A Private Limited Company is a privately held small business entity. According to the Companies Act, 2013, a private limited company is a company whose article of association restricts the transferability of shares and prevents the public from subscribing to them. This is a distinct feature that differentiates private limited companies from other types of public companies.
Different Types of Private Limited Company
Lets see the types of Private Limited Companies in India:
i) Private company Limited by shares
A private company limited by shares is limited to the nominal share amount as mentioned in the Memorandum of Association. “Limited by shares” indicates that the liability of the members of limited by share company ( Shareholders)to creditors of the private limited company is restricted to the capital amount initially contributed. The shareholders are not liable to pay more than their share capital invested in the company.
ii) Private Company Limited By Guarantee
In this Private Company Limited by guarantee, their capitals are not divided in the forms of share but introduced to members in terms of guaranteed nature. Limited by guarantee, however, does not include shareholders like a limited by share company. But they have members who are guarantors of the company’s liability. In case of a company’s debts or winding up, each member is allotted a certain amount mentioned in the articles.
iii) Unlimited Company
Unlimited companies are those types of company that do not have any limit on the liability of its members. The liability of each of the members extends to the whole amount of the company’s debts and liabilities. Therefore, the creditors of an unlimited company have the ability to enforce the debt and liability of the company on the shareholders, if wound-up. Despite NOT giving the shareholders limited liability protection, an unlimited company is still considered to be a separate legal entity. Therefore, the members of an unlimited company cannot be sued individually.
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Note: This Post was last updated on December 5, 2022
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