the following business requirements and goals ----
• When the company has massive paid-up share capital for doing a business on large scale.
• When the company aspires to become a large corporate house through regularly increasing its shareholders, there being no upper limit to the maximum number of shareholders in a public limited company.
• When the company has ambitions to transfer its shares and debentures to public investors and trade on the recognized stock exchanges.
• The business growth and diversifications can be easily funded by a public limited company through transfer of its shares to outside public investors.
• Lastly, when a company treasures to grow its business across many fields, enhance its profitability & prominence, and ensure undaunted sustainability & growth in the concerned market.
The above-mentioned business affairs of a public limited company necessitate the maximal disclosures and regulatory compliances by the company, along with following strictly a rather wide range of rigorous legal restrictions. These disclosures, compliances, and legal instructions are to be followed by a public limited company with the prospective shareholders or investors, relevant ROC, regulatory legal authorities, and authorities working under the Securities and Exchange Board of India (SEBI), as prescribed from time to time. As conclusion, it must be here noted that, a public limited company is generally opted for gathering massive funds, funding ambitious & strategic business diversifications, enhancing profitability, fortifying sustainability amid intense business competitions, and raising one’s reputation in the market. For achieving these all aims, the CSR (Corporate Social Responsibility) provisions stipulated under the section 135 of the Companies Act of 2013 shall be highly beneficial, particularly to the large and listed public limited companies located in India.
Thus, on the whole, for doing a secure, profitable, and prestigious business or services in the interested economic field, any of these two limited companies is certainly perfect, particularly in India which is at present, one of the largest and fastest progressing economies in the whole world. Selection of the private or public limited company would be depending on certain conditions specified above. Again, noteworthy here also are the facts that for making a business successful and sustainable, the following are vital and of paramount importance --- a broad and high vision, unflinching dedication towards offering high-quality products or services at just reasonable and competitive prices, legal and regulatory perfection, generous and highly impressive services for customers, steadfast benefits to shareholders and their families, and an ever-growing goodwill and favorable reputation of the concerned company.
Today, for any above-specified limited company registration in India, available economically and conveniently also are the Integrated Company Incorporation Form INC-29 and the SPICe (Simplified Proforma for Incorporating Company Electronically) Form INC-32, as well as SPICe+ Forms. Each of these forms facilitates many necessary tasks in a single application, such as company name approval, obtaining DIN, company incorporation, and other related tasks. Separate forms for completing these tasks may also be utilized, which are Form INC-1, Form DIR-3, Form INC-7, DIR-12, INC-22, etc. Lastly, the author of this article wishes a bright and successful future to the ambitious entrepreneurs in India!