In one-liner, Private Company limited by shares is referred for such a company that enjoys the privilege of limited liability. The members are actually the entities that together comprise a Private company hence they have limited liability and the extent of their liabilities is up to the maximum amount that is invested by them. The invested amount made up of two parts. Firstly, it is the nominal amount of shares followed by the amount paid in the form of premium in relation to the issue of shares. This is the maximum amount for which they can be held liable in the case of the legal proceedings or alternatively the litigation in relation to the liquidation. The private companies are subject to limited regulations and disclosure requirements in comparison to the Public company. The reason that the public company used to be the subject of the extensive regulation and disclosure requirements is because of the involvement of the public stake.
Small Companies, Naming Convention and Disclosure Requirements
Small companies are essentially Private companies. The rationale they are referred to as the small companies is their small scale of operations and conduct of business. In relation to naming convention, private companies names’ are followed by the suffixes that is ltd, inc which represents limited, incorporated words respectively and demonstrate the limited liability of the company in real-time. The companies Act in most of the common wealth countries is almost similar and comparable. In accordance with the provisions of the act in relation to the matters of the company, the private companies are required to have at least one director followed by a position of secretary as well. It is important to note that for the position of director or the secretary, the potential candidate should be an individual and have legal capacity and should not be adjudged a Bankrupt from the position of the court of law.
Share Certificates and Accounts of the Private Company
It is an essential requirement in relation to the incorporation of the private company; the company formally issues certificates of the shares of the same company to the subscriber and the potential subscribers against consideration of their agreeing to be members and forwarding the premiums to the company in this regard. The shares used to have added feature of transferable to some other subscriber or alternatively the authorized representative of the transferor subscriber. The private companies are subjected to the requirement of making annual and periodic accounts. Over and above, the companies are required to have the audit of the same and then ensure the filings of the audited accounts in the appropriate forums such as securities exchange commission and the registrar. Over and above, private companies are required to have the registered office to make sure the communication of the regulatory authorities and other stakeholders with the company.
Conversion to the Public Company
A private company can be easily converted into the public company by making some essential changes to the articles of association in addition to complying with the requirements of the companies act regarding the passing of the special resolution.
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