1.6.3.

1 Distinction between private company and public company

A Private company can be distinguished from a public company on the
following points:
1. Minimum number of members: The minimum number of
persons
required to form a public company is seven. It is two in case of a
private company.
2. Maximum number of members: There is no restriction of
maximum number of members in a public company, whereas the
maximum number cannot exceed fifty in a private company.
3. Number of directors: A public company must have at least three
directors. Whereas, a private company must have at least two
directors. But where a private company is a subsidiary of a public
company, in that case, a private company must have three directors
(Sec. 90).
4. Restriction on appointment of directors: In the case of a
public company, the directors must file with the Registrar
consent to act as director or sign an undertaking to take up
qualification shares. The directors of a private company need
not do so (Sec. 92).
5. Transferability of shares: In a public Company, the shares are
freely transferable. In a private company the right to transfer shares
IS restricted by the Articles.
 Text Book on Commercial Law
434

6. Restriction on invitation to subscribe for shares: A public

invites the general public to subscribe for the shares or the
company
its Articles
debentures of the company. A private company by
such invitation to the public [Sec.2(1))].
prohibits any
must issue prospectus before
7. Prospectus: A public company
allowing allotment of shares. A private company may allot shares
without delivering to the Register a statement
issuing a prospectus or

in lieu of prospectus. (Sec. 138)

8.
8. Commencement of business: A private company can commence
business immediately on incorporation. Whereas, a public compan;
can not do so (Sec. 150).
9. Statutory meeting and report: A private company need not hold
statutory meeting or file with the Registrar the statutory report.A
public company is required to hold statutory meeting and file wil
theRegistrar statutory report (Sec. 83).
10. Special privileges: A private
company enjoys Some
some specl
special

privileges. A public company enjoys no such privileges.

1.12 Distinction between company
and partnership
The principal differences between a company and a partnership are
as
follows:
1. Regulating Act: A company is regulated oy the Companies Act, 1994
Act, 1994
While a
partnership is governed by the Partnership Act, 1932.
2. Mode of creation: A company comes into existence after registration
under the Companies Act, 1994. Registration is not compulsory in the case
of a partnership.
3. Legal status: A company is a body corporate, whereas a partnership is
an unincorporated association of individuals. In other
words, a company has
a legal
personality distinct from that of its members. A firm is not a person
in the eyes of the law; it is made up of the several persons who compose it.
From the above it follows:
(a) The members of a company are not personally liable for its
contracts, debts or for wrongs done by it, while the members of a
partnership firm are personally liable.
 Company Law 449

its
(b) The property and rights of a partnership are vested in
must
members, so that on a change in its membership its assets
and rights are
be transferred to the new partners; the property
assets
vested in it, so that it is never necessary to transfer its
when there is a change in its membership.
of a company belongs to the company and not
to
(c) The property own the
its individual members or shareholders (although they
firm is the joint
company) whereas the property of a partnership
of the who are collectively entitled to it.
partners
property
members: The liability of the members of company
a
4. Liability of satisfaction of the
unlimited company) to contribute towards
an
(except whereas are liable
debts and liabilities is limited, partners
company's debts and
limit to contribute towards payment of the partnership's
without
creditor obtaining
the partnership firm and a
liabilities. Again in the case of the
the firm can proceed against
and attach the property of
judgment against
is the creditor not of
in the firm. But the creditor of a company
partners and attach the
and cannot proceed against
shareholders but if the company
him. He can do
of the shareholders, who are not directly liable to
property
of the company.
so only against the property
are managed by
its directors, or
5. Management: The affairs of company
a
members have no right to
take in the
director or manager and its
managing a firm may take part
in its
On the other hand, every partner of
management. otherwise.
agreement provides
management unless the partnership
transferable,
Shares in a company are freely
6. Transferability of interest: his share
otherwise provide. A partner cannot transfer
unless its Articles
without the consent of other partners.
firm
of members: Each partner is an agent of the partnership
1.Authority so long as he
acts in the ordinary
to make and incur liabilities
contracts is not an
shareholder
firm's busines. On the other hand, a
Course of the his
to bind the company by
and has no such power
agent of the company
acts.
which the partners
can do anything
8. Powers: A partnership for example, are
a company's powers
limit to its activities;
agree to do and there is no of
clause in its Memorandum
mited to those allowed by the objects
association. of a
restrictions on the powers
. Restrictions on powers: In a partnership,
avail
partnership agreement will not
particular partner contained in the
association of a copany are
those in the Articles of
gainst outsiders, but document and anyone
because it is a public
cective as the
against public
can inspect it to find out what is in it.
 Commercial Law
450 Text Book on

of company: The bankruptcy of

10. Bankruptcy of firm and winding up
of all the partners, whereas the
a partnership fim means bankruptcy make the members bankrupt.
does not
winding up of a bankrupt company
11. Debts: If a company owes a
debt to any of its members he can claim
when it is wound up rateably with its other
payment out of its assets
his firm cannot usually
creditors, whereas a partner who is owed money by
in competition with its other creditors.
prove against the firm's assets
into for a fixed period, it
12. Dissolution: Unless a partnership is entered
time by any partner. It is also automatically
may be dissolved at any
A company has a
dissolved by the death or bankruptcy of a partner.
circumstance affecting a member, such as
perpetual succession. No personal
its existence. It
death, bankruptcy or unsoundness of mind, will affect
comes to an end only when it is wound up according to the provisions of the
Companies Act, 1994.
13. Number of members:
minimunm: The minimumn number of partners in a firm is
2
(a)
whereas the minimum number of members in a private company 1s
2 two) and in the case of a public company 7( seven).
maximum: The minimum number of partners in a firm carying on
(b) 20
banking business can be 10(ten) and in any other business
(twenty). The maximum number of shareholders in a private
number in
company is 50(fifty). There is no limit to the maximum
the case of a public company.