Incorporation Of A Private Company

The incorporation of a Company is governed by the Companies Act 1956. The Companies Act is an Act to consolidate and amend the law relating to companies and certain other associations. It extends to the whole of India. Chapters I and II deal with the incorporation of a company and matters matters incidental thereto.

Private Company / Public Company

Private company means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by its articles,

• restricts the rights to transfer its shares, if any;
• limits the number of its members to fifty not including-
  • persons who are in the employment of the company, and
  • 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; and
• prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company ;
• prohibits any invitation or acceptance of deposits from persons other than its member, directors or their relatives;

  Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definitions, be treated as a single member;

Public company means a company which -

1. is not a private company;
2. has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed;
3. is a private company which is a subsidiary of a company which is not a private company.
   • Every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than one lakh rupees, shall, within a period of two years from such commencement, enhance its paid-capital to one lakh rupees.
   • Every private company, existing on the commencement of the Companies (Amendment) Act, 2000, with a paid-up capital of less than five lakh rupees, shall, within a period of two years from such commencement, enhance its paid-capital to five lakh rupees.
   • Where a private company or a public company fails to enhance its paid-up capital in the manner specified in sub-section (3) or sub-section (4), such company shall be deemed to be a defunct company within the meaning of section 560 and its name shall be struck off from the register by the Registrar.
   • A company registered under section 25 before or after the commencement of Companies (Amendment) Act, 2000 shall not be required to have minimum paid-up capital specified in this section.