Characteristic Features of Private Companies

Private Sector — By Shopping Blogs on February 21, 2009 7:19 am

A company which is held by private individuals is said to be a private sector company. Here private hands have dual meanings; firstly if the ownership of the company is in the hands of a non- governmental organization and secondly when few of its shares are floated in the market but its trading is not done in the stock market.

There are many features available that make private firm different from public sector companies. To understand the private sector better let us have a glance at some of its characteristic features. Some of the important features of the private companies include:

Capital: The minimum paid up capital required for a private sector company for a start up is 100000. It is the amount of capital which is mandatory for a firm. While the maximum paid up capital in case of a private sector company has no limit. One can incorporate as much capital as he thinks is sufficient for the smooth functioning of a business.

Number of members: The maximum and minimum numbers of members are predefined in a private company and the company needs to follow the limits of its members strictly. The minimum numbers of members required in case of a private company are 2 and the maximum limit cannot exceed beyond 50 members.

Clause regarding prospectus issue: Prospectus is the main document required by a company to issue its shares to the general public. As a private company is not allowed trade its shares in the market, thus a prospectus is not issued to it.

Provision of share transferability: Purchasing of shares, its exchange or exchange by an individual leads to transferability of a share. It is strictly prohibited in the case of a private sector company to transfer its shares. This is a major part of the articles of association of the private company.

Number and consent of directors: A private company cannot be formed without minimum of two directors. The consent of directors also does not play a major role in the private sector companies. Actually there is no need for the directors’ consent when speaking about private sector companies.

With reference to the commencement of business: Commencement of a business refers to starting the working of a business setup. It is possible for a private sector company to commence its business immediately after receiving the certificate of incorporation. So, it is easy for a private company to start its business without much legal formalities.

Clause regarding the statutory meeting: The first meeting of a company is known as the statutory meeting. It is not obligatory on the part of a private company to hold a statutory meeting. It is a compulsion only for the public company.

Quorum requirements: It is mandatory in a private company to maintain a quorum of minimum two members at the time of board meetings. Alternative options may be opted for if the article of association specifies so.

So, to sum the topic of private sector all to be said is that numerous privileges are available to a private sector companies which one usually does not find in a public sector company. So, if you want to opt for a private business, do not forget to consider the above mentioned points before forming an organization. These features are counted as the essential elements of a private sector company.

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