Q: Can a private company be company limited by shares ?

Question 1: Rajiv owns a garments shop with his two brothers. They decided to diversify its business by creating a company that will manufacture garments. They are facing some financial difficulties in this regard.

For example, they collectively have just Rs. 80,000 as capital. Furthermore, they wish to limit their liabilities because of such financial shortcomings. Can they form a private company under such conditions?

Answer: Rajiv and his brothers can definitely incorporate a company under such conditions. Although the Companies Act had previously prescribed a minimum capital requirement of Rs. 1 lakh, this is now omitted. Considering the second condition, they can opt for a company limited by shares or guarantee.

Both company limited by shares or company limited by guarantee limit the liabilities.  

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