Difference Between Private and Public Company in India

Key Takeaways

• A private company, defined under Section 2(68) of the Companies Act, 2013, needs at least 2 members (1 for an OPC) and 2 directors. Meanwhile, a public company, under Section 2(71), needs 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: What is Better

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. A subsidiary of a public company is also treated as public. making it a deemed public company under the Companies Act.
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 make a public offer or list equity shares	Can issue securities and seek a stock exchange listing, subject to the Companies Act, SEBI regulations, and exchange requirements. However, stock listing is not automatic
Minimum Capital	No minimum paid-up capital requirement	No minimum paid-up capital requirement
Total Incorporation Cost*	Starting from ₹8,000	Starting from ₹20,000
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 between 2 of them, subject to applicable exemptions
Annual Return	MGT-7, or MGT-7A for an eligible small company or OPC	MGT-7
AGM Quorum	2 members	5 members up to 1,000 members; 15 members between 1,001 and 5,000; 30 members above 5,000
MGT-14 Filing Exemption	Exempt from filing specified Board resolutions under Section 179(3), subject to the applicable private-company exemption and conditions. Special resolutions and other resolutions covered by Section 117 must still be filed where required	Must file resolutions covered by Section 117 and other applicable provisions. Not every Board resolution requires MGT-14
Audit Committee (Section 177)	Not required	Required for listed companies and for public companies with paid-up capital of ₹10 crore or more, turnover of ₹100 crore or more, or loans, borrowings, debentures and deposits above ₹50 crore. It must have at least 3 directors, most of them independent
Nomination and Remuneration Committee (Section 178)	Not required	Required in the same cases as the Audit Committee. It must have at least 3 non-executive directors, at least half of them independent. It recommends the appointment and pay of directors and senior management
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 Companies (Amendment) Act, 2015 removed the minimum paid-up capital requirement of ₹1 lakh (private) and ₹5 lakh (public). 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:

• You want to retain control among founders and selected investors.
• Your business needs funding through angel investors, venture capital, or private equity.
• You prefer lower compliance requirements and greater privacy, subject to applicable legal requirements.
• You want the option to convert into a public company as your business grows.

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.
• You need a wider shareholder base without a statutory maximum membership limit.
• 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: Under Section 18 of the Companies Act, 2013, read with Section 14 and Rule 33 of the Companies (Incorporation) Rules, 2014, you can convert a private limited company into a public limited company by:

• Increasing the number of members to at least 7 and appointing at least 3 directors.
• Passing a special resolution to amend the Articles of Association (AoA) and the company’s name clause.
• Filing Forms MGT-14 and INC-27 with the Registrar of Companies (RoC).

This conversion is simpler than the conversion of a public company into a private company, as it needs only a special resolution and RoC filings. 

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.
• In companies limited by shares, shareholders’ liability is generally limited to the unpaid amount on their shares.
• Both types have perpetual succession, so changes in shareholders or directors do not end the company’s existence.
• 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).
• Both must maintain a registered office in India and appoint directors as required under the Companies Act, 2013.

While these similarities give private and public companies the same basic legal foundation, their differences become more significant when raising capital. The company type determines which funding routes founders can use, from private investments and loans to public issues and stock market listing.

Advantages and Disadvantages of Private and Public Companies

Private and public companies differ in founder control, access to funding, and compliance requirements. The advantages and disadvantages of each structure are:

Advantages of a Private Company

• Founder control: A small group of shareholders gives founders greater control over ownership and business decisions.
• Faster decisions: Fewer shareholders can make it easier to agree on investments, hiring, and business priorities.
• Lower running costs: Fewer disclosure and governance requirements generally mean lower compliance costs than for listed companies.
• Confidentiality: Private companies file financial statements and annual returns with the ROC but do not face the continuous market disclosures required of listed companies.
• Flexible ownership terms: The Articles of Association (AOA) can define share transfer restrictions, investor rights, and exit terms, subject to applicable law.

Disadvantages of a Private Company

• Limited access to capital: Funding relies on founders, private investors, and lenders because the company cannot invite the public to subscribe to its securities.
• Limited share liquidity: Shareholders cannot sell shares on a public stock exchange, making exits dependent on finding a suitable buyer and meeting transfer requirements.
• No market-based share price: Valuing the company for fundraising, ESOPs, or a sale may require a separate valuation.
• Membership ceiling: A private company generally cannot have more than 200 members, subject to statutory exclusions, which can limit ownership expansion.

Advantages of a Public Company

• Access to public capital: Eligible companies can raise funds through IPOs, FPOs, and other permitted securities issues.
• Shareholder liquidity: Shares of a listed company can be traded on a stock exchange, giving investors a more accessible exit route.
• Market-based valuation: A traded share price provides a visible company valuation and can support share-based acquisitions.
• Greater visibility: Listing can improve the company’s profile among customers, lenders, investors, and business partners.

Disadvantages of a Public Company

• Reduced founder control: Wider ownership can dilute founders’ voting power and increase shareholder influence.
• Higher costs: Listing fees, additional reporting, governance requirements, and investor relations increase ongoing expenses.
• Greater scrutiny: Financial results and significant decisions face closer attention from regulators, investors, analysts, and the public.
• Slower decisions: Shareholder approvals and additional regulatory requirements can delay certain business decisions.
• Market pressure: Share price movements and investor expectations can push management to prioritize short-term performance over long-term growth.

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

The table below compares the funding routes available to private and public companies and the conditions that apply to each:

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 and the Companies (Acceptance of Deposits) Rules, 2014	Not permitted	Permitted for an eligible public company with a net worth of ₹100 crore or a turnover of ₹500 crore. It must also meet the rules on shareholder approval, credit rating, deposit limits, and filings
Deposits from members	Section 73(2)	Permitted with relaxed conditions if deposits stay within 100% of paid-up capital, free reserves and securities premium, or if the company is a startup or meets the low-borrowing conditions. Details are filed in Form DPT-3	Permitted on the full statutory conditions
Rights issue notice period	Section 62(1)(a)	Generally 7 to 30 days. A shorter period may apply with written or electronic consent from at least 90% of members, subject to the applicable exemption and conditions.	Generally 7 to 30 days (Rule 12A reduced the minimum statutory floor to 7 days)

Note: Private companies cannot invite the public to subscribe to their securities. Public companies may access public fundraising routes subject to the relevant legal and regulatory requirements. Public deposits have separate eligibility and compliance conditions, and an unlisted public company cannot list its securities without meeting the applicable listing requirements.

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
• Prohibits invitation to the public to subscribe for any securities (shares or debentures) of the company 

Pvt Ltd Company Registration gives a business a separate legal identity, limited liability, and a structured ownership model. Requiring at least 2 members and 2 directors, it is a suitable option for entrepreneurs who want to protect personal assets from business liabilities while retaining control and bringing in private investors as the company grows.

What is a Public Company Under Section 2(71)? Meaning and Features

A Public Company, requiring a minimum of 7 members and 3 directors (see the minimum and maximum number of directors in 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, backed by the documents required for public limited 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:

• 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.

Unlike a private company, a public company can access a broader pool of investors to raise capital for business expansion. It can also list its securities on recognized stock exchanges, such as the NSE and BSE, if applicable. These benefits make public companies suitable for large businesses seeking substantial funding, wider ownership, and long-term expansion.