What is a Private Company?

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What is a Private Company?

January 30, 2022         Lauren Hanna

A private company is a company registered under the Corporations Act 2001. It exists as an entity separate from the owners and is privately owned. 

To be considered a private company, the company must meet a certain criteria. It must:

  • only have a maximum of 50 shareholders that are not employees
  • have at least one director 
  • be a company limited or unlimited by shares with a share capital

Types of Private Companies

A private company can either be a small or large company. 

A small private company has a consolidated revenue under $25m, consolidated gross assets under $12.5m and less than 50 employees. 

A large private company has a consolidated revenue of more than $25m, consolidated gross assets of more than $12.5m and more than 50 employees. 

Private vs. Public Company

There are many differences between private companies and public companies.

A private company cannot sell shares to the public whereas a public company can.

Public companies must issue a prospectus which provides shareholders with the company’s financial information and to encourage the public to invest. Private companies, however, are not required to do this as they cannot invite the public to invest.

Unlike public companies, private companies do not need to release annual financial reports to the public.

There is also no limit on the number of shareholders in a public company. Additionally, while private companies require only one director, public companies require at least 3 directors. 

About Lauren Hanna

Lauren is studying a Bachelor of Law and a Bachelor of Business at UTS. She is interested in commercial law, finance and banking law, and property law.