What is the minimum number of members required to form a private and public company in India?

A private company requires a minimum of 2 members and allows a maximum of

A public company requires a minimum of 7 members with no upper limit. These requirements are defined under Sections 2(68) and 2(71) of the Companies Act, 2013, respectively. 2. Can a private company accept deposits from the public?

No, a private company cannot accept deposits from the general public. It can only accept deposits from its shareholders, directors, and their relatives. A public company can accept public deposits, subject to compliance with Section 73(2) of the Companies Act, 2013, and RBI regulations.

What is a deemed public company under the Companies Act, 2013?

A deemed public company is a private company that operates as a subsidiary of a public company. Even though it carries the “Pvt. Ltd.” suffix, it must follow the same compliance norms as a public company under the Companies Act, 2013, including stricter governance and disclosure requirements.

How does managerial remuneration differ between a private and a public company?

Public companies cannot pay total managerial remuneration exceeding 11% of net profits in a financial year under Section 197 of the Companies Act,

Private companies face no such restriction. They can pay their managing director or whole-time director any remuneration agreed upon between the parties. 5. What is the quorum requirement for an AGM in a private and public company?

A private company needs just 2 members personally present to form a valid quorum at an AGM. A public company needs 5 members if the total membership is up to 1,000, 15 members if between 1,001 and 5,000, and 30 members if it exceeds 5,000, as per Section 103 of the Companies Act,

6. Do directors in a private company need to retire by rotation?

No, directors of a private company are not required to retire by rotation. In a public company, at least two-thirds of the directors are liable to retire by rotation, and one-third of those must retire at every AGM. This rule ensures regular board renewal in publicly accountable entities.

Can a private limited company raise funds through an IPO?

No, a private company must first convert to a public company under Section 18 of the Companies Act,

The conversion requires passing a special resolution, increasing the number of members to at least 7, and appointing a minimum of 3 directors. Form MGT-14 must be filed within 30 days of the resolution, and Form INC-27 within 15 days before approaching SEBI for an IPO. 8. Is a secretarial audit mandatory for private companies in India?

Secretarial audit applies to private companies only if outstanding loans or borrowings from banks or public financial institutions equal or exceed Rs. 100 crore. For public companies, any one of three triggers applies, paid-up capital of Rs. 50 crore, turnover of Rs. 250 crore, or loans of Rs. 100 crore. All listed companies must undergo it regardless of size under Section

9. What are the key similarities between a private and a public company?

Both private and public companies are incorporated under the Companies Act,

Both have a separate legal identity, offer limited liability to shareholders, require a statutory audit every year, must file annual returns with the RoC, and are managed by a Board of Directors. Perpetual succession applies to both structures equally. 10. Which is more tax-efficient, a private company or a public company?

Both private and public companies pay corporate tax at the same base rate under the Income Tax Act,

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Difference Between Private and Public Limited Company in India

Srihari Dhondalay

Updated:Jun 5, 2026

9 min read

difference between private limited company and public limited company

The difference between a public and private company lies in ownership, share transferability, compliance requirements, and access to capital. A private company restricts share transfers and caps its membership at 200. It cannot invite the public to subscribe to its shares. A public company, on the other hand, trades its shares freely on stock exchanges like the NSE and BSE. It has no upper limit on members and can raise capital through an IPO.

Both structures fall under the Companies Act, 2013, but they differ in how they own shares, raise capital, and meet compliance requirements. This guide covers everything you need to know about the difference between a private and public company, definitions, and key distinctions under the Companies Act, 2013.

Key Takeaways

A private company is defined under Section 2(68) and a public company under Section 2(71) of the Companies Act, 2013.
A private company caps membership at 200 members and restricts share transfers. A public company has no membership limit and allows free share trading.
A private company requires a minimum of 2 members and 2 directors. A public company requires a minimum of 7 members and 3 directors.
Public companies cap total managerial remuneration at 11% of net profits under Section 197. No such restriction applies to private companies.
Secretarial audit applies to private companies only if outstanding borrowings equal or exceed Rs. 100 crore under Rule 9.
Public companies can accept deposits from the public under Section 76, subject to a net worth of Rs. 100 crore or turnover of Rs. 500 crore.
A private company can convert to a public company under Section 18 by filing Form MGT-14 and Form INC-27 with the RoC.

What is a Private Limited Company?

A private limited company is a privately held business entity incorporated under the Companies Act, 2013. It is owned and controlled by a closed group of founders, family members, or private investors, and is not open to the general public.

Under Section 2(68) of the Companies Act, 2013, it caps membership at 200 members. It requires a minimum of 2 members and 2 directors. The company uses the suffix “Pvt. Ltd.” in its name.

Private Limited Company Incorporation is the most popular structure for startups and SMEs in India. It offers limited liability, flexibility, and lower compliance requirements.

What is a Public Company?

