Private Limited Companies are those types of companies where minimum number of members is two and maximum number is two hundred. These are closely held businesses usually by family, friends and relatives.Private companies may issue stock and have shareholders. However, their shares do not trade on public exchanges and are not issued through an initial public offering.Shareholders may not be able to sell their shares without the agreement of the other shareholders. The main restriction The Company is a Private Company within the meaning of Section 2(68) of the Companies Act, 2013 and accordingly:-

  • Restricts the right to transfer its shares;
  • Limits the number of its members to two hundred:
  • Prohibits any invitation to the public to subscribe for any securities of the company;

These are major restriction that are put on private company to safeguard the interest of the investors.

The major advantage of Private Limited company:
  • More capital: More capital can be raised as the maximum number of shareholders allowed is 200.
  • Limited liability:  It means that if the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors.
  • Lesser statutory formalities: Private company enjoys less number of statutory formalities and rules & regulations
  • Minimum number of shareholders: Minimum number of shareholders need to start the business are only 2. One can start of the business with 2 members only.
  • Separate legal entity: A company is a legal entity and a juristic person established under the Act. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.