Difference between a private limited and a public limited company are:

1. A public limited company is a company listed on a recognized stock exchange and the
stocks are traded publicly. On the other hand, a private limited company is neither
listed on the stock exchange nor are they traded. It is privately held by its members
only.
2. The minimum number of members required to start a public company is seven. As
against this, the private limited can be started with a minimum of two members.
3. In case of a public company, it is compulsory to call a statutory general meeting of
members. There is no such compulsion in case of a private company.
4. The issue of prospectus or statement is mandatory in case of public company.
However, this is not the case of a private company.
5. The public company will require a certificate of commencement post incorporation to
begin its operation. In contrast to this, a private company can start its business right
after its incorporation.
6. The transferability of shares is restricted completely in private limited company.
While the shareholders of a public company can transfer their shares freely.
7. Since there is a limited number of people and fewer restrictions, the scope of a private
limited company is limited. In contrary, the scope of a public company is vast. This is
because the owners of the company can raise capital from the general public and have
to abide by may legal restrictions.
8. There is a greater regulatory burden on a public limited company . This is because a
great amount of information has to be made available to the public who are
shareholders or prospective shareholders. A lot of money has to be invested in order
to prepare reports and disclosures that match with the regulations provided by SEBI.
9. A signed written resolution is received by holding general meetings of a private
limited company.
10. While it mandatory for public companies to appoint a company secretary, private
companies may choose to do so only at their will.
Depending upon one's need a type of company is chosen to be registered. However, the
principal reason for choosing a public company is to have the ability to offer shares to the
public. One has to pay a price for this by complying with a greater number of restrictions and
considerable loss of privacy.
Types of Companies
on the Basis of Liabilities
When we look at the liabilities of members, companies can be
limited by shares,
limited by guarantee or
simply unlimited.

a) Companies Limited by Shares

Sometimes, shareholders of some companies might not pay the entire value of their shares in
one go. In these companies, the liabilities of members is limited to the extent of the amount
not paid by them on their shares.
This means that in case of winding up, members will be liable only until they pay the
remaining amount of their shares.
Learn more about Multinational Companies here in detail.
b) Companies Limited by Guarantee
In some companies, the memorandum of association mentions amounts of money that some
members guarantee to pay.
In case of winding up, they will be liable only to pay only the amount so guaranteed. The
company or its creditors cannot compel them to pay any more money.
c) Unlimited Companies
Unlimited companies have no limits on their members’ liabilities. Hence, the company can
use all personal assets of shareholders to meet its debts while winding up. Their liabilities
will extend to the company’s entire debt.
Learn more about Small Scale Industries here in detail.
Companies on the basis of members
a) One Person Companies (OPC)
These kinds of companies have only one member as their sole shareholder. They are separate
from sole proprietorships because OPCs are legal entities distinct from their sole members.
Unlike other companies, OPCs don’t need to have any minimum share capital.
b) Private Companies
Private companies are those whose articles of association restrict free transferability of
shares. In terms of members, private companies need to have a minimum of 2 and
a maximum of 200. These members include present and former employees who also hold
shares.
c) Public Companies
In contrast to private companies, public companies allow their members to freely transfer
their shares to others. Secondly, they need to have a minimum of 7 members, but the
maximum number of members they can have is unlimited.
Companies on the basis of Control or Holding
In terms of control, there are two types of companies.
a) Holding and Subsidiary Companies
In some cases, a company’s shares might be held fully or partly by another company. Here,
the company owning these shares becomes the holding or parent company. Likewise, the
company whose shares the parent company owns becomes its subsidiary company.
Holding companies exercise control over their subsidiaries by dictating the composition of
their board of directors. Furthermore, parent companies also exercise control by owning more
than 50% of their subsidiary companies’ shares.
b) Associate Companies
Associate companies are those in which other companies have significant influence. This
“significant influence” amounts to ownership of at least 20% shares of the associate
company.
The other company’s control can exist in terms of the associate company’s business decisions
under an agreement. Associate companies can also exist under joint venture agreements.
Companies in terms of Access to Capital
When we consider the access a company has to capital, companies may be either listed or
unlisted.
Listed companies have their securities listed on stock exchanges. This means people can
freely buy their securities. Hence, only public companies can be listed, and not private
companies.
Unlisted companies, on the other hand, do not list their securities on stock exchanges. Both,
public, as well as private companies, can come under this category.
Other Types of Companies
a) Government Companies
Government companies are those in which more than 50% of share capital is held by either
the central government, or by one or more state government, or jointly by the central
government and one or more state government.
b) Foreign Companies
Foreign companies are incorporated outside India. They also conduct business in India using
a place of business either by themselves or with some other company.
c) Charitable Companies (Section 8)
Certain companies have charitable purposes as their objectives. These companies are called
Section 8 companies because they are registered under Section 8 of Companies Act, 2013.
Charitable companies have the promotion of arts, science, culture, religion, education, sports,
trade, commerce, etc. as their objectives. Since they do not earn profits, they also do not pay
any dividend to their members.
d) Dormant Companies
These companies are generally formed for future projects. They do not have significant
accounting transactions and do not have to carry out all compliances of regular companies.
e) Nidhi Companies
A Nidhi company functions to promote the habits of thrift and saving amongst its members. It
receives deposits from members and uses them for their own benefits.
f) Public Financial Institutions
Life Insurance Corporation, Unit Trust of India and other such companies are treated as
public financial institutions. They are essentially government companies that conduct
functions of public financing.

