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Std-11, Commerce, Organization of Commerce, Secretarial Practice, Ch-4, Formation of Joint Stock Company

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Hi, kids, we are going to start with chapter 4 of secretarial practice, formation of joint stock company, one big joint or business organisation, right, let’s see.

We are going to start with the first module, explain in brief public limited and private limited companies. Now here you can see we have two types, private limited companies and public limited companies, right. Please watch it carefully. It is necessary to have the word private in private, nothing of the type in public, only simple, you are going to write the name of the company that’s all.

Now let’s take an example. We have Mr. Chinta Money who is interested in starting a new company so he is talking to Mr. Vatan Kata. ‘Sir, we would like to become a businessman and start a company like yours.’ ‘Which type of company do you want to start?’ What are the different kinds of companies?’ he is asking. Now let’s see the reply. ‘There are two types, right, private and public. To get detailed information about these you must have to approach the registrar of companies.’ Okay, so my dear students, he is approaching registrar of companies. Now he comes to the office of the registrar, who, Mr. Chinta Money. ‘Sir, can you give me a brief idea about a private limited and a public limited company and what will be the formalities for the same?’

Private company means let’s check: According to Companies Act, 1956, Section 3(1)(iii) a private company is one which by its articles restricts the rights to transfer it shares. That means you cannot freely transfer, you cannot sell shares easily. Limits the number of its members to 50, you can see private limited company maximum number of persons or members is 50. Prohibits any invitation to the public to subscribe that is to buy for any shares in order or maybe debentures of the company. And prohibits any invitation or acceptance of deposits from person other than its members, directors or their relatives. What does that mean? They can only take money from their near and dear ones and their own members, not from the public. Right, kids, do remember, now private company is a kind of a joint stock company. Those who want to establish a joint stock company, keep its businesses limited, usually register the company as private limited company, right. Restricted to few number of members. Now private company collects capital privately, minimum 2 members and maximum 50. Remember that company we call it as a private limited company. It cannot collect capital by inviting general public to purchase the shares of the company, neither its shareholders can transfer their shares freely. Freely means without taking any permission from directors. In short private company performs operations in restricted manner. A private company has to add words called as ‘private limited’ at the end of its name. You can check the example given, right, on your left hand side, MT Educare Private Limited.

‘What about public company, sir?’

Public company means, let’s check, according Companies Act, 1956, Sec 3 (1) (iv) public company means a company which is not a private company, it is so simple and easy to remember. Which is private is not public and which is public is not private. Now there are no restrictions on transfer of shares, that is shares are freely transferable. You just need to take permission from directors. There is no limit on maximum number of membership, it means the maximum number can be unlimited. There is no prohibition to any invitation to the public to subscribe for any shares or debentures of the company. Means what, they can collect money, money, money from public, right, by means of shares or debentures. Prohibition – restriction. There is no prohibition again for acceptance of deposits from persons, thus public company can accept public deposits. A public company has to add the word ‘limited’ at the end of its name. Do remember, right kids, at the top you can see, MT Educare Limited. And membership is minimum 7, maximum no limit.

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