Consentia on Multidisciplinary Research



We have been seeing tremendous corporate growth in India in the recent past and it can be attributed to the liberalization policy, growth of service sector and computerization/simplification of corporate filing through MCA scheme etc. The advantage of incorporating a company and do business is its liability factor. The liability of a member/shareholder for the losses sustained by the Company is limited to the extent of his shareholding and exception can be invoked by lifting the corporate veil. Again, the scope of expansion of business is so much when a company is incorporated rather a partnership firm or a proprietorship concern. Everybody knows this. Despite many advantages in forming a company and doing business, we will see some difficulties in the course of management and the disputes between the majority and the minority shareholders in a company. Fairness in functioning and unbiased management is the underlying principle of company law. Its true that the majority can do many things in a company through AGM, Board resolutions and extraordinary general body meetings. But, the majority or the managerial personnel are not supposed to misuse their position and authority in the company in order to oppress the minority or a group. Some companies are promoted by businessmen and technocrats with a clear intention to have a complete say in the management of the company.

In India, laws governing Companies are mainly to be found in the Companies Act, 1956. Voluminous and containing 658 Sections, 15 Schedules and several Rules, the Companies Act, 1956 is modeled on the English Companies Act. Any entrepreneur desirous of doing business in India has an option to form a Company, Private or Public with limited liability under the provisions of the Companies Act.

The New Companies Bill (“Co Bill”) had received the assent of the President of India on 29th August 2013, thus creating a landmark in Indian Corporate arena. Saying Adieu to year old Anarchic law of The Companies Act 1956, which served the corporate India for about 57 years. This is historic change in old law, which was a riddle  wrapped up in enigma. The new law is futuristic, sustainable and give flexibility to corporate environment.[1]


The word ‘Company’ is an amalgamation of the Latin word ‘Com’ meaning “with or together” and “Pains” meaning “bread”. A company is nothing but a group of persons who have  come  together  or  who  have  contributed  money  for  a  particular  purpose  and  have incorporated themselves into a distinct legal entity in the form of a company for that purpose.

Technically,  a  company  is  a  collection  of  many  individuals  who  unite  to  form  one independent body under special domination, having perpetual succession under an artificial form and vested by the policies of law with the capacity of acting in several respect as an individual, particularly for taking and granting of property, for contracting obligation and for suing and being sued, for enjoying privileges and immunities in common and exercising a variety of political rights, more or less extensive, according to the design of its institution or the powers upon it, either at the time of its creation or at any subsequent period of its existence. However, the Supreme Court of India has held that a company cannot have the status of a citizen under the Constitution of India. A company as an entity has several distinct features which together make it a unique organization.

According to Professor Haney “a company is an artificial person created by law, having separate entity, with a perpetual succession and a common seal.”[2]


Salient characteristics of a company are stated as below in the following points:

  • Corporate Personality: It is a legal person distinct from its members, large or small; beneficiary or trustee as held in the case of Salomon v Salomon & Co Ltd. [3]
  • Limited Liability: of a shareholder extends only up to the nominal value of the shares held and not paid by him.
  • Perpetual succession: Being a legal entity it does not die except when it is wound up.
  • Separate property: A company is capable of owning, enjoying and disposing of property in its own name; shareholders not part owners.
  • Transferability of shares: Shares are transferable and no shareholder is permanently wedded to the company.
  • Common Seal: It is the official signature of the company.
  • Capacity to sue and be sued: Legal proceedings can be instituted by or against the company in the name of the company itself.
  • Contractual rights: A company can enter into contract with any person or association of persons for the conduct of business of the company
  • Limitation of action: Its function is limited with its territorial boundaries it cannot function beyond the powers stated in its memorandum of Association.
  • Separate management: The management and ownership of the company are distinct. Owners are the share holders and the management is done by the elected members of share holders, they are Board Of Directors.
  • Voluntary association: It is a voluntary association of person formed for the purpose of earning profit.
  • Termination of existence: It is created by law, carries on business according to law and ceases to exist by operation of law.


There are two broad classifications of companies, they are as follows:


PRIVATE COMPANY is defined under Section 3(i) (iii) of the 1956 Companies Act[4] as it is a company that:

  • Has a minimum paid‐up capital of one lakh rupees or such higher sum as may be prescribed, and
  • By its articles :
  • Restricts the right to transfer its shares,
  • Limits the number of its members to fifty (excluding employees and ex‐employees),
  • Prohibits any invitation to subscribe for any shares in or debentures of the company, and
  • Prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives.

