What are the exemptions and privileges available to all private companies ?

Exemptions and privileges enjoyed by all private companies (includ­ing ‘subsidiary of a public company’ and ‘deemed to become public company’) are as follows:

(1) Only two persons (instead of seven required for a public company) may form themselves into a private company (Sec. 12).

(2) It can commence business immediately on incorporation as it has not to wait to obtain a certificate for the commencement of business [Sec. 149(7)].

(3) It is allowed to work with only two directors while at least three are required in case of a public company [Sec. 252(2)].

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(4) At the time of getting the company incorporated with the Registrar of Companies, directors are not required to file with the Registrar their consent in writing to act in that capacity and their undertaking to take up qualification shares, if any [Sec. 266(5)].

(5) It need not prepare and file ‘prospectus’ or ‘statement in lieu of prospectus’ with the Registrar [Sec. 70(3)],

(6) It can proceed to allot shares without having to wait for any such thing as ‘minimum subscription’ (Sec. 69).


(7) It is also exempted from the requirements of holding statutory meeting and filing statutory report. A public company must hold such a meeting after one month and before six months from the date of obtaining the certificate to commence business in order to acquaint the shareholders about the details of company’s working till that day (Sec. 165).

(8) Right of pre-emption does not apply to such a private com­pany. Under Section 81, a public company, in certain cases proposing to increase its subscribed capital by allotment of further shares, must offer them to existing equity shareholders pro-rata in the first instance. But this Section does not apply to a private company, which is, there­fore, free to allot new issues to outsiders [Sec.81(3)].

(9) Life director appointed by a private company on or before 1st April 1952, cannot be removed by the company in general meeting. While any director, other than appointed by Central Government, can, be removed by the company in a general meeting in case of a public company (Sec. 284).

(10) Quorum required for the general meeting of shareholders in case of a private company is two persons personally present, unless provided otherwise in the articles, while in the case of a public company, it is five persons personally present [Sec. 174(1)].


(11) It need not keep an index of members (Sec. 151).

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