Private and public limited liability companies are the most important forms of business entities in Nigeria, each serving different purposes and operating under different frameworks. This article examines the key features and differences between these two types of companies.
Private Companies
A private company, under the Companies and Allied Matters Act, is characterized by the restriction of share transfers and inability to offer shares to the public. However, this has been modified by the Business Facilitation Act, Miscellaneous Provisions 2023, which amended Section 67 of the Investments and Securities Act to allow private companies to offer securities to the public in accordance with specific regulations that will be prescribed by the Securities and Exchange Commission.
Features of a Private Company
1.Limited Membership
Private companies cannot have more than 50 shareholders, not including employees.
- Capital Requirements
The minimum authorized share capital of a private company is ₦100,000.
- Less Disclosure and Filing Requirements
Private companies are not expected to make financial records publicly available or audit such books. However, they shall file annual returns with the CAC and�FIRS.
- Number of Directors
A private company can operate with one to ten directors.
Public Companies
Section 24 of CAMA defines a public company as any company other than a private company, with its status explicitly stated in its Memorandum of Association. Public companies, typically operating on a larger scale, require substantial investment and are subject to stricter regulatory oversight to protect public investors and ensure transparency.
Features of a Public Company
1.Membership Requirements
Public companies must have at least two shareholders, with no upper limit.
2.Capital Requirements
The minimum authorized share capital for public companies is ₦2,000,000.
3.Shares and Fundraising
Public companies may raise capital by offering their shares to the public.
4.Transparency and Disclosure
They must file financial reports with the CAC and adhere to high standards of transparency.
5.Regulatory Oversight
Public companies fall under several regulatory bodies such as CAC, SEC, and the Nigerian Stock Exchange (if listed).
Key Differences Between Private and Public Companies
1.Membership Limits
Private companies have a limitation of 50 members, while public companies have no limit on membership.
2.Minimum Share Capital
Public companies have the minimum share capital of ₦2,000,000, while private companies have it at ₦100,000.
3.Shares in public companies are normally freely transferable in the stock exchange, but private companies have restrictions, and this is often only possible with the consent of the other shareholders.
4.Business Continuity
Public companies have greater continuity as there is dispersed ownership. Private companies are easily affected by any change in ownership or management.
5.Company Secretary: Public companies need to appoint a qualified company secretary, whereas private companies may or may not.
6.Name: Public companies have their names end with “PLC,” and private companies end with “LTD” or “Limited.”
- Disclosure of Accounts: Public companies need to publish accounts publicly, and private companies need not comply with too many disclosure formalities.
8.Audit: Public companies must be externally audited annually, while it is not required of private ones.
Private and public limited liability companies are indispensable in business operations in Nigeria, serving different purposes. Private companies are simpler to set up and have fewer regulatory requirements, making them suitable for startups and foreign-owned businesses. On the other hand, public companies, since they can raise capital from the general public, are more suitable for large-scale projects that require huge investments.
The choice of a business organization structure depends on the specific aims and needs of the business. We have successfully assisted individuals and businesses in registering their companies and enterprises. Contact us to schedule a consultation and take the next step towards your business goals.