Other features of the private companies are stated below:

  • Joint members shall be treated as a single member for calculating the limit of fifty.
  • The words “Private limited” must be added at the end of its name.
  • It must have at least two members (Section 12) of the Act.
  • It shall have at least two directors (Section 252) of the Act.
  • The Act confers certain privileges and exemption on Private Limited Company

Special obligations imposed on a private limited company are stated below:

  • Along with the Annual Return, it shall send certificate stating that the company:
  • has not issued any invitation to public to subscribe to its shares ,
  • And, where the number of members exceeds fifty, they only comprise of employees or ex‐employees as per the Section 161(2)(b)) of the Act.
  • A member of a private company cannot appoint more than one proxy to attend and vote at a meeting.
  • If the conditions contained in Section 3(1) (iii) of the Act are infringed, it shall cease to be a Private Company.

PUBLIC COMPANY is defined under Section 3(1) (iv) of the Act it means a Company that:


  • Is not a private company,
  • Has a minimum paid‐up capital of five lakhs of rupees or such sum as may be prescribed,
  • Is a public company which is subsidiary of a company which is not a private company.

Other features of the public company are:

  • It shall have at least 7 members.
  • It shall have at least 3 directors.

The consequences faced by public companies in case of reduction in members:

  • In case of public companies the number falls below 2 or 7 and the business is carried on for more than six months, the liability of the member shall be unlimited as per Section 45 of the Act.
  • A valid ground for compulsory winding up is prescribed under Section 433



As a public company has large numbers of investors, such companies are protected shareholders interests by framing and following strict rules. But in a private company, the membership is usually restricted to the promoters, their friends and relatives.  It raises its capital privately from a limited number of members.  The members of the public are not substantially interested in such companies.  Therefore many of the provisions of the Companies Act are not applicable to a private company.  Thus, a private company is granted a number of rights and privileges.  They are as follows:


  • SECTION 3(1)(iii)(a): It can be formed with a minimum paid-up Share Capital of INR. 100,000 as against INR 500,000 for a Public Company.
  • SECTION 3(1)(iii)c): Private Company cannot raise funds from the Capital Markets, and a PLC can do so. However, for an unlisted Public Company ,if it were to raise additional resources for tying up its Capital requirements from its Promoters, then, it can do so only if its Articles of Association permits it and also comply with many disclosure requirements. Whereas there are no such restrictions / disclosures that are required to be made by a Private Company.

  • SECTION 12(1): It can be formed with only 2 persons as against 7 in case of a Public Limited Company.

  • SECTION 70(3): A Statement in Lieu of Prospectus need not be delivered to the Registrar before allotment of Shares in the Company.


  • SECTION 111: Appeal against refusal to transfer shares restricted. A right of pre-emption is incorporated in the articles of a Private Company to restrict the members right to transfer shares to non members. Under Sec 111, Refusal to register the transfer of shares can be done only on the ground of restrictions contained in the Articles of Association. This was also upheld by the Supreme Court in the case of B Rangaraj vs. V.B. Gopalakrishnan[5].

In this case shareholders of a private limited company were two branch of family and it was agreed orally in 1951, it means in backdrop of Independence and partition, that the proportion of the shareholding of respective branches would not change, and further agreed that for this purpose, any member of a branch want to sell his shares must first offer the share to his own branch. The crux in this case is the oral agreement about restriction was not incorporate in Articles. Referring its own earlier relevant decision in Kalinga Tubes, the Supreme Court held that the shares are “freely transferable”  and that a private agreement imposing restriction on transfer of shares which is not stipulated in Articles of association is neither binding to the Company nor to shareholders. It means such kind of agreement is void in toto. One thing very clearly established in this case is any restriction on share transfer must be incorporated in the Articles of the Company otherwise it will not have any effect and aggrieved shareholder can not have any legal remedy against violation of such restrictive provisions of agreement or understanding.

The later part of the decision that it does not bind the company is not new and is an accepted rule of English Rule. However that it does not bind the shareholders was something strange to Indian Law.

Also under sub section 13 of Sec. 111, no petition can be filed in respect of a Private Company which by its Articles has imposed restrictions against the right to transfer its shares. However, a petition lies under the section in case of refusal by a private Company which is not a subsidiary of a public authority.[6]

In Bajaj Auto Limited v. Company Law Board[7], it was held by the Supreme Court that the power of the Board of Directors to refuse registration of transfer of shares must be in the interest of the company and the general body of share holders.

