CHAPTER XXII
PRIVATE COMPANIES

Definition.

THE expression ‘private company,” until the Companies Act,
1go7, came into force, was commonly used amongst the
business community to denote a limited liability company
in which no capital was raised by appeals to the public and
in which the shares were in a few hands. A private company
generally resulted from the transformation of an existing
business into a company, the shares being held by the former
partners, with such other persons as they chose to admit.

Such private companies as described above differ not at all in
law from other incorporated companies; they must make all
the returns required in the case of other companies, and other-
wise comply with the provisions of the Companies Acts.

But the Companies Act, 1907, which came into force on
July 1, 1908, gave a new and technical meaning to the ex-
pression ‘private company.” That Act, in fact, created the
private company, properly so called. No alteration was
made in the law as to private companies by the Companies
(Consolidation) Act, 1908, but, in consequence of the decision
in Park v. Royalties Syndicate [(1912), 1 K.B. 330], to the
effect that, provided the articles contain the three necessary
provisions prescribed by s. 121 of the Act of 1908, the com-
pany does not cease to be a private company, although in
fact the provisions are not complied with, the Companies
Act, 1913, which was to be construed as one with the Act of
1908, was passed. The statute law on the subject is now
to be ascertained from ss. 26 and 27 of the Act of 1929, and
from the references to private companies contained elsewhere
in that Act.

By s. 26 of the Companies Act, 1929, a private company
is defined as ‘a company which by its articles:

‘(a) restricts the right to transfer its shares; and

'(b) limits the number of its members to fifty, not including

persons who are in the employment of the company
and persons who, having been formerly in the em-
ployment of the company, were while in that employ-
ment, and have continued after the determination of
that employment to be, members of the company;
and
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