Difference Between Private and Public Company in India

Key Takeaways

• Private companies require at least 2 members and 2 directors, while public companies require at least 7 members and 3 directors.
• A private company can have up to 200 members and must restrict share transfers. A public company has no statutory maximum membership limit and generally allows free transfer of shares.
• A private company cannot make a public offer of securities, while a public company can pursue public fundraising and listing subject to applicable requirements.
• Both structures provide limited liability, separate legal identity, and perpetual succession.
• Private companies generally have simpler governance and lower compliance requirements, while public companies face additional governance and disclosure requirements.
• A public company is not automatically a listed company. Listing requires a separate regulatory and stock-exchange process.

Key Differences Between a Private Company and a Public Company (Tabular Form)

The table below covers all key parameters that distinguish a private company from a public company under the Companies Act, 2013:

Parameter	Private Company	Public Company
Governing Section	Section 2(68)	Section 2(71)
Definition	Restricts share transfers, limits members to 200, and cannot invite the public to subscribe to securities	Any company that is not a private company, including a private company that is a subsidiary of a public company
Name Suffix	Pvt. Ltd.	Ltd.
Minimum Members	2	7
Maximum Members	200	No limit
Minimum Directors	2	3
Resident Director	At least 1 resident director	At least 1 resident director
Share Transfer	Restricted through Articles of Association	Shares of a public company are generally freely transferable, subject to applicable law and the company’s constitutional documents
Public Issue / Listing	Cannot list equity shares	Can issue securities and may list on stock exchanges
Minimum Capital	No minimum paid-up capital requirement	No minimum paid-up capital requirement
Total Incorporation Cost*	Starting from ₹8,000	Starting from ₹15,000
Board Meetings	Minimum 4 a year, gap not exceeding 120 days. A small or dormant company holds 2 meetings a year, at least 90 days apart	Minimum 4 meetings annually, not exceeding a gap of 120 days, subject to applicable exemptions
AGM Quorum	2 members	5 members up to 1,000 members; 15 members between 1,001 and 5,000; 30 members above 5,000
Ideal For	Startups and SMEs	Businesses that need a wider ownership base or may pursue public fundraising/listing
Examples	Zoho Corporation, Parle Products	Reliance Industries, Infosys

The minimum paid-up capital requirement of ₹1 lakh (private) and ₹5 lakh (public) was removed by the Companies (Amendment) Act, 2015. Now, there is no mandatory minimum capital to incorporate either type of company in India.

Note*: Incorporation cost varies based on factors such as authorized capital, state-specific stamp duty, number of directors, DSC requirements, and professional fees. The figures above are indicative starting costs, not fixed government fees.

Private Company vs Public Company: Which Structure is Right for You?

The right choice between a Private and Public Limited Company depends on your ownership preferences, funding plans, and long-term business goals. 

Choose a Private Limited Company if:

• Control matters; founders want to retain full decision-making authority.
• Your business is at an early or growth stage.
• Lower compliance costs and operational privacy are priorities.
• Funding needs are moderate and met by angel investors, venture capital, or private equity.
• You plan to convert to a public company later, when ready for an IPO.

Choose a Public Limited Company if:

• You need large-scale capital through an IPO, FPO, or stock market listing.
• Listing on the NSE or BSE forms part of your expansion strategy.
• Higher compliance and disclosure requirements under the Companies Act, 2013, and SEBI regulations fit your governance framework.
• Wider shareholder participation and share liquidity will support your business objectives.
• Rapid expansion, acquisitions, or institutional investment require access to public capital markets.

Note: You can convert a private limited company into a public limited company under Section 18 of the Companies Act, 2013. The process involves increasing the membership to at least 7 members, appointing at least 3 directors, passing a special resolution to amend the Articles of Association and name clause, and filing MGT-14 and INC-27 with the RoC.

Which Funding Routes Can a Private and a Public Company Actually Use? 

Private and public companies can use most private funding routes, including founder capital, loans, venture debt, and investments from angel investors, VCs, and private equity firms.

Funding route	Governing provision	Private Company	Public Company
Public issue, IPO and follow-on offers	Sections 23 and 26	Not permitted	Permitted
Equity listing on the NSE or BSE	SEBI ICDR Regulations	Not permitted	Permitted after meeting listing conditions
Deposits from the public	Section 76	Not permitted	Permitted for an eligible public company at ₹100 crore net worth or ₹500 crore turnover
Deposits from members	Section 73(2)	Permitted on relaxed conditions, where the company stays within the prescribed investment and borrowing limits	Permitted on the full statutory conditions
Rights issue notice period	Section 62(1)(a)	Can be shortened with 90 per cent member consent	Full statutory notice period applies

Note: Private companies are restricted from public fundraising, while eligible public companies have access to additional funding routes. However, an unlisted public company still relies largely on private funding methods until it meets the requirements for a public listing. 