This position was overruled by another Bombay High Court Division bench judgement, in Messer Holding Limited Vs. Shyam Madanmohan Ruia And Others[8] wherein First time the Court went into legislative history of section 111A of the Act. The expression “freely transferable” therein is in the context of the mandate against the Board of Directors to register the transfer of specified shares of the members in the name of the transferee, unless there is sufficient cause for not doing so. The said provision cannot be construed to mean that it also intends to take away the right of the shareholder to enter into consensual arrangement/agreement with the purchaser of their specific shares.

If the legislature intended to take away that right of the shareholder, it would have made an express provision in that regard. Reliance has been rightly placed on the decision of the Apex Court in the case of Byram Pestonji Gariwala vs. Union Bank of India[9] which takes the view that the freedom of contract generally, the legislature does not interfere except when warranted by public policy, and the “legislative intent is expressly made manifest” That means it is open to the shareholders to enter into consensual agreements which are not in conflict with the Articles of Association, the Act and the Rules, in relation to the specific shares held by them; and such agreement can be enforced like any other agreement. That does not impede the free transferability of shares at all. Further, such consensual agreements between particular shareholders relating to their shares can be enforced like any other agreements. It is not required to be embodied in the Articles of Association.

  • SECTION 204 (6): Restrictions on appointment of a Firm or Body Corporate to an office or place of profit in the Company are not applicable.

  • SECTION 409: The special powers of interference given to the Company Law Board to prevent change in the Board Of Directors of a company where, in the opinion of the CLB, such change will be prejudicial to the interests of the company, are not extended to the case of private companies.


  • SECTION 77(2): Financial assistance for purchase or subscribing for shares in itself of its holding company.

In a recent case concerning Orissa Sponge Iron & Steel Ltd. & Ors vs Bhushan Energy Ltd. & Ors decided by the Orissa High Court in February,2011 ,a petition was filed by the said three companies are that Orissa Sponge Iron and Steel Ltd.which is not only governed under the provisions of Companies Act, 1956 but under the provisions of SEBI Act and Guidelines. It wass alleged in the petition that the present management and the promoters holding the controlling stake in the company are trying to dispose of the said unit by way of transferring its shareholding to a 3rd party without the consent and approval of the shareholders. The attitude of the existing promoters to wash their hands of the Company’s Management confirms the belief that affairs of the company are being conducted with an intent to defraud its members, creditors and public at large and are oppressive to its members. The circumstances and facts as now emerging or as may emerge fully after investigation would prove beyond doubt that some person other than the existing promoters, who intend to take over management of the Company is influencing the policy of the company. Such action adversely affects the rights of the shareholder at large. It was also alleged that in case of promoters holding the controlling stake handover the company to a party alien to the present line of business, the same would be prejudicial to the interest of the company and consequently the shareholders. It was further alleged that the present management/ directors intend to handover the management of the company to some outsiders to absolve themselves from the liability of the company after siphoning away the huge funds of the company resulting in loss. Such conduct of the present management/directors is an act of oppression, which may ultimately give rise to winding up of the company.

The Court providing relief to the Petitioners ordered the following-

  1. Direct the respondents to maintain the status quo regarding their shareholdings, fixed assets of the company, and not to change the shareholding pattern of the company by transfer or further issue of shares.
  2. Direct that any transfer in the facts and circumstances of the case shall be void.
  3. c) Direct the Respondents not to sell its shares held in the Respondent No.1 Company without the prior approval of the shareholders.
  4. d) Direct the investigation in the affairs of the company for its financial mismanagement and huge siphoning of the funds.


  • SECTION 77A: It is not prohibited from giving financial assistance for purchasing its own Shares or shares of its Holding Company.

  • SECTION 81 (3) (a): The provisions of Sub-Sections (1), (1A) and (2) of Section 81 prescribing the manner of further issue of Share Capital are not applicable.

  • UNDER THE SECTION 90 (2): The definitions of Preference and Equity Share capital as given in Section 85 of the Act are not applicable. It is free from the restriction contained in Section 86 that, a Company Limited by Shares shall have only 2 kinds of Shares (Equity and Preference).The voting rights of the Members need not be in conformity with the provisions of Section 87.The prohibition of issue of Shares with disproportionate rights as contained in Section 88 is not applicable. The provision contained in Section 89, requiring termination of disproportionately excessive voting rights attached to Equity Shares in existing Companies, if they are in excess of those specified in Section 87 are not applicable.

  • SECTION149 (7): It need not comply with the Provisions of Section 149(1) or (2) regarding commencement of business and need not obtain a Certificate of Commencement of Business, from the Registrar.

