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Question
State the important privileges available to a private company.
Solution
A private company enjoys certain exemptions or privileges which are often not available to a public company. Some of the privileges enjoyed by a private company are given below.
(a) Lesser number of members required: A private company requires only two members for formation, while a public company requires at least seven members.
(b) Commencement of business: A private company can start its business operations right from the day of receiving the certificate of incorporation. On the other hand, it is mandatory for a public company to obtain a certificate of commencement along with a certificate of incorporation before starting business.
(c) No restriction on advancing loans to the directors: In the case of a private company, there is no restriction on the amount of loans that can be granted to the directors. No prior permissions are required to be sought for advancing such loans. In contrast, a public company has to seek permission from the government before advancing loans to its directors.
(d) Lesser number of directors required for operations: A private company can continue operations with just two directors, whereas a public company must have at least three directors to continue its operations.
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