Companies Act Section 2(68) Private Company

Private Company Section 2 (68)

A Private Company is a type of company that is privately held, typically by a small group of individuals or entities. It is characterized by restrictions on transferability of shares and limitations on the number of shareholders.

Key Characteristics:

1. Restrictions on Shareholders:

A Private Company restricts the right to transfer its shares. Shares of a private company cannot be freely traded on the stock exchange and usually require consent from existing shareholders for transfer.

The maximum number of shareholders in a private company is limited to 200, excluding employees who hold shares through an employee stock option plan (ESOP).

2. Minimum Number of Directors:

A Private Company must have a minimum of two directors. However, a One Person Company (OPC) can be incorporated with only one director.

3. Share Capital:

There is no minimum capital requirement for a Private Company under the Companies Act, 2013. 

It can be registered with a nominal share capital as decided by its promoters.

4. Operational Flexibility:

Private Companies have more flexibility in operations compared to public companies. 

They are not required to hold annual general meetings (AGMs) as frequently as public companies and can operate with less stringent regulatory requirements.

5. Corporate Governance:

While they enjoy operational flexibility, private companies are still required to comply with certain corporate governance standards, including maintenance of statutory registers, filing of annual financial statements, and adherence to tax and regulatory obligations.

Advantages:

Ownership Control: 

Founders and promoters maintain control over the company’s ownership and direction due to limited shareholders.  

Privacy: 

Operations and financial details are less exposed to public scrutiny compared to public companies.  

Operational Flexibility: 

Easier decision-making processes and quicker operational changes due to fewer regulatory requirements.

Compliance and Regulations:

Companies Act, 2013: 

Private Companies must comply with provisions related to incorporation, management, governance, and winding-up as per the Act.  

SEBI Regulations: 

Certain provisions under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, apply to private companies if they opt for listing on stock exchanges or have issued debt securities.