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Forms Of Business Organization

Question

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Explain the concept and extent of deemed public companies.

Solution

Prior to the amendments in the Companies Act 1956 in the year 2000, there was a category of companies known as deemed public companies
Such companies were registered as private companies.
Thus a private company automatically becomes a public company if:

1. Its share holding pattern involves member of the public.
2. Its turnover was high enough to warrant public interest.
3. It employs public money.

Or in other words, a private company becomes a demand public company when:

1. 25% or more of the paid up share capital of the private company was held by a public company.
2. The private company holds 25% or more of paid up share capital of public company.
3. The average annual turnover of the private company for 3 consecutive financial years was Rs. 5 crore.
4. The private company invited deposits from the public.

A deemed public company therefore, was a special type of public company.
It was not treated as a public company in all respects.
It could retain some features of private company.
However, in the present legal structure, deemed public companies do not exist.

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