The most common way to differentiate a private company from public company is by their company name. The name of a private company must end with “Sdn. Bhd.” while a public company name will end with “Bhd”. Most of the public companies will be publicly listed on stock exchange, and these companies are known as public listed companies.
Read on to learn the main differences of a private and public company.
1. Number of Directors
In a private company, the minimum number of resident directors can be 1 only while a public company is required to have at least 2 residential directors.
2. Maximum number of Shareholders
For public companies, the public can subscribe to their company’s shares freely and there is no restrictions as to the number of shareholders. For private companies, the number of shareholders must be capped at a maximum of 50 shareholders. As private companies are not allowed to offer shares to public, shareholders of a private company are usually individuals who are close to the business owner.
For instance, shareholders can consist of family members if the company is a family business or consists of a few business partners who decided to run the company business together. But it may also be external investors who have interest towards the Company. Normally the shareholder agreement will be formally drafted and signed between the shareholders in the above situation.
3. Standards required for Financial Reporting
A higher standard of financial reporting is expected from Public Companies as they are required to disclose the company financials publicly and there is involvement of public interest. Public Companies are also required to comply with the law administered by the Securities Commission Malaysia and Bank Negara Malaysia. On the other hand, for Private Companies’ financial reporting shall comply with either Malaysia Private Entities Reporting Standard (MPERS) or Malaysia Financial Reporting Standards (MFRS).
4. Disclosure of financial report
A public company are required to disclose their financial report quarterly and annually to the public while a private company is not required to disclose their financial report to the general public.
5. Requirement to hold AGM
With the implementation of the Companies Act, 2016, the requirement for private company to hold AGM has been removed thus it is no longer mandatory for a private company to hold AGM at every calendar year. However, for a Public Company, AGM is required and must be held within 6 months from the financial year-end of the company and not more than 15 months after the last preceding AGM.