What is a Limited Company ?

Limited Company : When we say XYZ Pvt Ltd or Public Ltd, what we mean by the word ‘limited’ in this context is the liability of the shareholders. It means, the liability of the shareholders, for the debts of the company, is limited to the extent of the share capital subscribed by them.

Let us suppose you are a shareholder of XYZ Pvt Ltd. In case if this company goes bankrupt tomorrow, then you will be liable only for your share capital. On the other hand, if this is not a Limited Company and if it is a Partnership. In such a case, if the company goes bankrupt, your assets may be taken into control to clear the debts made by the company, which essentially means you are Totally Liable.

Private Limited Company:

– Must have minimum two shareholders and max shareholders is 50

– Must have minimum two directors

– Cannot invite public to subscribe to its shares

– Transfer of shares is restricted to some conditions. The shares should be offered to present shareholders first and then to any outsider interested.

Public Limited Company:

– Must have minimum seven Shareholders

– Should have seven Directors

– Can invite public subscription of shares

– Permits free transfer of shares

All the above definitions and regulations are as followed in India

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2 thoughts on “What is a Limited Company ?

  1. Long time since studied them in seventh and eight class social textbooks…. nice to read them again in the form of textbook def’s 🙂

    • But, I never read finance in my school curriculum. So, it is a great experience for me going through the concepts of Balance Sheet
      and other major financial statements of a company.

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