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Question
Why is a private company more desirable than a public company? Give any two reasons.
Solution
Inspite of certain restrictions imposed on a private company, it enjoys certain privileges under the Companies Act. A substantial number of entrepreneurs prefer to form a private company because of the following important privileges:
- Only two members are required to form a private company.
- Only two directors are required to constitute the quorum to validate the proceedings of the meetings.
- Such company can file a statement in lieu of prospectus with the Registrar of Companies.
- It can commence its business immediately after incorporation.
- Holding of a statutory meeting or filing of a statutory report is required by a private company.
- A non-member cannot inspect the copies of the profit and loss A/c filed with the Registrar.
- Limit on payment of maximum managerial remuneration does not apply to a private company.
- Restrictions on appointment and reappointment of managing director do not apply.
- Maintaining of index of members is not required by a private company.
- Directors of the private company need not have qualification shares.
Notes
(Write any two points)
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