Private Limited companies can be formed by at least two individuals. The shares allotted to its members are also not freely transferable between them. These companies are not allowed to raise money from the public through open invitation. They are required to use “Private Limited” after their names. The examples of such companies are ABC Private Limited, XYZ Private Limited, etc.
A company is a separate person having its own rights & obligations.
The company will continue to exist in the eyes of law even in the case of death, insolvency, transfer of shares or bankruptcy of any of its members.
The liability of each member of the company is limited.
As compared to public limited company, a private limited company is required to comply with lesser legal formalities and compliances. It also enjoys special exemptions and privileges under the company law.
Under the Company Law, a Private Limited Company is not mandated to publish its accounts and file several documents. This way, it becomes easier for a Private Limited Company to maintain business secrets.
A Private Limited Company has the flexibility to easily raise loans and investments from NRIs and foreigners.
Shares of a company limited by shares can be transferred by a shareholder to any other person. The transfer is much easier as compared to the transfer of interest in a proprietary concern or a partnership.
A company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No shareholder can make any claim upon the property of the company as long as the company is a going concern.
Just as one person can bring a legal action in his/her own name against another in that person’s name, a company being an independent legal entity can sue and also be sued in its own name.
In a Private Limited Company, it is possible for the company to make a valid and effective contract with any of its members. It is also possible for a person to be in control of the company and at the same time be in its employment.
