Understanding the Differences Between Private Companies, Public Companies, and One-Person Companies (OPCs)

In the corporate world, different types of companies exist, each with its unique characteristics and legal requirements. This article aims to highlight the differences between Private Companies, Public Companies, and One Person Companies (OPCs) based on various aspects such as applicable sections, capital requirements, number of members and directors, transferability of shares, public issue provisions, and filing requirements.

Applicable Sections and Definitions

Private Company:

Section: Section 2(68) of Companies Act, 2013
Definition: A private company restricts the right to transfer its shares, and except in the case of an OPC, limits the number of its members to 200.

Public Company:

Section: Section 2(71) of Companies Act, 2013
Definition: A public company is one that is not a private company and allows the free transfer of its shares.

One Person Company (OPC):

Section: Section 2(62) of Companies Act, 2013
Definition: An OPC is a company that has only one person as a member.

Minimum Capital Requirement:

Private Company: The minimum capital requirement is omitted.
Public Company: The minimum capital requirement is omitted.
OPC: There is no minimum capital requirement.

Number of Members:

Private Company: Minimum of 2 and a maximum of 200 members.
Public Company: Minimum of 7 members with no maximum limit.
OPC: Only one member.

Number of Directors:

Private Company: Minimum of 2 directors and a maximum of 15 directors.
Public Company: Minimum of 3 directors and a maximum of 15 directors.
OPC: Minimum of 1 director and a maximum of 15 directors.

Public Deposits:

Private Company: Can accept deposits only from its members, directors, and their relatives.
Public Company: Free to accept public deposits.
OPC: No specific requirement.

Transferability of Shares:

Private Company: Shares are restricted but not prohibited from being transferred.
Public Company: Shares are freely transferable.
OPC: No specific requirement.

Public Issue:

Private Company: Cannot issue a prospectus to invite the general public to subscribe to its shares, debentures, and deposits.
Public Company: Can issue a prospectus to invite the general public to subscribe to its shares, debentures, and deposits.
OPC: No specific requirement.

Company Name Suffix:

Private Company: The name must end with “Private Limited” or “Pvt Ltd”.
Public Company: The name must end with “Limited” or “Ltd”.
OPC: The name must end with “(OPC) Private Limited”.

Board Meetings:

Private Company: Must hold a minimum of four board meetings with no more than 120 days between two consecutive meetings.
Public Company: Must hold a minimum of four board meetings with no more than 120 days between two consecutive meetings .
OPC: Must hold at least one board meeting in each half of the calendar year with no less than 90 days between two meetings.

Quorum for Board Meetings:

Private Company: A quorum is 1/3rd of its total strength or two directors, whichever is higher.
Public Company: A quorum is 1/3rd of its total strength or two directors, whichever is higher .
OPC: No specific requirement.

Annual General Meeting (AGM):

Private Company: The AGM must be held within six months from the end of the financial year, with no more than fifteen months between two meetings.
Public Company: The AGM must be held within six months from the end of the financial year, with no more than fifteen months between two meetings.
OPC: Not required to hold an AGM.

Quorum for AGM:

Private Company: Two members personally present constitute a quorum.
Public Company:
- Total Members Quorum:
  - Less than1000: 5 Members
  - 1000 up to 5000: 15 Members
  - More than 5000: 30 Members
- OPC: No specific requirement.

Filing Financial Statements and Annual Returns:

Private Company: Form AOC-4 must be filed within 30 days of the AGM.
Public Company: Form AOC-4 must be filed within 30 days of the AGM.
OPC: Form AOC-4 must be filed within 180 days from closure of financial year. An OPC is exempted from the preparation of a Cash Flow Statement.

Filing of Annual Return:

Private Company: Form MGT-7/MGT-7A must be filed within 60 days from the date of the AGM.
Public Company: Form MGT-7 must be filed within 60 days from the date of the AGM.
OPC: Form MGT-7A must be filed within 60 days from the due date of the AGM, i.e., 30th September.

Conclusion:

Understanding the differences between Private, Public, and One Person Companies is crucial for entrepreneurs and business owners as it impacts their choice of legal structure and compliance obligations. Each type of company has its advantages and limitations, and the decision should be based on the specific needs and objectives of the business. By having clarity on these differences, businesses can ensure legal compliance and make informed decisions to achieve their goals.

Selecting the appropriate company structure is a crucial step in establishing a successful business. At StartUpPortal Business Services, we understand that a thoughtful consideration of the legal and regulatory framework can result in better governance and more efficient operations. Contact us to ensure your business is set up for success.