  • SECTION 165: This meeting is held once during the lifetime of a company and it is the first meeting generally held after incorporation. The purpose of the meeting is to enable and apprise the members of the company regarding the financial affairs of the company immediately after the date of incorporation. Every public company limited by shares or limited by guarantee and having a share capital must hold a general meeting of the members of the company, which may be called the statutory meeting. Private companies and Government companies are not required to hold such a meeting.


  • SECTION 166 (2) Second Proviso(6): A private company which is not a subsidiary of public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the time as well as the place for its annual general meeting. Such a place need not be within the city, town or village in which the registered office of the company his situated.


  • SECTION 170 to 186– The Provisions of these Sections relating to General Meetings applies to a Private Company unless in any particular Section it is specifically expressed that the applicability is not intended or unless the Articles of a Private Company which is not a Subsidiary of Public Company make any other provisions in respect of any of the matters covered by these Sections.

Relaxation in the length of Notice for calling General Meeting, contents and manner of Service of Notices, Explanatory Statements, Quorum for meeting, Chairman of meeting, Restrictions of voting rights, etc. can be made to the extent to which the Company makes provisions in its Articles.

Joint holders and quorum: In the case of joint holders it would seem prima facie that any one of them may be counted in a quorum. In an Australian case Re. Trans-Continental Hotel Ltd.[10], It has been held that two joint holders are each members and are to be counted towards a quorum as two members personally present.It should be noted that Act specifically provides that for certain purposes where two or more persons hold any shares jointly, they shall be counted only as one member, e.g. under Section 3(1) (iii) for the purposes of counting the number of members in a private company, and under Section 399 for the purposes of right to apply for relief in cases of oppression or mismanagement. If the articles do not provide anything to the contrary, it appears that two or more joint holders when personally present can be counted as so many members for the purpose of forming a quorum.

When quorum is immaterial:If all the members are present, it is immaterial that the quorum required is more than the total number of members Re. Express Engineering Works Ltd[11] and Re Oxted Motor Co. Ltd.[12]. If, for example, the articles of a private company provide that four members personally present shall be a quorum, and the number of members is reduced to three then the question of quorum will not arise when all the three members attend a meeting.

Section 174 of the Companies Act, 1956 stipulates that unless the articles of associations provide for a larger number, two members personally presented shall constitute quorum in the case of a private company. Hence, the private company may provide a larger number for quorum. The general principle is that if no quorum is present the meeting and proceedings are void. However, there can be situations when quorum becomes immaterial. If all the members are present, it is immaterial that the quorum required is more than the total number of members.[13]

  • SECTION 192 (1) with Section 170(1) (ii): It need not file with the Registrar a copy of an Explanatory Statement along with a Special resolution, if its Articles provide that Section 173 shall not apply to it.

  • SECTION 192(4) (e): It need not file the resolutions passed in General Meetings pursuant to clause (a), (d) and (e) of Section 293(1) since that Section does not apply to Private Companies.

  • SECTION 192A: The provisions relating to passing of resolutions by Postal Ballot does not apply in Private Company.


  • SECTION 198 (1): There is no bar imposed on the ceiling on Managerial Remuneration in private company. The term remuneration as defined under Explanation of Section 198 covers the following types of expenditure incurred by the company for its Director or his family or its manager–

  • Rent free accommodation;
  • Any benefit or amenity in respect of accommodation free of charge;
  • Any other benefit or amenity free of charge at a concessional rate;
  • Any personal obligation; and
  • Insurance on the life of, or to provide any pension, annuity or gratuity for, any of the director or his /her spouse or child.

But the definition is inclusive one. It covers every amount that the company pays or spends for or for the benefit of a Director, in whatever form and by whatever name.

  • SECTION 210: The inspection of Profit and Loss Account by public is not permitted in private company. At every annual general meeting of a company the board of directors of the company is required to lay before it a balance sheet as at the end of, and a profit and loss account for the financial year. The scheme of the companies act contemplates that there shall be one annual general meeting at the course of one year. The annual general meeting shall be in relation to the financial year and the business to be transacted at the said meeting must be in respect of the financial year. On that account it is not open for the company to submit accounts for more than one year for consideration at the annual general meeting of the company. For consideration of the annual account of the company, there must be an annual general meeting and only annual general meeting or an adjourned annual meeting can consider the accounts.