The major differences between memorandum of association and articles of

association are given as under:
1. Memorandum of Association is a document that contains all the condition which
are required for the registration of the company. Articles of Association is a
document that contains the rules and regulation for the administration of the
company.
2. Memorandum of Association is defined in section 2 (56) while the Articles of
Association is defined in section 2 (5) of the Indian Companies Act 1956.
3. Memorandum of Association is subsidiary to the Companies Act, whereas Articles of
Association is subsidiary to both Memorandum of Association as well as the Act.
4. In any contradiction between the Memorandum and Articles regarding any clause,
Memorandum of Association will prevail over the Articles of Association.
 5. Memorandum of Association contains the information about the powers and objects
of the company. Conversely, Articles of Association contain the information about the
rules and regulations of the company.
6. Memorandum of Association must contain the six clauses. On the other hand,
Articles of Association is framed as per the discretion of the company.
7. Memorandum of Association is obligatory to be registered with the ROC at the time
of registration of Company. As opposed to Articles of Association, is not required to
be filed with the registrar, although the company may file it voluntarily.
8. Memorandum of association defines the relationship between company and external
party. On the contrary, articles of association govern the relationship between the
company and its members and also between the members themselves.
9. When it comes to scope, the acts performed beyond the scope of memorandum are
absolutely null and void. In contrast, the acts done beyond the scope of artciles can be
ratified by unanimous voting of all shareholders.
A company (including Private company) having a share capital can increase its subscribed
capital by issue of further shares to persons who are holders of equity shares of the company
in proportion to the paid up share capital on those shares, by sending a letter of offer.

Further Issue of Share Capital

Where at any time, a company having a share capital proposes to increase its subscribed
capital by the issue of further shares, such shares shall be offered—

(a) to persons who, at the date of the offer, are holders of equity shares of the company in
proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by
sending a letter of offer subject to the following conditions, namely:—
(i) the offer shall be made by notice specifying the number of shares offered and limiting a
time not being less than fifteen days and not exceeding thirty days from the date of the offer
within which the offer, if not accepted, shall be deemed to have been declined;
(ii) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed
to include a right exercisable by the person concerned to renounce the shares offered to him
or any of them in favour of any other person; and the notice referred to in clause (i) shall
contain a statement of this right
(iii) after the expiry of the time specified in the notice aforesaid, or on receipt of earlier
intimation from the person to whom such notice is given that he declines to accept the shares
offered, the Board of Directors may dispose of them in such manner which is not dis-
advantageous to the shareholders and the company;
(b) to employees under a scheme of employees’ stock option, subject to [special resolution]
passed by company and subject to such conditions, or

