Characteristics/Features of Private Limited Company

What is a Private Limited Company?

A Private Limited Company (often written as “Pvt Ltd”) is a business structure where a business is registered as a separate legal entity, owned by a small group of people, with limited liability for those owners. It is governed by the Companies Act, 2013 and relevant rules. This structure is very common for startups, small and medium-sized businesses because it offers both protection and flexibility. 

Key Characteristics / Features

Here are the major features, explained in simple terms:

• Separate Legal Entity : The company is legally separate from its owners (shareholders) and its directors. It can own property, enter contracts, sue and be sued in its own name. 

• Limited Liability of Shareholders : The shareholders’ liability is limited to the amount unpaid on their shares or what they have invested. Their personal assets are not generally at risk if the company fails.

• Minimum & Maximum Membership (Shareholders)

1. Minimum number of shareholders: 2 (in most cases).
2. Maximum number of shareholders: 200 (excluding certain staff/former employees) for most private companies. 

• Minimum & Maximum Number of Directors : Usually the company must have at least 2 directors.Maximum directors allowed is typically 15 (but may increase by resolution) for private companies. 

• Perpetual Succession : The company continues to exist even if the owners/shareholders or directors change or pass away. It only ends if legally wound up. 

• Restriction on Share Transfer : Shares cannot be freely transferred to the public. The company’s Articles will typically restrict how and to whom shares can be transferred. 

• No Public Invitation to Subscribe to Shares : A Private Limited Company cannot invite the public to subscribe for shares or debentures.

• Name Requirement : The company’s name must end with “Private Limited” or “Pvt Ltd” to show it is a private company. 

• Capital Requirement / Share Capital : Earlier there was a minimum paid-up capital requirement (for example Rs. 1 lakh) but the law has relaxed this in many cases. 

• Limited Members’ Burden of Compliance Compared to Public Companies : While there are regulatory and compliance requirements, private companies’ paperwork and public‐disclosure requirements are generally less heavy than for public companies.

Learn more about : Private Limited Company

Why These Features Matter – In Plain Words

• If you start a business as a Private Limited Company, you get protection (your personal things aren’t at big risk).

• You also get a stable business setup (company doesn’t vanish if something happens to a director).

• You keep control (since shares aren’t freely sold to the public).

• It’s a recognizable business form that banks, investors, and clients understand and respect.

• But you still have to follow rules and keep books – it’s more formal than running things as a sole proprietor or partnership.

A Quick Snapshot Table

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