A private limited company is a voluntary association of not less than two and not more than 200 members, whose liability is limited. Their shares do not trade on public exchanges and are not issued through an initial public offering. The shareholders hold all the shares of the company privately. Companies Act, 2013 has granted a number of privileges and exemptions to private limited companies in order to facilitate doing business in India easily and effectively without much compliance.
1. In private limited company, right of shareholders to transfer shares is restricted
2. The number of shareholders is limited to 200.
3. In private limited company, an invitation to the public to subscribe to any shares or debentures is prohibited.
1. Limited Liability: In a Private Limited Company the liability of the shareholders is limited. The liability of the members of a company is limited only to the extent of the face value of shares taken up by them. Therefore, where a company is limited by shares, the liability of the members on a winding-up is limited to the amount unpaid on their shares.
2. Minimum Capital Requirement: There is no minimum capital requirement for formation of Private Limited Company.
3. Business continuity: Private limited companies enjoy permanent succession because the company has own legal entity. A company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
4. Foreign Direct Investment: Private Company is eligible to receive Foreign Direct Investment in terms of RBI Guidelines and FEMA Provisions.