The Distinction between Public and Private Companies and its Relevance for Company Law. Observations from the Netherlands and the United Kingdom

This article analyses the distinction between public and private (limited) companies and its relevance for company law. Usually, the distinction refers to the fact that the tradability of shares in private companies is more restricted than in public companies. In this paper the differences between the two company forms are studied from the perspective of the United Kingdom and the Netherlands. In both jurisdictions, the private company is of a more recent origin than the public company and currently the most popular company form in numbers. The paper discusses the motives to choose the public company form over the more lightly regulated private company form, and the justifications for the more extensive regulation of the public company. It is submitted that both British and Dutch law could relax certain mandatory provisions for non-listed public companies and thus offer more flexibility to shareholders. Curiously and in contrast with British law, a Dutch private company can make public offers of its securities and become listed, although there is no appropriate legislative regime as in case of a public company. The article concludes with a discussion of several topics where the British and/or Dutch company legislation make distinctions between public and private companies, including capital protection, resolutions and meetings, rights attached to shares, the board, accounting law and dispute resolution. Improvements in these areas are suggested for both British and Dutch company law.