The Annual Accounts of a Public Company filed with the Registrar is a public document and any person can inspect the same & obtain copies. However, in case of a Private Company the Profit & Loss Account should be filed separately in Form 23ACA, and no person other than a shareholder can obtain copies from the Registrar.

  • SECTION 220(1) (a) Second proviso: A person who is not a member of a company is not entitled to inspect, or obtain copies of the Profit and Loss Account of a Private Company under Section 610. This equally applies to the Companies in which one or more Bodies Corporate incorporated outside India holds the entire paid-up Share capital.

  • SECTION 224(1B) Fourth proviso: The Company or Board can appoint or re-appoint any person who is in full-time employment elsewhere or Firm as its Auditors if such person or Firm is, at the date of such appointment or re-appointment, holding appointment as auditor of specified number of Companies or more than the specified number of Companies.

  • SECTION 252 (1): The provision regarding small Shareholder’s representative on the Board which is there in public company is not applicable. Clause 2 talks about the minimum limit of number of Directors as 2 are needed as against 3 in case of Public Company.

  • SECTION 255 to 257: The of Retirement of Directors etc. provisions mentioned not applicable in private company.

  • SECTION 259: Central Government’s sanction to appoint more than 12 directors is not applicable on private companies.

  • SECTION 262: The provisions relating to the manner of filling of casual vacancies among the Directors and the period of office of those so appointed do not apply to such a company. The power of the board under the section extends only to filling the casual vacancy in the office of the director appointed by the company in general meeting. If any other director vacates, and appointment to the place vacated by him can’t be made under this section under duration of such appointment will not be governed by this section.

  • SECTION 263 (1): Two or more Directors may be appointed by a single resolution in private companies.

  • SECTION 264 (3): In case of private company the consent to act, as Director need not be filed with Registrar Of Companies.

  • SECTION 266 (5): The provisions regarding consent to act as Director to be filed with the Registrar and Qualification Shares are not applicable as in the case of public companies.

  • SECTION 268: No approval of Central Government required for effecting an amendment to the Memorandum, Articles or an agreement relating to appointment or reappointment of a Managing or Whole-time Director or Non retirable Director.

  • SECTION 269 and 388: No approval of Central Government required for appointing or re-appointing a Manager or Whole-time Director or Manager, It shall not comply with the provisions of Schedule XIII.


  • SECTION 270 to 273: Section 270 and 272 which talk about share qualification, does not apply to Private Company by virtue of Section 273 of the Act. Qualification Shares is the number of shares which a shareholder must hold in order to be eligible for election as a director. However, the Articles of a Private Company may provide that the directors are required to obtain shares as qualification shares. If articles contain the requirement to hold qualification shares then by passing special resolution in the general meeting you can amend your articles and remove that clause from article. Within 30 days of passing special resolution file form 23 with ROC.

  • SECTION 274 (1) (g): The prohibition against a person disqualified under Section 274(1) clause (g) does not apply to the Director of a Private Company.

  • SECTION 274 (3): The Company may in its Articles provide for grounds for disqualification of a Director, in addition to those laid down in Section 274(1).

  • SECTION 275 to 279: No restriction apply to the director of private company in respect of the number of companies he can be appointed as directors it is five in case of public companies.

  • SECTION 283 (3): Additional Grounds for vacation of office by Director are provided which are nor given in case of directors of public companies.

  • SECTION 292 A: The requirement as regards to Audit Committee as in public companies is not applicable in private companies.

  • SECTION 293: The restriction imposed on the powers of the Board as in public companies are not applicable for private companies.

  • SECTION 295(2): No approval of Central Government for is needed in giving a loan, guarantee or security to Director of a private company.

  • SECTION 303 (1): The date of birth of Directors need not be entered in the Register of Directors required to be maintained under Section 303 of the Act.

  • SECTION 309 (1): Restrictions and ceiling on remuneration to be paid to the Directors / Managing Director / Whole-time Director and Manager as imposed by Section 309 are not applicable in private companies.

  • SECTON 310 and 388 & 311 and 388: The approval of Central Government is not required in case of increase in remuneration of a Managing Director, Whole-time Director or Manager of the Private Company. The approval of Central Government is not required in case of increase in remuneration of a Managing Director, Whole-time Director or Manager of the Company on re-appointment.

  • SECTION 317 and 388: The restriction on appointment of Managing Director for more than 5 years at a time is not applicable.

  • SECTION 349 to 350: The provisions relating to the method of determination of net profits, the quantum or the percentage of depreciation, payment of office allowance or additional remuneration, etc., do not apply to a private company. Thus, a private company is free to make its own provisions in respect of all these matters.

