Compare and contrast the private limited company... | WAEC SSCE - Economics - 1994 (Essay)

Question 1 Report

Compare and contrast the private limited company with the public limited company.

Answer

Both are joint-stock companies formed by registration (incorporation) under the Companies Act, so they share several features before we look at their differences.

Similarities. Each is an incorporated body with a separate legal personality from its owners; the shareholders enjoy limited liability (they lose only what they invested); each has perpetual succession (it continues despite death of members); each is owned by shareholders but run by a board of directors.

Differences.

Feature	Private limited company (Ltd)	Public limited company (Plc)
Membership	Minimum of 2, maximum of 50 (excluding employees)	Minimum of 7, no maximum
Transfer of shares	Restricted; shares cannot be freely transferred	Freely transferable through the stock exchange
Raising capital	Cannot invite the public to buy shares or debentures	Can invite the public through a prospectus
Commencement of business	Can begin once it receives the certificate of incorporation	Needs both the certificate of incorporation and a certificate of trading
Name ending	Ends with "Ltd"	Ends with "Plc"
Publication of accounts	Enjoys more privacy	Must publish audited accounts

Examination takeaway: a "compare and contrast" answer must give both the shared features and the point-by-point differences on the same characteristic (membership vs membership, shares vs shares); a table earns marks cleanly.

Read lesson note on Business Organizations (WAEC)

Answer Details

Both are joint-stock companies formed by registration (incorporation) under the Companies Act, so they share several features before we look at their differences.

Differences.

Feature	Private limited company (Ltd)	Public limited company (Plc)
Membership	Minimum of 2, maximum of 50 (excluding employees)	Minimum of 7, no maximum
Transfer of shares	Restricted; shares cannot be freely transferred	Freely transferable through the stock exchange
Raising capital	Cannot invite the public to buy shares or debentures	Can invite the public through a prospectus
Commencement of business	Can begin once it receives the certificate of incorporation	Needs both the certificate of incorporation and a certificate of trading
Name ending	Ends with "Ltd"	Ends with "Plc"
Publication of accounts	Enjoys more privacy	Must publish audited accounts

Read lesson note on Business Organizations (WAEC)

Business Organizations

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Compare and contrast the private limited company with the public limited company.

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