A public company is a legally incorporated business entity that raises capital from the general public by offering its shares on recognised stock exchanges. It operates under strict regulatory oversight from SEBI and the MCA.

Under Section 2(71) of the Companies Act, 2013, a public company can offer its shares to the general public. It has no upper limit on members and faces no restrictions on share transfers. It requires a minimum of 7 members and 3 directors.

The company uses the suffix “Limited” or “Ltd.” in its name. Any private company that operates as a subsidiary of a public company is also treated as a public company under the Act.

Public Limited Company Registration suits businesses that need large-scale capital. It offers access to stock exchanges like the NSE and BSE, a broader investor base, and greater market credibility.

What is the Difference Between a Private Company and a Public Company?

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

Parameter	Private Company	Public Company
Governing Section	Section 2(68)	Section 2(71)
Name Suffix	Pvt. Ltd.	Ltd.
Minimum Members	2	7
Maximum Members	200	No limit
Minimum Directors	2	3
Independent Directors	Not mandatory	Mandatory (if listed)
Share Transfer	Restricted	Freely transferable
Stock Exchange Listing	Not allowed	Allowed (NSE / BSE)
Invitation to the Public	Not permitted	Permitted via IPO / prospectus
Raising Public Deposits	Not allowed	Allowed under Section 76 (eligible public companies with net worth ≥ Rs. 100 crore or turnover ≥ Rs. 500 crore)
Minimum Paid-up Capital	No minimum	No minimum
Board Meetings per Year	Minimum 4 (Section 173)	Minimum 4 (Section 173)
AGM Quorum	2 members	5 / 15 / 30 members
Managerial Remuneration	No restriction	Capped at 11% of net profits
Director Retirement	Generally not mandatory unless provided in the Articles of Association (AoA)	1/3rd retire at each AGM
Prospectus Requirement	Not required	Required for public issue
SEBI Compliance	Not applicable	Mandatory if listed
Secretarial Audit	Not mandatory	Mandatory above threshold
Compliance Burden	Lower	Higher (additional forms: MGT-14, MR-3, SEBI quarterly disclosures, corporate governance report)
Ideal For	Startups and SMEs	Large-scale businesses
Funding Sources	Angel investors, VC, private equity, and bank loans	IPO, FPO, rights issue, public deposits, stock markets

Note: The minimum paid-up capital requirement of Rs. 1 lakh (private) and Rs. 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.

Advantages and Disadvantages of Private and Public Companies in India

A founder who only sees the advantages of a public company may rush into an IPO before the business is ready. One who only sees the disadvantages of a private company may give up control too early. Knowing both angles helps you choose the right structure at the right time:

	Private Limited Company	Public Limited Company
Advantages	Founders retain full control	Raises large-scale capital through IPO
	Lower compliance burden and costs	Shares are freely tradable
	Financials are not publicly disclosed	Higher brand credibility and market visibility
	Faster decision-making with fewer shareholders	Employees incentivized through listed ESOPs
	Limited liability protects personal assets	No cap on membership or shareholders
Disadvantages	Cannot raise capital from the general public	Heavy compliance burden under SEBI
	Share transfer requires approval and limited liquidity	Founders dilute control as shareholders increase
	Growth is restricted without public funding	Financials are disclosed publicly every quarter
	Maximum membership capped at 200	The cost of going public and staying listed is high

Note: Most Indian startups begin as private limited companies and convert to public only when they are ready for an IPO. Companies like Zomato, Nykaa, and Paytm all started as private limited companies before listing on the NSE and BSE.

If you are considering this route, read our detailed guide on the conversion of a private company into a public company in India and know full detail.

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

Both structures serve different business needs at varying stages of growth. The right choice depends on where your business stands today and where you plan to take it in the future. Here is a practical breakdown to help you decide:

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:

Large-scale capital is needed through an IPO, FPO, or stock market listing.
SEBI and Companies Act, 2013 compliance norms are something you are prepared to meet.
Brand credibility and market visibility from a public listing matter to your business.
Liquidity for early investors and listed ESOPs for employees are priorities.

Note: A private limited company can convert into a public limited company at any time. It must increase the number of members to 7, appoint a minimum of 3 directors, and amend its Articles of Association (AoA). Most companies do this just before an IPO.

If you’re considering starting a business and need guidance on choosing the right business structure, consult a legal expert today! Contact RegisterKaro for more information.

Srihari Dhondalay

Srihari Dhondalay is a Chartered Accountant and Co-Founder at RegisterKaro with over 7 years of experience in financial strategy, taxation, and business advisory. Before co-founding RegisterKaro, he honed his expertise at KPMG and Angel Broking, working across audit, tax planning, and corporate finance. Having cleared the CA Final, IPCC, and CPT exams, Srihari now focuses on helping early-stage founders make smarter financial decisions, from GST structuring to fundraise-ready bookkeeping. He has personally advised over 1,000 startups and SMEs across India.