Features of a Private Limited Company

This article briefly explores the key features of a private limited company and what makes it stands out in comparison to other forms of companies that you can register.

A Private Limited Company is formed when an association of persons team up for conducting business, possessing a distinct name and having limited liability. A company is a separate legal entity and is different from its members.

Here is a brief on some of the major features of a Private Limited Company incorporated in India.

1. A Private Company is a Separate Legal Entity

As per the Indian law, a company is considered as a separate legal entity which is entirely distinct from the shareholders.

In case the total shareholding of the concerned Private Limited Company is being purchased by either one person or a group of individuals; the company would still maintain a separate legal entity.

Read: Private Limited Company for an in-depth coverage on the subject

2. Private Limited Company is Considered as a Juristic Person

As per the Companies Act, there are various terms ‘A Person’ includes pertaining not only to a natural person but also another juridical person.

A private company is a juristic person which is eligible to be represented before a Court of Law or any other place by a person which is competent to represent it.

There is a power to institute a suit in the case of a company which vests with the Board of Directors of the Company and an individual Director which can institute a suit only when empowered.

A company is not allowed to take an oath or make an affirmation. Hence, a private corporation is not eligible to become a witness.

3. Company Possesses Perpetual Succession

One of the prime reasons for the incorporation of a company is perpetual succession. Once a company is incorporated, it will continue to remain in existence unless and until it is wound up.

In case of the death of a shareholder who holds the maximum number of shares; the shares of the private limited company will very much continue to be in existence.

4. Law Regarding the Decree Against Company and Corporate Veil

If there is a decree passed against a private limited company, it cannot be satisfied by the sale and attachment of properties which belong to other limited companies being managed by the same Directors.

A corporate veil is incorporated which helps in protecting the members of the company from any liability of the private limited company.

Related: Types of Private Limited Company

5. The Company does not hold any Liability for the Wrongful acts of employee(s)

A private limited company is not at all responsible for any unlawful act or negligence on the part of any employee of the enterprise.

6. Company has the Power to Own Property

A company has the power of owning assets and properties which solely belong to the company itself and not to any of its members. However, the members of the company have the liberty to participate in the assets of the company which are left over after the company is winded up.

7. Company has the Power to be a Trustee

A company can opt to be a trustee, but it has to be permitted by the ‘Objects’ clause mentioned in the Memorandum of Association of the concerned company.

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