Question

A private company avoids many of the defects of a public company. Explain

Answer 1

Answer:

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Explanation:

A number of procedures and legal delays are exempted for private companies which are strictly followed in case of public companies hence,flexibility in operation.

A private company can be formulated with the composition of only two members and it only has to undergo two steps in the process of formation whereas a public company can starts its business only after getting its certificate of incorporation & it takes four steps hence ease of formation.

Answer 2

Explanation:

A private company enjoys certain privileges and exemptions as compared to a public

company.

These privileges are as follows

(i) Number of Members A private company needs a minimum of two members for its incorporation as compared to seven required by a public company. This makes its formation easier.

(ii) Number of Directors A private company can have a minimum of two directors as compared to three directors in case of a public company.

(iii) Exemption from Prospectus A private company need not issue a prospectus or file a statement in lieu of prospectus with the Registrar of Companies.

(iv) No Minimum Subscription A private company can proceed with the allotment of shares without receiving the minimum subscription.

(v) Exemption from Certificate to Commence Business A private company can commepce business immediately after its incorporation as it need not procure a certificate of commencement of business from the Registrar of Companies as is required in case of a public company.

After focusing on these points it can be said that a private company is superior to public company.