- October 31, 2023
- Posted by: mirembeadvocates
- Category: Commercial Law
PRIVATE AND PUBLIC COMPANY
The corporate landscape in Uganda is governed by the Companies Act of 2012, offering various structures for businesses to choose from. Two of the most commonly utilized types are Public and Private Companies. These distinct classifications come with their own set of characteristics, impacting ownership, governance, and access to capital. Understanding the differences between these company types is crucial for entrepreneurs and investors looking to establish a foothold in Uganda’s dynamic business environment. This article delves into the key disparities between Public and Private Companies, shedding light on their unique features and implications for business operations in the country.
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.”
In essence, a private company is one that imposes restrictions on the transfer of shares, limits its membership to fifty individuals, forbids public invitations to subscribe for shares or debentures, and necessitates unanimous shareholder consent for adding a new member.
On the other hand, a public company permits its members to freely transfer their shares and extends invitations to the public for subscribing to shares or debentures.
There are other differences between a private and public company which include;
- Initially, public companies are established with the aim of engaging in business activities and are designed to attract a wide range of investors from the public. Conversely, private investment is more tailored towards family, friends, and close associates, and the company is typically focused on business operations, trade, and various commercial endeavors.
- Additionally, there is a distinction in naming between a private and public company. Public companies with limited liability conclude their names with “Public Limited Company” or “plc,” whereas private companies with limited liability must conclude their names with “limited” or “ltd.”
- Moreover, the membership criteria for a private and public company also varies. Public companies can be established by one or more individuals with no prescribed limit on membership. In contrast, private companies may be formed by one or more individuals, but they do have a specified maximum number of members.
- Additionally, in terms of directorship there are distinctions between a private and public company. Public companies are mandated to have a minimum of two directors, with one of them being a natural person. On the other hand, private companies are only required to have at least one director.
- The distinction between a private and public company lies in their capital requirements. Private companies do not have any mandated minimum capital requirements and face no restrictions on the allotment of shares. Conversely, public companies are obliged to maintain an authorized minimum capital and are subject to specific regulations regarding the allocation of their shares.
- Another difference between a private and public company is that public companies are obligated to appoint a company secretary, whereas private companies are not required to do so unless they possess a paid-up capital.
- One other distinction between a private and public company lies in share transferability. Public companies have the liberty to freely transfer their shares to the public, whereas private companies have restrictions in place, making their shares less freely transferable.
- To note further, this is an essential point of differentiation. Private companies are exempted from the obligation to conduct statutory meetings, while public companies are mandated to hold such meetings. Additionally, public companies must furnish a report of these meetings to their shareholders and submit it to the Registrar.
- Another important distinction is that in public companies, a specific portion of directors, namely 2/3rd of the total, must retire by rotation. Meanwhile, directors in private companies are not bound by this rotation requirement and can serve in a permanent capacity.
- Finally, private companies can initiate their operations right after obtaining the certificate of incorporation. On the other hand, public companies must obtain a certificate of commencement of business following the issuance of the certificate of incorporation in order to commence their operations.
Seeking the guidance of a qualified lawyer or advocate specializing in Commercial law is essential for a seamless and legally sound registration process, be it for a private or public company. The experienced team at Mirembe & Company Advocates is well-equipped to provide invaluable assistance. Simply send an email to [email protected] or call +(256) 393 228 836 to schedule a strategy call. The legal team will be more than happy to assist you with the registration of both a private and public company in Uganda.
Contact us at the Mirembe Advocates office nearest to you or submit an inquiry online.