Which of the following statement is incorrect -
A private company is one which by its articles of association:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Its paid up share capital is not more than Rs. 50 Lakhs
A paid-up capital of not more than Rs. 50 lakhs is one of the conditions laid down for a One Person Company by Rule 3 of the Companies (Incorporation) Rules, 2014. It has nothing to do with what the articles of a private company must say, so option (3) is the incorrect statement.
Option (1) Restricts the right to transfer its shares — A condition of a private company. Its shares are not freely transferable, unlike those of a public company.
Option (2) A private company must have at least 2 persons, except in case of one person company — A condition of a private company. The minimum is two members; only an OPC can work with one.
Option (4) Limits the number of its members to 200 (excluding its employees) — A condition of a private company. Employees who hold shares are not counted in the 200.
NCERT (2026-27 edition):
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