Public Offer v/s. Private Placement Difference Between Them

1. Public Offering is one of the methods of selling securities to general public where
there are large number of investors. While, Private Placement is one of the methods
of selling securities privately or directly to a few group of individual investors or
institutional investors. 
2. Large scale companies raises fund through Public Offering. While, Small scale
companies prefer raising funds through Private placements.
3. In case of Public Offering, Investment Bankers act as Middlemen which hiring
together suppliers and users of long term fund in capital market. While, there is no
middleman required in case of private placement since direct negotiations take place
between the issuing company and the investors. 
4. In case of Public Offering, Floatation costs are required to be included since
underwriters are required. While, in case of Private Placement, Floatation cost is
excluded as there is no need of underwriter.
Related party transaction
A company, in the course of conduct of its business, enters into various transactions with
different parties, including its related parties. Companies also carry on their activities through
subsidiary companies and associate companies. Accordingly, related party relationships are a
normal feature of business. Due to this relationship, related parties may enter into
transactions that unrelated parties may not. Every transaction with a related party may not be
a ‘related party transaction’ although every ‘related party transaction’ is necessarily a
transaction with a related party.
Transactions with related parties need not always be disadvantageous to the parties
concerned. The concern arises only when the transactions which are at non arm’s length
dealings beneficial to a related party but detrimental to the other stakeholders. Transactions
with related parties raise important concerns and hence transparency in such transactions is
essential. Therefore, law requires certain specific compliances with respect to the related
Party transaction
Section 2(76) of the Act defines a related party with reference to a company, means:
i. A director or key managerial personnel or their relatives.
ii. a firm, in which a director, manager or his relative is a partner.
iii. a private company in which a director or manager or his relative is a member or director.
iv. a public company in which a director or manager is a director and holds along with his
relatives, more than two per cent of its paid-up share capital.
v. anybody corporate whose Board of Directors, managing director or manager is accustomed
to act in accordance with the advice, directions or instructions of a director or manager.
vi. any person on whose advice, directions, or instructions a director or manager is
accustomed to act:
Provided that nothing in sub-clauses (v) and (vi) shall apply to the advice, directions or
instructions given in a professional capacity.
vii. anybody corporate which is (a) a holding, subsidiary, or an associate company of such
company;(b) a subsidiary of a holding company to which it is also a subsidiary; (c) an
investing company or the venturer of the company.
What is related party transaction?
A company entering into contracts and arrangements with related party as follows:
 sale, purchase or supply of any goods or materials;
 selling or otherwise disposing of, or buying, property of any kind;
 leasing of property of any kind;
 availing or rendering of any services;
 appointment of any agent for purchase or sale of goods, materials, services or
property;
 such related party’s appointment to any office or place of profit in the company, its
subsidiary company or associate company; and
 underwriting the subscription of any securities or derivatives thereof, of the company.

Difference between amalgation and merger

An amalgamation is a combination of two or more companies into a new entity.
Amalgamation is distinct from a merger because neither company involved survives as a
legal entity. Instead, a completely new entity is formed to house the combined assets and
liabilities of both companies.

TYPES OF FOREIGN INVESTMENT

1) FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) is when a foreign company or individual makes an
investment in India that involves either
(i) establishing new business operations (known as green-field FDI) or
(ii) acquiring business assets, including controlling interests, in an already existing Indian
company. (known as brown-field FDI)
FDI is distinguished from FII in the sense it establishes a long-term relationship and involves
substantial control over the decision making of the company.
 Inward FDI is when foreign companies or individuals invest in India.
 Outward FDI is when Indian companies or individuals invest in foreign countries
As per the Companies Act 2013, if a foreign investor owns more than 10 % shares in a listed
company, it will be treated as FDI. The rationale behind the rule is that the higher equity
ownership will result in substantial control over the decision-making of the company.
2) FOREIGN INSTITUTIONAL INVESTMENT
FII is when foreign institutional investors invest in the shares of an Indian company, or in
bonds offered by an Indian company. So, if a foreign investor buys shares in Reliance, it is an
FII.
Only institutional investors like Investment companies, Insurance funds, etc. are allowed to
invest in the Indian stock market directly. Hence the term foreign institutional investor. These
investors have to get a license from SEBI.
However, if foreign individuals want to invest in India’s markets, they have to get themselves
registered as a sub-account of an FII. The FII will buy shares/ bonds from the Indian markets
on their behalf.
India allows only wealthy foreign individuals or high net worth individuals (HNIs) who have
a minimum net worth of $50 million to be registered as a sub-account of a foreign
institutional investor (FII).
Foreign institutional investors are also known as ‘hot money’ because it is not stable in
nature. The FIIs can pull out money from a country’s stock market/ bond market overnight.
3) QUALIFIED FOREIGN INVESTMENT 
As we know, foreign individuals cannot invest directly in India’s markets without sub-
accounts with an FII.
As an alternative, QFI was introduced in the year 2002. A Qualified Foreign Investor can
invest in India without sub-account.
However, they have to open a Demat account and Trade account with a depository participant
in India.
[So the difference between QFI and FII is that a QFI can invest in India directly without
subaccounts]
 The Qualified foreign investor (QFI) can be an individual, group, or association.
 The QFI should be a resident in a foreign country that is compliant with the standards
of the Financial Action Task Force (FATF).
 In addition, the QFI must be a signatory to the International Organization of Securities
Commission’s Multilateral Memorandum of Understanding. (MMOU).
4) FOREIGN PORTFOLIO INVESTMENT
In the Indian context, FIIs (along with sub-accounts with FIIs) and QFIs can be collectively
classified as Foreign Portfolio Investment (FPI).
Note: The accounting record of FDI inward, FDI outward, etc. are reflected in the capital
account of a country’s balance of payment (BOP). Read this article: /bop-current-account-
explained/
So, we have explained the different types of foreign investment in the Indian context.
You may also read: 
 What are Offshore Derivative Instruments or Participatory Notes?
 Derivatives meaning: Forward, Futures, Option & Swap
 GDP Explained
 Inflation Explained
 Fiscal Deficit Explained

