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Unit 3: Kinds of Companies

A private company is not required to hold a statutory meeting or to file a statutory report Notes
with the Registrar of Companies [s.165 (10)].
Only two members, who are personally present at the meeting, shall form the quorum
unless the articles provide for a larger number [s.174 (1)].
In case of a private company, poll can be demanded by one person present in person or by
proxy, if not more than seven persons are present; if the number present is more than
seven, two members present in person or by proxy can demand a poll [s.179 (1) (b)].
A private company need have a minimum of two directors only [s.252 (2)].

All the directors may be appointed by a single resolution.
The directors of a private company need not file their written consent to act as directors or
to take up their qualification share (Ss.264 & 266).

The directors of a private company need not retire by rotation (s.255).
Section 266 dealing with restrictions on appointment or advertisement of directors is not
applicable to a private company [s.266 (5) (b)].

Where a new director is to be appointed, a special notice of fourteen days is required. This
provision is not applicable to a private company, unless it is a subsidiary of a public
company [s.257 (2)].
Directors of a private company can vote on a contract in which they are interested (s.300).
A private company is exempted from restrictions regarding managerial remuneration.

Loss of Privileges by a Private Company

Section 43 provides that if a private company contravenes any of the three conditions included
in its Articles as per s.3(1) (iii), then it will be treated as if it is a public company and it will then
result in loss of privileges and exemptions to which it is normally entitled to.
The provision to s.43 states that if the contravention of any of the three restrictions contained in
the articles was accidental, or if the Central Government is satisfied that it is just and equitable
to grant relief, it may relieve the company from these consequences on the application by the
company or any other interested person.

Conversion of a Private Company into a Public Company

Section 44 provides for conversion of a private company into a public company. The
procedure is:

The company in general meeting must pass a special resolution altering its articles in such
a manner that they no longer include the provisions of s.3(1) (iii) which are required to be
included in the articles of a private company. On the date of the passing of the resolution,
the company ceases to be a private company and becomes a public company.
Within thirty days of the passing of the special resolution altering the articles, the company
shall file with the Registrar (i) a printed or type-written copy of the special resolution and
(ii) a prospectus or a statement in lieu of prospectus.

If default is made in filing the resolution and the prospectus or the statement in lieu of
prospectus, the company and every officer in default shall be liable to a fine up to 5,000
for every day of default.

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