In non-technical language, operations of a private limited company affect the fate of smaller number of people. As such, Companies Act, 1956 is very liberal towards the private limited companies. Private Limited Company is entitled to many privileges/exemptions from the various provisions of the Companies Act, 1956. A Private Limited Company is characterised by the following features.
1) Minimum number of shareholders is 2 and the maximum number is 50.
2) A Private limited company cannot approach the public in general for subscribing to the shares/debentures of the company. Similarly, a private limited company cannot invite or accept deposits from public in general other than its shareholders, directors or their relatives. The funds required by the company are required to be collected through the private circulation only.
3) In case of a private limited company, right of the shareholders to transfer the shares is restricted. These restrictions are usually in two forms:
a) That the shares to be transferred should be offered to the existing members on priority basis and if the existing members do not want to take up those shares, they can be transferred to anybody else.
b) That the director will have the power to refuse to register the transfer of shares provided that such power should be exercised by the directors in good faint and in the interest of the company.
4) A private limited company needs to have a minimum paid-up shares capital of Rs. 1 Lakhs or any higher amount as may be prescribed.
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