9 Questions
Match the minimum paid-up share capital of a private company with its description:
₹1 lakh = Minimum paid-up share capital of a private company ₹5 lakh = Minimum paid-up share capital of a public company ₹10 lakh = Minimum paid-up share capital of a government company ₹50 lakh = Minimum paid-up share capital of a foreign company
Match the restrictions on a private company with its description:
Issue any invitation to the public to subscribe for its shares = Prohibited by the Companies Act 2013 Allot or agree to allot shares or debentures to more than 50 people = Permitted by the Companies Act 2013 Make any provision for the payment of commissions = Permitted by the Companies Act 2013 Restrict the right to transfer its shares = Mandatory for a private company
Match the process of converting a public company into a private company with its description:
Altering its articles of association to include the restrictions and limitations = Step 1 in converting a public company to a private company Filing an application with the Registrar of Companies = Step 2 in converting a public company to a private company Holding a general meeting to approve the conversion = Step 3 in converting a public company to a private company Appointing a new auditor = Not required for conversion of a public company to a private company
Match the effect of conversion of a public company into a private company with its description:
The company becomes a public company = Not an effect of conversion The company becomes a private company = Effect of conversion The validity of any alteration made in the articles of association is affected = Not an effect of conversion The company's auditor is changed = Not an effect of conversion
Match the number of members allowed in a private company with its description:
200 = Maximum number of members allowed in a private company 150 = Minimum number of members required in a private company 250 = Maximum number of members allowed in a public company 100 = Minimum number of members required in a public company
Match the provision related to employee shareholders with its description:
Employees and former employees who were members while in employment are excluded from the count of 200 = Provision applicable to private companies Employees and former employees who were members while in employment are included in the count of 200 = Not applicable to private companies Employees and former employees who were members while in employment can hold only a maximum of 50 shares = Not applicable to private companies Employees and former employees who were members while in employment cannot hold shares = Not applicable to private companies
Match the section of the Companies Act 2013 that defines a private company with its description:
Section 7 = Defines a public company Section 8 = Defines a private company Section 9 = Defines a government company Section 10 = Defines a foreign company
Match the restriction on a private company with its description:
Restrict the right to transfer its shares = Mandatory for a private company Prohibit any invitation to the public to subscribe for its shares = Mandatory for a private company Allow the company to issue debentures to more than 200 people = Not applicable to private companies Allow the company to make any provision for the payment of commissions = Not applicable to private companies
Match the provision related to payment of commissions with its description:
A private company can make provisions for the payment of commissions = Not applicable to private companies A private company cannot make provisions for the payment of commissions = Provision applicable to private companies A public company can make provisions for the payment of commissions = Provision applicable to public companies A government company cannot make provisions for the payment of commissions = Not applicable to government companies
Study Notes
Section 8 of Company Act 2013
Definition of Private Company
- Section 8 of the Companies Act 2013 defines a private company.
- A private company is a company that:
- Has a minimum paid-up share capital of ₹1 lakh (or such higher amount as may be prescribed) or such higher amount as may be prescribed.
- Restricts the right to transfer its shares.
- Prohibits any invitation to the public to subscribe for any securities of the company.
- Limits the number of its members to 200 (excluding employees and former employees who were members while in employment and still holding securities).
Restrictions on Private Companies
- A private company cannot:
- Issue any invitation to the public to subscribe for its shares or debentures.
- Allot or agree to allot shares or debentures to more than 200 people.
- Make any provision for the payment of commissions, etc., in connection with the subscription of its shares or debentures.
Conversion of Public Company into Private Company
- A public company can be converted into a private company by:
- Altering its articles of association to include the restrictions and limitations specified in Section 8.
- Filing an application with the Registrar of Companies in the prescribed form and manner.
Effect of Conversion
- Upon conversion, the company becomes a private company and is subject to the provisions and restrictions applicable to private companies.
- The conversion does not affect the validity of any alteration made in the articles of association of the company prior to its conversion.
Definition of Private Company
- A private company is defined in Section 8 of the Companies Act 2013.
- It has a minimum paid-up share capital of ₹1 lakh or a higher amount as prescribed.
- It restricts the right to transfer its shares.
- It prohibits any invitation to the public to subscribe for its securities.
- It limits the number of its members to 200, excluding employees and former employees who were members while in employment and still holding securities.
Restrictions on Private Companies
- A private company cannot issue any invitation to the public to subscribe for its shares or debentures.
- It cannot allot or agree to allot shares or debentures to more than 200 people.
- It cannot make any provision for the payment of commissions, etc., in connection with the subscription of its shares or debentures.
Conversion of Public Company into Private Company
- A public company can be converted into a private company by altering its articles of association to include the restrictions and limitations specified in Section 8.
- An application must be filed with the Registrar of Companies in the prescribed form and manner.
Effect of Conversion
- Upon conversion, the company becomes a private company and is subject to the provisions and restrictions applicable to private companies.
- The conversion does not affect the validity of any alteration made in the articles of association of the company prior to its conversion.
Learn about the definition of a private company according to Section 8 of the Companies Act 2013. Understand the key characteristics of a private company, including minimum paid-up share capital, restrictions on share transfer, and more.
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