Features of a Private Limited Company Image

Features of a Private Limited Company

Features of a Private Limited Company

A private limited company is a separate legal entity formed under Companies Act, 2013. It is generally formed by small businessmen who want to own a company but keep its affairs private. A private limited company is formed with a minimum capital of ₹1,00,000. It requires a minimum of 2 members but can have as many as 200. A private limited company is called a small company if its turnover as per the last audited financial statements is less than ₹2 crores and its paid up share capital does not exceed ₹50 lacs. we Know hear Features of a Private Limited Company.

Under the old companies act, that is, Companies Act, 1956 private limited companies enjoyed certain privileges. There were provisions which were expressly not applicable on private limited companies. But the new Act has modified that and quite a few provisions which were applicable only on public limited companies are now applicable even on the private ones.

The features of a private limited company are:

Non-transferability of shares

Companies Act, 2013 expressly restricts transfer of shares. This is done to prevent take over of small businesses by big public limited companies. It can also not purchase its own shares.

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Cannot accept deposits

The Act also prohibits private limited companies from asking money from public in form of loans or deposits. It cannot ask public to make monetary deposits. If it needs to borrow money it has to be done through financial institutions.

Number of directors

As per Companies Act, 2013 a private limited company needs to appoint at least 2 directors. Although they are not required to appoint any independent directors.

Limited liability 

In a company a person holds liability to the amount of shares he holds. Unlike partnership there will be no risk on the assets of a shareholder and he will not be required to pay anymore than the value of shares he holds.

Separate legal entity

Unlike sole proprietorship and partnership a company enjoys separate legal entity wherein even if the shareholders, directors or members of a company die, the company still continues to stay in existence. It can be taken over by other people who can then continue to run the business.

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