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private limited company

Definition

Type of incorporated firm which (like a public firm) offers limited liability to its shareholders but which (unlike a public firm) places certain restrictions on its ownership. These restrictions are spelled out in the firm's articles of association or bylaws and are meant to prevent any hostile takeover attempt. The major restriction are: (1) stockholders (shareholders) cannot sell or transfer their shares without offering them first to the other stockholders for purchase, (2) stockholders cannot offer their shares or debentures to the general public over a stock-exchange, (3) number of stockholders cannot exceed a fixed figure (commonly 50).

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