DISADVANTAGES OF PRIVATE COMPANY:
1 It cannot raise fund through public.
2 It needs to comply the provisions of the Company Law which are applicable to a public company which are stricter as compared to private company.
3 Shares of this type of Company don’t have liquidity as they can’t be traded and members of the company cannot sell the shares easily and that to unknown person unless the rest members are ready to it.
4 Heavy fund cannot be raised through the private person in general.
Thus if the management wants to have the status of their entity as private it should further raise fund by issuing share either to existing members or by splitting shares & issuing them to some other close friends and relatives i.e. from private persons only.
Thus if the company wants to have the full control over the company and little scrutiny then it must go with this option otherwise not.