Private limited companies can be identified as a business organization which is
popular among the Sri Lankan entrepreneurs at present. Ability of even a single
person to start, having a legal personality, ability to get the involvement of family
members, friends and relatives, etc., for the commencement are the main reasons
for this popularity.
Companies of which the number of shareholders are limited to 50, shares cannot be
offered to the public and, liability is limited are known as private limited companies.
Characteristics of a private limited company
# Cannot invite the general public to purchase the shares of the company.
Buying the shares of a private limited company could be done only by the members
of the family, friends and relatives. Shares of these companies cannot be offered to
the public.
# Minimum number of shareholders is one and maximum is 50.
Since, based on the companies Act, even a single person can start a private limited
company, the minimum number of shareholders of a private limited company will
be one. Similarly, the maximum number of shareholders of such companies has
been limited to 50 by the Companies Act.
# Managed by a board of directors.
Management of limited companies is done by a board of directors. According
to Companies Act, there should be at least one director in a limited company to
manage the company affairs. Yet the Companies Act does not specify the maximum
number of directors.
# Has a legal personality.
# Has a continued existence.
# Accounting and auditing is mandatory.
# Liability is limited.
Advantages of private limited companies
# Even a single person can commence.
# Since the ownership of the company is with few people, controlling is easy.
# The profits of the company is shared among few.
# Can commence by getting the involvement of the family members, friends
and relatives.
# Being formal and having a high recognition.
# Limited liability.
# Having a separate legal identity.
# Having a continued existence.
Limitations of private limited companies
# Inability to raise more capital since the shares are issued to the members of
the family, friends and relatives.
# Having mandatory rules, regulations and procedures.
# Opportunity to get the involvement of many people is limited since the
maximum number of shareholders is limited to 50.
