ANALYSIS ABOUT THE OPTION 1ST
(First option available with the Company is that Company remains a private company and seeks to raise further capital.)
Benefits/ Advantages in being Private Company (with analysis)—
- Existing members have the full control over the Company and the least scrutiny that is in the good of the existing members. If the existing members wants to raise the fund through the share capital then it is good for them as they can issue shares privately to their close persons and can raise the fund they cannot come with the public issue as it is a private Company. And for this authorization in the article of the company is required .
- Limited number of Directors and members – as there are limited number of Directors and members in a private limited company that’s why existing members of the company will always remain in the privilege position as far as any future decision is concerned as meeting of the Board or of members of the company will have the maximum number of persons who will be in your favors and on the other hand if the no. of members or directors as in case of a public Company , will affect the decision of the existing members of the company as in this case total member of the company will be more as compare to the existing.
- Less compliance in raising fund- if Company raise the fund privately through their close relative, friends as happens in case of a private company , Company is not required to company more legal formalities as in case of a public company.
- Total earnings of the company will be either distributed as dividend or kept as retained as retained earnings in both the case benefit goes to the existing members only.
- . Being private it gives freedom to the management’s time and effort to concentrate on running and growing a business, as there are no SOX regulations to comply with. Thus, the senior leadership team can focus more on improving the business’s competitive positioning in the marketplace. Internal and external assurance, legal professionals and consulting professionals can work on reporting requirements by private investors.
Private-equity firms have varying exit time lines for their investments depending on what they have conveyed to their investors, but holding periods are typically between four and eight years. This horizon frees up management’s prioritization on meeting quarterly earnings expectations and allows them to focus on activities that can create and build long-term shareholder wealth. Management typically lays out its business plan to the prospective shareholders and agrees on a go-forward plan. This covers the company’s and industry’s outlook and sets forth a plan showing how the company will provide returns for its investors. The extra time and money private companies enjoy from decreased regulation can also be used for other purposes, such as implementing a process-improvement initiative throughout the organization.