4.2.2.2.2 Private companies limited by shares

CA 2006 s. 4 (1) provides a quite simple and straightforward definition of a private company. It says: "a private company is any company that is not a public company." Private companies in the UK can be operated with less formality and expense than the public ones. Public companies must be capitalized with a minimum of 50,000 pounds while private companies are subject to no minimum capital requirement.1 Public companies must have at least two directors whereas private companies may have only one director.2 Accounting requirements for a private company are also less strict and simpler.3 A private company, however, may not offer shares to the public and its shareholders usually may not transfer their shares without restrictions. Because of this illiquidity, minority shareholders in a private company are vulnerable in the event of a dispute with majority shareholders and at an acute risk of being manipulated by them. This is a common plight for minority shareholders in private companies in all jurisdictions. Broadly speaking, private companies limited by shares are the focus of this book in discussing the exit remedies.