Private company
Also called: Private limited company
A company whose articles restrict share transfer, limit members to two hundred (except a One Person Company) and bar public invitation to subscribe for its securities. Section 2(68), Companies Act, 2013.
Explained
Section 2(68) of the Companies Act, 2013 defines a private company as a company having a minimum paid-up share capital as may be prescribed, and which by its articles (i) restricts the right to transfer its shares; (ii) except in the case of a One Person Company, limits the number of its members to two hundred; and (iii) prohibits any invitation to the public to subscribe for any securities of the company. The words fixing a minimum paid-up capital of one lakh rupees were omitted by amendment in 2015, so no fixed statutory minimum now applies.
In counting the two hundred members, joint holders are treated as a single member, and present employees who are members, and former employees who became members while employed and continue as members, are excluded. A public company under Section 2(71) is one that is not a private company; by the proviso, a subsidiary of a company that is not a private company is deemed a public company even if its articles retain private company restrictions. A One Person Company, having only one member (Section 2(62)), is a type of private company.
The status has practical consequences. A private company can be formed by two or more persons (Section 3(1)(b)), against seven for a public company, and its name must end with the words 'Private Limited' (Section 4(1)(a)). It needs a minimum of two directors, against three for a public company (Section 149(1)(a)). Conversion between private and public status is made by a special resolution altering the articles under Section 14, with an order of the Central Government also needed to turn a public company into a private one, and a private company that drops the required restrictions ceases to be private from the date of alteration.
In Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd. (2021) the Supreme Court held that from 12 September 2013 whether a company is private is decided by Section 2(68) of the 2013 Act, and upheld the reconversion of Tata Sons into a private company. Examiners test the three restrictions, the employee exclusion from the member count, the deemed public company proviso and the minimum number of members and directors.
What the law says
(68) “private company” means a company having a minimum paid-up share capital *** as may be prescribed, and which by its articles,—
(i) restricts the right to transfer its shares;
(ii) except in case of One Person Company, limits the number of its members to two hundred:
Defines private company (2(68)), public company (2(71)) and OPC (2(62))
(b) two or more persons, where the company to be formed is to be a private company; or
(c) one person, where the company to be formed is to be One Person Company that is to say, a private company,
by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:
Minimum number of persons to form a private company
(a) the name of the company with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company:
Provided that nothing in this clause shall apply to a company registered under section 8;
(b) the State in which the registered office of the company is to be situated;
Name to end with Private Limited
(a) a private company into a public company; or
(b) a public company into a private company:
Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company:
Conversion between private and public company
(a) a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
(b) a maximum of fifteen directors:
Provided that a company may appoint more than fifteen directors after passing a special resolution:
Minimum number of directors
For the exam
- Articles must restrict share transfer, cap members at 200 (except OPC) and bar public invitation (Section 2(68)).
- Employees and qualifying ex-employee members are not counted towards 200; joint holders count as one.
- Subsidiary of a public company is deemed public (proviso to Section 2(71)).
- Minimum two members to form (Section 3(1)(b)) and two directors (Section 149(1)(a)).
- Name must end with 'Private Limited' (Section 4(1)(a)).
93 questions in the Law Maker question bank use this term. Practise Company Law questions
Judgments
Related terms
- Public companyUnder Section 2(71) of the Companies Act, 2013, a company that is not a private company and has the prescribed minimum paid-up capital, including a subsidiary of a non private company.
- One Person CompanyUnder Section 2(62) of the Companies Act, 2013, a company which has only one person as a member. It is a form of private company formed under Section 3(1)(c).
- Small companyUnder Section 2(85) of the Companies Act, 2013, a company other than a public company whose paid-up capital and turnover are both within the prescribed limits.
- ProspectusUnder Section 2(70) of the Companies Act, 2013, any document described or issued as a prospectus, including red herring and shelf prospectuses, or any notice, circular or advertisement inviting public offers for securities.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.