Write a note on the privileges and exemptions of a private

Write a note on the privileges and exemptions of a private company.

Define a private company. What are the privileges and exemptions which such companies may enjoy under the Companies Act?

What do you mean by privileges of a company? Explain any fifteen privileges provided to a private company.

Ans.

PRIVILEGES OF A COMPANY

The Companies Act, 2013 confers certain privileges on private companies. Such companies are also exempted from complying with quite a few provisions of the Act. The basic rationale behind this is that since the private limited companies are restrained from inviting capital and deposits from the public, not much public interest is involved in their affairs as compared to public limited companies.

The private limited companies lose the privileges and exemptions the moment they cease to be private companies. A private limited company, which is a subsidiary of a public limited company, is a public company in accordance with the amended definition of the public company under Sec. 3 of the Act.

PRIVILEGES AND EXEMPTIONS OF PRIVATE COMPANY

Following are the privileges and exemptions available to a private company:

(1) Minimum Members – It requires only two members to form a business.

(2) Allotment of Shares – It can allow shares without getting the amount of minimum subscription.

(3) Prospectus or Statement in Lieu of Prospectus – It is not required to file with registrar a prospectus or a statement in lieu of prospectus.

(4) Issue of Shares to Existing Shareholders – Reissue of shares should be made to the existing shareholders is not binding on a private company.

(5) Certificate of Commencement of Business – It can commence it’s business immediately after incorporation. It is not required to get certificate of commencement of business.

(6) Statutory Meeting or Statutory Reports: It is not required to hold the statutory meeting or to file statutory report with the ROC.

(7) Division of Shares and Voting Rule – The Rules regarding division of shares and voting right does not apply to private company.

(8) Quorum – The number of quorum is 2.

(9) Rights to demand Poll- Only one or two members have right of poll.

(10) Restriction on Transfer of Shares – It restricts the transfer of shares.

(11) Index of Members – It is not required to keep an index of its members.

(12) Kinds of Shares – A private company is free to decide the kinds of share capital to be issued.

(13) Financial Assistance for Purchase of Own Shares – A private company may provide financial assistance to others to purchase its own shares.

(14) No Inspection of Profit/ Loss by Non-members- Only a member of private company is entitled to obtain or inspect copies of Profit and Loss Account of the company filed with the Registrar. A non-member cannot receive it.

(15) No Restriction as to Number and Term of Managing Directorship – A person can be a M.D. of any number of private companies.

(16) Relief as to Rules regarding Directors – The director of a private company need not file with the Registrar a written consent to act as a director.

(17) No Appeal against Refusal to register the Transfer – A private company may realize to register transfer of shares of any member and its decision against such refusal will be final.