Private Company can be formed by two individuals or companies. The name of the private company should bear the words “private limited” and the liability may be limited (by shares or by guarantee) and unlimited by the memorandum. The articles should specifically contain the restrictions as stated in section 3(iii) and the minimum capital should be Rs. 1 lakh. The objects can be main, incidental or ancillary and other objects.
The minimum number of directors of a private company is two. The tenure of directors is not fixed by the law. The board can appoint additional, alternate director and director to fill up casual vacancy. An additional director shall hold the office upto the date of the next Annual General Meeting. The powers and functions of directors are specified in section 292. There is no additional liability for directors as provided for directors in a producer company.
3. General Meetings
The first AGM is required to be held within 18 months from the date of incorporation and notice of the meeting should be given not less than 21 days.
4. Share Capital and Members Rights
Share capital may be equity or preference or any other class. There is no provision for holding of shares according to the patronage and there is no distinction between members. Transfer of shares is restricted and nomination is voluntary. There is also no provision for cession of membership and their rights. The voting rights shall be generally governed by the manner prescribed by the articles of association.
5. Loans and Investments
Excepting that of loan to directors a private company cannot provide loan or advance to its members. The provisions of Section 372A relating to inter-corporate loans and investments are not applicable to a private company.
6. Finance, Accounts and Audit
Proper books of accounts shall be kept. Internal audit need not be carried out and auditor’s report shall be subject to the provisions as specified in section 227. A private company has no restriction for making donations or subscription and it can contribute donation to political party or purpose as specified in section 293A.
For popular videos of CA CS CMA visit www.cakart.in
Click here to download FREE CA CS CMA books