Private vs Public Company: Compliance Thresholds, Forms and Audits

Both private and public companies follow core annual requirements, including statutory audits, AOC-4, annual returns, DIR-3 KYC, and DPT-3 where applicable. Here’s how they differ:

Compliance	Private Company	Public Company
Annual return	MGT-7, or MGT-7A for an eligible small company or OPC	MGT-7
Internal audit (Section 138)	Applies when prescribed thresholds are met	Applies to listed companies and other prescribed companies
Secretarial audit (Section 204)	Applies when prescribed thresholds are met	Applies to listed companies and other prescribed companies
Audit and NRC committees (Sections 177 & 178)	Generally not required	Required for listed companies and certain prescribed public companies
MGT-14 filing (Section 117)	Exempt for specified Section 179(3) board resolutions	Required for applicable resolutions
Whole-time Company Secretary	Required at the prescribed paid-up capital threshold	Same requirement applies

Private companies generally face additional governance requirements only when specific thresholds apply. Meanwhile, public companies, particularly listed ones, face broader governance and disclosure obligations.

What is a Private Limited Company? Which Features Make it Different?

A private limited company is a privately held business entity incorporated under the Companies Act, 2013. Under Section 2(68) of the Companies Act, 2013, a private company:

• Restricts the transfer of shares
• Limits its members to 200
• Requires a minimum of 2 members and 2 directors.

Key Features of a Private Limited Company

Here are the key advantages of Pvt Ltd Company Registration:

• Limited Liability: Shareholders’ liability remains limited to the unpaid amount on their shares, protecting their personal assets from business liabilities.
• Separate Legal Entity: The company can own assets, enter into contracts, and sue or be sued in its own name.
• Closely Held Ownership: Share transfer restrictions help founders retain ownership and control.
• Access to Private Funding: The company can raise capital from angel investors, venture capital firms, private equity investors, and other private sources.
• Perpetual Succession: The company continues to exist regardless of changes in its shareholders or directors.
• Investor-Ready Structure: A clear shareholding structure, the ability to issue equity and ESOPs, and a well-maintained cap table make a Private Limited Company easier for investors to evaluate and fund.
• Scalable Structure: The company can issue new shares to existing or new investors, making it well-suited for startups and high-growth businesses.

What is a Public Company? What are its Key Characteristics?

A Public Company is a company incorporated under the Companies Act, 2013 that can invite the public to subscribe to its securities. Through Public Company Registration, businesses can raise capital from a broad investor base and, subject to applicable laws, list their securities on recognized stock exchanges.

Under Section 2(71) of the Companies Act, 2013, a public company:

• Requires at least 7 members and 3 directors.
• Has no maximum limit on the number of members.
• Allows the free transfer of shares, subject to applicable laws and regulations.
• Must use “Limited” as the suffix in its name.

Key Features of a Public Company

A public company structure is designed for businesses that require wider ownership, larger funding opportunities, and greater transparency. Its key features include:

• Raises Funds from Public Investors: A public company can access public fundraising and may list its securities if it meets the applicable Companies Act, SEBI, and stock-exchange requirements.
• Enables Stock Exchange Listing: The company can list its shares on recognized exchanges such as the NSE and BSE after meeting applicable requirements.
• Supports Large Investor Base: The company can have unlimited members, allowing broader ownership participation.
• Allows Easier Share Transfers: Shareholders can transfer their shares with fewer ownership restrictions compared to private companies.
• Builds Greater Market Trust: The company follows higher disclosure and compliance requirements, improving transparency for investors and stakeholders.
• Facilitates Large-Scale Growth: The structure supports businesses seeking institutional investment, public fundraising, and nationwide expansion.

Similarities Between Private and Public Companies

Despite their differences, private and public companies share several core features under the Companies Act, 2013:

• Each company has its own legal identity and can own property, enter into contracts, and sue or be sued in its own name.
• Shareholders remain liable only to the extent of the unpaid amount on their shares.
• The company continues to exist even if its shareholders or directors change.
• Both public and private companies incorporate through the SPICe+ application on the MCA portal.
• Companies with share capital must file Form INC-20A under Section 10A before commencing business or exercising borrowing powers.
• Each company must file annual financial statements and annual returns with the Registrar of Companies (RoC).

Still deciding between a Private and Public Limited Company? Our experts can assess your business goals, funding plans, and compliance needs, recommend the right structure, and handle the registration from start to finish. Fill out the form, and our team will get in touch.