question_answer 16)

State the important privileges available to a private company.

Answer:

The following are some of the privileges of a private limited company as compared to a public limited company (i) The minimum number of members required to form a private company is only two while at least seven people are needed to form a public company. (ii) A private company does not need to issue a prospectus as public is not invited to subscribe to its shares. (iii) Allotment of shares can be done without receiving the minimum subscription. (iv) A private company can start business as soon as it receives the certificate of incorporation and does not have to wait for the receipt of certificate of commencement as in case of a public company. (v) A private company needs to have only two directors as against the minimum of three directors in the case of a public company. (vi) A private company is not required to keep an index of members unlike a public company. (vii) There is no restriction on the amount of loans to directors in a private company while in case of a public company permission from the government is required.