What is a Private Limited Company? Meaning, features, and more.

हिंदी में पढ़ें:

Small unit businesses can be handled comfortably with sole proprietorship or partnership firm but if the business is big or the business is growing then we will need more resources and as the business grows the risk also increases. To solve this problem the concept of Private Limited was established. The Companies Act, 2013 regulates private limited companies.

What is a Private Limited Company?

Meaning of Private Limited Company

Private limited company means a company which is registered under the Companies Act and only a few members are the owners of that company.

In simple language, private limited company means privately owned company. It has a minimum of 2 members and a maximum of 200 members.

Definition of Private Limited Company

According to Section 2(68) of the Companies Act, 2013 -“Private Company means a company having a minimum paid-up share capital of one lakh rupees or such higher paid-up share capital as may be prescribed, and which by its articles, —

(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this clause, be treated as a single member:

Provided further that—
(A) persons who are in the employment of the company; and
(B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company.”

Note: The words “of one lakh rupees or such higher paid-up share capital” omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015)

Features of Private Limited Company

Following are the features of Private Limited Company:

1. Member:

Company is an association of members. Private Limited Company has minimum 2 and maximum 200 members.

Minimum – 2
Maximum – 200

2. Separate Legal Entity:

Separate legal entity is the biggest feature of a private limited company because under it the company gets separated from its owner and becomes a separate legal entity. According to this, the company and its owner are two different persons.

3. Limited Liability:

Members of a private limited company enjoy limited liability facilities. Under limited liability, member is liable only up to his share.

4. Perpetual Succession:

Perpetual succession means continuity, according to which members may come and go but the company will continue. The company cannot be closed unless it is closed.

5. Ability to Sue:

When the business is registered under the Companies Act, the business gets a separate legal entity under the law, under which the company can sue anyone in its name.

6. Capacity of Ownership:

When the business is registered under the Companies Act, the business gets a separate legal entity under the law, under which the company can buy and sell property in its own name.

7. Name:

A business registered under the concept of Private Limited Company in the Companies Act must add Private Limited (Pvt. Ltd.) after its name. For Example;

• ABC Private Limited (ABC Pvt. Ltd.)
• XYX Private Limited (XYZ Pvt. Ltd.)

8. Transferability of Shares:

Transferability of shares in a private limited company is restricted, only a public limited company gets the benefit of transferability of shares.

Read Also:

• What is a One Person Company? Meaning, features, and more.

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