Basis of Pledge Hypothecation Mortgage

Difference

Purpose To avail secured Getting smaller Availing higher amount of loan for immovable
loan easily amount of loan in assets in a simple way at comparitively lower
an easy way interest rates
 alongwith
possession of the
asset

Act under Section 172 of the Securitisation Section 58 of the Transfer of Property Act, 1882
which it is Indian Contract and
defined Act, 1872 Reconstruction of
Financial Assets
and Enforcement
of Security
Interest Act

Definition Pledge is the Hypothecation is Mortgage is the transfer of an interest in specific

bailment of a charge in or immovable property for the purpose of securing
goods as a upon any payment of money advanced by way of loan,
security for the movable existing or future debt, or the performance of an
payment of a property, engagement which may give rise to a pecuniary
debt or existing or liability
performance of a future, created
promise. by a borrower in
favour of a
secured creditor
without delivery
of possession of
the movable
property to such
creditor, as a
security for
financial
assistance, and
includes floating
charge and
crystallization
into fixed charge
 on movable
property

Type of May be Movable Movable Immovable

Assets/ or Immovable but
Goods must be long
lasting

Loan Period Average Smaller Larger

Loan Moderate Lesser Higher

Amount

Possession Pledgee Hypothecator Borrower

of Asset (Borrower)

Owenership Pledger Hypothecator Borrower

of Asset (Borrower)

Rights to sell A Pledgee has the Lender If the mortgagor fails to repay the loan, the
the Asset right to sell the mortgagee has the right to sell the property and
goods pledged, on recover the loan from the sale amount
default after
giving a notice to
the Pledger

Right to use A pledgee has no Hypothecator Borrower

the assets or right to use the (Borrower)
goods goods pledged

Others Borrower can not N.A. Generally, policy of borrower is also assigned
use pledged asset with mortgage
during the term of
loan

Example Gold Loan, Loan Vehicle Loan, Housing Loans

 against NSCs, etc. Loan against
Securities, etc.

What are the 6 elements of a valid contract?

  A contract is valid and legally binding so long as the following six essential elements are
present:   1. Offer 2. Acceptance 3. Consideration 4. Intention to create legal relations 5.
Legality and capacity 6. Certainty

1. Offer   Offer and acceptance analysis form the basis of contract law and the formation of a
valid contract. Developed in the 19th century, the offer and acceptance formula identifies the
point of formation, where the parties are of 'one mind'.   An offer is a proposal constituting
specific terms for one party to enter into an agreement with another party, which is essential
to the formation of an enforceable contract.

2. Acceptance   Acceptance is an agreement to the specific terms of an offer. Offers do not

have to be accepted through words; they can be accepted through conduct. If someone
purports to accept an offer but accepts on different terms than that of the original offer, that
will constitute a counter-offer rather than an acceptance.   The acceptance must normally be
communicated to the offeror – silence cannot be treated as an acceptance.    In exceptional
circumstances (for example, where the offeree has been given terms of dealing and the
offeree proceeds with the dealing without formally communicating acceptance) silence may
be treated as an acceptance.

