Compare and contrast the private limited company with the public limited company. – NABTEB QUESTION

The private limited company and the public limited company are similar in certain aspects while they are different in some others.

SIMILARITIES

1. LEGAL ENTITY: The private limited company and the public limited company both have a separate legal entity.

2. LIMITED LIABILITY: The liability of the shareholders is limited to the amount of capital invested.

3. CONTINUITY: In both companies, continuity of the company is guaranteed for the death of a shareholder does not put an end to the existence of the company.

4. MANAGEMENT: The management of the companies is vested with the board of Directors or manager.

5. RAISING OF CAPITAL: Both private and public limited liability companies can raise capital through loans and shares.

DIFFERENCES

I. MINIMUM NUMBER OF OWNERS: The minimum number of owners in a public limited liability company is 7 while it is 2 in a private limited company.

II. MAXIMUM NUMBER OF OWNERS: in a private company, the maximum number of owners is 50 while there is no upper limit for the public company.

III. ABILITY TO SELL SHARES: Whereas the public company can sell shares to the general public. The private company sells shares to the 50 owners only.

IV. TRANSFERABILITY OF SHARES: Shareholders in public company are free to transfer their shares from hand to hand while this is not so in a private
company.

V. PUBLICATION OF ACCOUNTS: The public company must publicize its accounts annually but the private company is not required to do so.

VI. ISSUE OF DEBENTURES: While the public company can issue debentures the private company cannot issue debentures.

VII. COMMENCEMENT OF BUSINESS: The private limited liability company can start operation in full after securing the certificate of incorporation, the public company cannot operate until the certificate of trading had been secured.