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DIFFERENCE BETWEEN PRIVATE AND PUBLIC COMPANY IN KENYA

 

There exists various types of companies in Kenya as provided for by the Companies Act, 2015, and amongst them are Public and Private Companies, being the most preferred types of companies used to undertake business in Kenya.

Essentially, a private company refers to a company that restrict a shareholder’s right to transfer shares; limits the number of members to fifty; prohibits invitations to the public to subscribe for shares or debentures of the company and requires the consent of all shareholders to add a new member.

Whereas, a public company is that which allow its members the right to transfer their shares in the company and allows invitations to the public to subscribe for shares or debentures of the company.

There are other differences between a private and public company which include;

Firstly, public companies are created with the intention of conducting business and are suitable for public investment attracting many persons. However, private investment is suitable for family, friends and relatives while the company is intended for business, trading and other commercial purposes.

Secondly, the two companies differ in their naming where public companies that enjoy limited liability end with “Public Limited Company” or “plc” while private companies that enjoy limited liability must have their names end with “limited’ or “ltd”.

Thirdly, the two types of companies differ in their membership. Public companies can be formed by one or more persons with no maximum membership. However, private companies may be formed by one or more persons but have a maximum number of members.

Fourthly, public companies differ with private ones when it comes to directorship. Public Companies are required to have at least 2 directors where one has to be a natural person whereas private companies are required to have at least one director.

Fifthly, private companies have no minimum capital requirements nor restrictions on allotment of shares. However, public companies are required to have an Authorized minimum capital and they have restrictions as to how they can allot their shares.

Sixthly, Public companies are required to have a company secretary while private companies are not mandated to have accompany secretary unless it has a paid-up capital of at least Ksh 5 million and above.

Seventhly, public companies may transfer their shares to the public freely while private companies have their shares not freely transferable.

Eighthly, private companies are not required to organize statutory meetings but public companies must organize a statutory meeting and deliver the report of such meetings to the shareholders and file the same with Registrar.

Ninthly, in public companies, 2/3rd of the total number of directors must retire by rotation. However, the directors of a private companies are not required to retire by rotation, they can be permanent.

Finally, private companies can start their business immediately after receiving the certificate of incorporation, whereas a public companies need a certificate of commencement of business after it has received a certificate of incorporation, to commence business.

DISCLAIMER: –

“The information provided in this article is intended for general legal advice and does not constitute legal advice for specific transaction or case. Since each transaction presents a unique legal context, it is advisable to retain a legal adviser for specific transactions.”

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