Private Limited Company
A privately held business with limited liability is known as a private limited company in India. Because of its many benefits, which include limited liability protection, ease of formation and maintenance, and independent legal entity status, it is one of the most popular types of business structure types in the country. A private limited company needs to have two directors and at least two members in order to be recognized as a separate legal entity from its owners.
Legal Definition of Private Limited Company
According to Section 2 (68) of the Companies Act, 2013 defines a private company as:
“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles, —
- restricts the right to transfer its shares;
- 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”
Benefits of Private Limited Company
Limited liability: A private limited company’s limited liability protects its members from the risk of losing their personal assets. The shareholders are responsible for selling their assets to cover losses if the company collapses.
Minimum Number of Shareholders: A private limited business can be formed with just 2 shareholders, as compare to a public company, which needs 7. And maximum shareholders are 200 for a private limited company.
Minimum number of Directors: A private limited company must have 2 directors and at least one director must be an Indian citizen.
Ownership: Investors, founders, and management own the company’s shares, and they are free to transfer or sell the shares to others.