  • SECTION 372 A: The restrictions as regards of making of loan to other companies do not apply to private companies. On any question regarding granting loans or advances any corporate professional would generally recall the provision of section 372A or section 293(1)(d) of the Companies Act 1956 which speak of Inter Corporate Loans or borrowing powers of the Company respectively. None of the said provision has however extended their ambit beyond the area stipulated by the statute. Specifically, Companies Act remains mute regarding granting loans to the shareholders of the companies concerned. The present picture will however become radically different when the shareholder(s) will itself be a body corporate one. Such circumstances will positively entail the applicability of the provision of section 372A of the Companies Act 1956. If the shareholder concerned becomes a public limited company all the existing conditions and ceiling limit of (60% of paid up capital and free reserve or 100% of paid capital which ever is higher) section 372A will automatically come into play. However, as the provision of the section concerned of the Companies Act 1956 permits a free business of granting loans or advances by a private limited company regardless of any norms contained therein it seems that transaction of granting loans or advances will be impervious to any statutory bindings.






  1. Sec 2(68) limits the maximum number of members to 200 and does not include any prohibition of acceptance of deposits, which was present in the old Act. However, Sec 73 read with draft rules issued, prohibits a private company to accept unsecured loans/deposits from relatives of directors.
  2. The new Act makes it mandatory for a private Company to file statement stating the subscription money and minimum paid up capital, with the ROC before the commencement of its business or making any borrowings. (Section 11)
  3. A private company can make further allotment only by means of Rights Issue, ESOP or Private placement/preferential allotment and needs to comply with the all the provisions relating to these types of allotment.[Section 62]
  4. Section 43 read with the rules allows for issue of shares with differential voting rights for a private company.
  5. Sec 185 restricts all companies, including private companies, from giving loans, advances or providing securities, guarantees to directors and other interested entities subject to certain exceptions.
  6. The new act brings the private companies within the ambit of Corporate Social Responsibility as mentioned under Sec 135 and requires the constitution of a CSR committee consisting of at least 3 directors out of which atleast 1 must be independent director and spend at least 2% of average net profits on CSR activities.
  7. Sec 141 allows the maximum number of Companies in which an auditor can audit as 20, and restricts the Private Companies from appointing an auditor incase the auditor has crossed the limit.
  8. Maximum term of auditor
  9. Appointment of auditor will be for 5 years term in each appointment subject to ratification every year in AGM.
  10. Individual auditor can serve maximum 5 years and Firm for maximum 10 years followed cooling off period of 5 years. (Section 139)
  11. The new Act, has removed the power of exemptions regarding the general meetings to be sought on the basis of AOA. All prerequisites with regard to the same are applicable to Private Companies.
  12. Chairperson, if he is authorized by board or 2 Directors out of which one shall be Managing Director The Chief Executive officer, if he is a Director of the company, The chief financial officer and the company secretary of the company, wherever they are appointed. (Section 134)
  13. Except subsection (1) of Section 186, other provisions on Inter Corporate Investments/loans/Guarantees are applicable.
  14. Chairperson, if he is authorized by board or 2 Directors out of which one shall be Managing Director or by the Director where there is one Director (Section 134)
























In comparison to the Public Companies, the Private Companies are enshrined with a number of rights, privileges and exemptions under the Companies Act, 1956.

They are given privileges and exemptions from the very beginning of their incorporation, only two persons are needed. Certificate of Commencement is not required for the commencement of the business. They only need two directors. They do not need to maintain an index of members. For conducting general meeting quorum of only two members is required.

There are many other relaxations granted to the Private Companies in respect to the remuneration, powers and appointment of directors and many other privileges as mentioned in the Companies Act of 1956. But then, the restrictions on the issuance of shares in the public, and the right of pre-emption are few disadvantages that exist for a Private Company.

[1] Tarun Nagpal,The Companies Act 2013: A game changer ,4th Sept,2013,–5622.asp

[2] A.K. Majumdar and G.K. Kapoor, Taxman’s, Company Law And Practice,11 (17d.ed.)

[3] (1985-99) All. ER 33(HL)

[4] Act refers to Companies Act 1956.

[5] (1992) 1 SCC 160

[6] Sec. 111 (11)

[7] AIR 1998 SC 437

[8] [2010] 159 Comp. Cas. 29

[9] (1992) I SCC  456

[10] (1947) SASR 49

[11] (1920) Ch 466

[12] (1921) 3 KB 32

[13] Re. Express Engineering Works Ltd. (1920) CH466.


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