As the Director of the Company are more curious to have the continuous control over the Company and want to minimize public scrutiny and if in any option discussed above, is availed by the Company which requires the Company to convert into the public one then the purpose/objective of the Director is defeated, hence the option which requires the conversion of the Company from private into public one is not good form the Directors’ point of view, thus is almost useless to recommend or even discuss.
However First option would be the suitable one as the Directors want as it don’t require the company to covert it into the public that automatically results in minimizing the public scrutiny that is first motive of the Director of the company . it may be noted that first option recommends to raise further share capital that technically means to increase the capital ( as in private company that cannot be raised from the public by giving them the status of members ) however that can be raised from the public as deposit or loan by giving the status to them as creditors of the Company then after it may raise the capital of the Company that will help the company to finance the viable project of the company and to get the return thereon , however in this case it may be noted that the required return from the project should be more then cost of Capital( debt) otherwise option will be of no use . Cost of Capital generally will be the interest payable to the Creditor in turn of proving the finance/loan to the company. Following are the things that to be kept in mind while using this option—
1- Debt equity ratio is required to be maintained ideally it should be 2:1.( i.e. debt should not be more than twice of the capital of the Company)
2- Creditors should be unsecured one.
If Company uses this option then it will exclusively participate in the net earnings of the Company however it would have raise the fund form the public by way of being conversion into public then it would require to allow the new members to participate in this earning however in present case it will only give the interest to the creditor not the earning.