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Public limited vs private limited company: key differences

1 min read

"Public" does not mean listed on a stock exchange. A public limited company is simply one that is allowed to offer its shares to the public and has no restrictions on transferring them. Most public companies in India are unlisted. For almost every new business, a private limited company is the right starting point.

Comparison

Private limitedPublic limited
Minimum members27
Maximum members200No limit
Minimum directors23
Share transferRestricted by the articlesFreely transferable
Raising money from the publicProhibitedAllowed, through a prospectus
Name ends withPrivate LimitedLimited
Independent directorsNot requiredRequired above certain thresholds
Compliance exemptionsMany under the 2015 exemption notificationFew

Why private companies get exemptions

Because private companies cannot take money from the public, the law relaxes many rules for them. Examples include fewer restrictions on related-party transactions, loans to directors and managerial remuneration, and flexibility in how meetings are called. These make a private company much lighter to run.

When to become a public company

A company usually converts to public when it plans an IPO, needs more than 200 shareholders (for example, after broad ESOP exercises), or wants to raise money from the public through debentures. Conversion needs a special resolution, an amended AOA, and approval from the Registrar.

Frequently asked questions

Not necessarily. Listing is a separate process with SEBI and the exchanges. Many public companies are unlisted.

No, apart from current and former employees who hold shares. Above that, it must convert to a public company.

A private limited company. It is cheaper to run and is what investors expect at early stages.

This guide is general information, not legal advice. Government fees and procedures change; confirm current figures before you file.

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