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Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2017 Hllo sir/madam
I want to ask in class 12 we have studied that only public limited company can isssue shares and trade in stocks in stock market. But private company's shares like reliance. pvt. ltd shares are also there. What are the criteria that a private company has to follow to issue shares to general public

Ashiwini Ballodia

Ashiwini Ballodia (Expert)
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12 October 2017 Reliance is not a private company it is a public company

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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02 August 2025 Hey! Good question—let me clarify the difference and the rules about issuing shares for private companies versus public companies.

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### 1. **Can Private Companies Issue Shares to the Public?**

* **No**, private companies **cannot issue shares to the general public or list on stock exchanges.**
* Private companies have **restricted transferability** of shares and fewer members (max 200).
* Shares are issued to a **closed group of people** (promoters, family, friends, investors) as per the Articles of Association.
* **Shares of private companies cannot be freely traded on stock markets.**

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### 2. **What About Reliance Pvt. Ltd. Shares?**

* Shares of a **private company like Reliance Pvt. Ltd.** exist but:

* They are **not traded on public stock exchanges.**
* They are transferred privately (with board approval).
* Ownership is **restricted to private shareholders**.

If you see shares of “Reliance Pvt. Ltd.” listed somewhere, likely it is in private transactions, not on a public exchange.

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### 3. **Criteria for a Private Company to Issue Shares**

* Shares can be issued to:

* Existing shareholders (rights issue),
* New members by invitation,
* Private placements to select investors (like VC or PE firms).
* The issue must be:

* **Approved by the Board of Directors**,
* Within the authorized share capital,
* Comply with **Section 42 (Private Placement)** and other provisions of the **Companies Act, 2013**.
* No advertisement or public invitation is allowed.

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### 4. **When Can Shares be Issued to the Public?**

* Only a **public company** can issue shares to the general public.
* Public companies must comply with SEBI regulations if listing on stock exchanges.
* Public companies can raise money via IPO (Initial Public Offering), FPO, rights issue, etc.

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### 5. **Can a Private Company Become Public?**

* Yes, a private company can convert into a **public company** by following legal procedures (filing with Registrar of Companies, changing Articles of Association).
* Once converted, it can issue shares to the public.

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### **Summary Table**

| Parameter | Private Company | Public Company |
| ----------------------------- | --------------------------------- | ---------------------------------------- |
| Shares issued to | Limited/private group only | General public |
| Shares traded on stock market | No | Yes |
| Number of members | Max 200 | No limit |
| Share transfer | Restricted, board approval needed | Freely transferable |
| Legal provision for issuing | Section 42 (Private Placement) | IPO/FPO under Companies Act & SEBI rules |

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**In short:**
**Private companies cannot issue shares to the general public or trade shares on the stock market.** Only public companies can do that.

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If you want, I can help explain **how private placements work** or the process for a private company to become public.

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Let me know!

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