3. Intention to Create Legal Relations   An agreement does not need to be worked out in
meticulous detail to become a contract. However, an agreement may be incomplete where the
parties have agreed on essential matters of detail but have not agreed on other important
points.    The question of whether the parties have reached an agreement is normally tested by
asking whether a party has made an offer which the other has accepted. Agreements may not
give rise to a binding contract if they are incomplete or not sufficiently certain. There will
usually be no contract if the parties agree ‘subject to contract’ but never quite agree on the
terms of the contract.   If the agreement is a stepping stone for a future contract or is an
agreement to agree, then the agreement might be void for a lack of intention to create legal
relations. Moreover, a domestic contract is presumed to not be legally binding in common
law jurisdictions.    For an example of a memorandum of understanding (MOU) concerning a
joint venture,

4. Consideration   Consideration constitutes something of benefit to the person who has the
obligation or who makes a promise to do something (the promisor). It can also be something
detrimental to the person who wants to enforce the obligation, or who has the benefit of the
promise (the promisee). There is no need for an 'adequate' value: if some value is given for
the promise it would be sufficient consideration. Where the consideration of one party is not
absolutely clear, the agreement will generally include language such as ‘FOR GOOD AND
VALUABLE CONSIDERATION, the receipt of which is hereby acknowledged’  in the
recital.  Alternatively, one can make the document in a deed without the need for
consideration.

5. Legality and Capacity    What would render a contract illegal? A contract is illegal if the
agreement relates to an illegal purpose. For instance, a contract for murder or a contract to
defraud the Inland Revenue Department is both illegal would therefore be unenforceable.    
Certain contracts may also be unenforceable because they are immoral and against public
policy.

Whether the other party has the capacity to contract?  The law presumes that a party to a
contract has the capacity to contract. However, minors (children under 18) and mentally
disordered people do not have the full capacity to contract. It is for the person claiming the
incapacity to prove their incapability to enter a contract.  There are special rules which apply
to corporations (including companies), unincorporated associations (including clubs and trade
unions), the government (including any government department or officer), public authorities
(including local government bodies, state-owned enterprises), organisations and charities.

6. Certainty    A valid contract requires reasonable certainty for the essential terms. If the
parties fail to reach an agreement on the essential terms with reasonable certainty, then the
agreement might be void even if all other essential elements are present. 

Documents need to be registered

The Registration Act 1902 contains the provisions related to registration of documents. The
registration of any document needs to be done as per these statutory requirements. The statute
has provisions relating to registration of all property documents. It specifies the documents
that are compulsorily registrable and those that are not compulsorily registrable. This is
further clarified under the provisions of the Transfer of Property Act 1882. Apart from the
statutory reasons, in order to create a permanent record, it is always advisable to register any
document related to property. There are certain documents that need to be compulsorily
registered. These are specified under Section 17 of the Indian Registration Act 1902.

Documents that need to be compulsorily registered:

Documents related to gift of immovable property. Any gift deed irrespective of the value of
the gifted property needs to be registered.

All non-testamentary documents that create interest, right, or title in property.

All non-testamentary documents that restrict or cancel any right, interest or title in property.
Receipt of payment to acquire a right, title, or interest in property.
All non-testamentary documents transferring or assigning any decree or order that affects the
interest, rights and title in a property.

Most mortgages need registration. However, a mortgage created by depositing of title deeds
(also known as equitable mortgage) is not compulsorily registrable Under the provisions of
Section 54 of the Transfer of Property Act 1882, the sale of property should be registered.
Only if the value of the property is less than Rs 100, the registration of the sale deed is not
mandatory. So, effectively, all sale deeds need to be registered.

Lease
A lease of property from year to year, for a term exceeding one year, or reserving a yearly
rent must be registered. The term from year to year denotes a continuity of lease from one
year to the next year. In such a case, the landlord cannot terminate the lease at the end of the
year without notice. The term 'reserving yearly rent' means the annual rent has been
determined but the lease has no definite period. The lease should run year after year or at
least for more than a year. This means any lease which is in excess of one year should be
registered.
Sale agreement

The purchase of a house through a sale deed should be registered with the office of the
registrar or sub-registrar of the district within whose jurisdiction the house is situated.
Registration is done after the parties - buyer and seller - have executed the documents related
to purchase and sale
The sale deed should be registered with the Sub-registrar of Assurances within four months
from the date of execution of the document. In case due to some unavoidable circumstances
this is not done within the prescribed time limit of four months, the document can still be
registered. An application needs to be made to the Sub-registrar of Assurances within a
further period not exceeding four months. Along with the application, the prescribed fine
needs to be paid.
Under the provisions of Section 49 of the Registration Act, in case a document that is
compulsorily registrable is not registered, it does not convey or transfer a legally valid title to
the transferee. Further, the document is not admitted as evidence of any transaction affecting
the property referred to in the document. However, despite not being registered, it may be
received as evidence in a suit for specific performance under the Specific Relief Act or as
evidence of part performance of a contract.