What Is A Private Company? Is It The Same Thing As A Proprietary Limited Company?

A private company, otherwise known as a private limited company, is the most common type of company in the UK, especially for small and medium-sized businesses. As the name suggests, a private company is owned privately, as opposed to being owned by the public on a stock exchange or by the government.

You can quickly recognise private companies as they have ‘Ltd’ as part of their name. For example, ‘Sprintlaw Ltd’.

In the UK, private companies can be limited by shares or by guarantee. This makes private companies an attractive option for shareholders and members, because liability of the company is limited to any unpaid shares or the amount they have agreed to contribute in the case of companies limited by guarantee.

Private companies are classed as either a small or medium-sized enterprise (SME), and have different reporting obligations to Companies House depending on their size. For example, small companies may qualify for exemption from audit and can submit abbreviated accounts.

For financial years starting on or after 1 January 2016, to be categorised as a small company, at least two of the following need to be satisfied:

• annual turnover must be £10.2 million or less
• the balance sheet total must be £5.1 million or less
• the company must have 50 or fewer employees on average

These thresholds are part of the criteria for small companies under the Companies Act 2006 and are subject to change.

Private companies have certain limitations compared to a public company, such as restrictions on the transfer of shares. There must be a minimum of one director, and while having a company secretary is optional for private companies, it is often recommended. There must also be a registered office, though it does not have to be accessible to the public.

Previously, equity crowdfunding options were more commonly associated with public companies, but private companies in the UK have increasingly been able to access this option as well.