PUBLIC LIMITED COMPANY
PUBLIC LIMITED COMPANY
What is a Public Limited Company?
A Public Limited Company is a type of large business entity and regulated through Indian companies act 2013.It has limited liability and also offers shares to the public through the national stock exchange . It provides huge benefits to the people compared to the Private Limited Company. A Public Limited Company is a separate legal entity with the public at large as shareholders. For doing business to an outsized extent, the finest preference would be a Public Limited Company. The public limited companies in India are solely permitted to trade on the stock exchanges and congregate enormous capital from public investors. Thus the Public Limited Company is listed on a stock exchange.
A Public Limited Company is a separate legal entity with the public at large as shareholders. For doing business to an outsized extent, the finest preference would be a Public Limited Company. Public Limited Companies are solely permitted to trade on the stock exchanges and congregate enormous capital from public investors.
What are the advantages of a Public Limited Company?
Privileged Profile: Public Limited Companies that are listed on stock exchanges are more advanced, recognizable, and visible than Private Limited or unlisted companies. Further, this visibility because of the listing helps the company to attract new Investors and also helps the company catch the attention of new clients.
Access to Capital: For any small and medium-scale company, the hurdle towards growth is Capital. The public limited companies which are listed on the Stock exchange can raise capital easily by way of visibility. Heavy industries need huge capital for their operation, which is highly possible by way of public contribution as well as issuance of stock exchange attracts a large number of investors to generate substantial funds for development of business.
A public company is allowed to sell shares to investors to raise its capital. It issues shares through stock markets. Public companies can also raise capital by issuing bonds and debentures.
Separate Legal Entity: A Public limited company is considered to to be distinct from the owners and shareholders of the company because the company itself considered as a separate legal person can enter into the contracts and own the individual property in the name of the company. Even Though company enjoys the benefits and losses with the power of a separate legal entity, it grants the legal protection to the personal properties of the owner and shareholders.
Limited Liability:The greatest advantage for shareholders of a public limited company is limited liability. The personal assets of the shareholder and owner will not be at risk in the event that the company faces a loss. The shareholder’s liability is limited to the number of shares he/she has invested in the company.
Timely disclosure of corporate information: The regulations and laws provide for a timely revelation of information relating to dividends, bonuses, dates, and company-related information by the company because the public limited company has a highly skilled and experienced professional to serve as a directors and executives. This endows with more precision decision making and constructs confidence.
Increases Visibility: As Crores of people visit the stock exchange portal every day for investment, this has become a massive branding and because of this, the Listed Public Limited Company has got huge visibility in the market.
The above-mentioned points are Some of the main advantages of getting listed on the Stock Exchange which will benefit and the only company that has a benefit to be listed in stock exchange is public limited company.
Transparency: Public limited companies are rigorously regulated and are required by law to publish their financial statements to ensure the true financial position of the company. This also facilitates the establishment of the market value of its shares. Through transparency The shares of the Public Limited Company can be sold and purchased through a Stock exchange.
Uninterrupted existence: As the company has ‘Perpetual Succession’, Separate legal entity from the owner. The change or the death of the Shareholders or the Directors will not affect the existence of the company. A company can be only winded up by the dissolution process.
What are the eligibility criteria to form a Public Limited Company?
- Minimum of three Directors and Maximum of fifty Directors.
- A minimum of 7 shareholders is required.
- Minimum 5 Lakhs of share capital.
What are the documents that ought to register a Public Limited Company?
- ID Proof of all the shareholders and Directors
- Address proof of all the shareholders and Directors
- PAN Card of the Directors
- Passport size Photo of the Directors
- Bank statement of the directors for last two months
- Copy of the Rental deed for the proposed company
- Latest Electricity Bill
How to register a Public Limited Company?
Step 1: DIN
The Director Identification Number (DIN) is an extension of the DIN. It is a unique identification number assigned by the Regional Director’s Office under the Ministry of Corporate Affairs of the Central Government. It is mandatory for a new or existing director of a company.
Step 2: DSC
The Digital Signature Certificate is an extension of the DSC. Under the Information Technology Act, of 2000, directors are required to obtain a DSC when filling out the application for registration of a public limited company, because it is an online process, therefore, directors are required to sign through a DSC for filling the forms in the MCA portal, which also ensures the security of the signature DSC is compulsory for the registration of public limited company.
Step 3: Name Approval :
The name approval for the company is the primary and essential one to show the uniqueness of the company and the name of the company can be stored in the consumer’s mind through the service of the product. the name approval has been done by submitting form INC 1 on the MCA.
Step 4: MOA & AOA :
The MOA and AOA documents are required to be submitted when filing the forms for the formation of a public limited company. The MOA is a document that helps to define the objectives of the company as well as the details of the premises and founders, responsibilities, capital, etc. The AOA is a document that describes the terms and conditions, qualifications of directors, appointments, powers, remuneration, borrowing powers of the company, conducting meetings, and winding up of the company.
Step 5: Certification of Incorporation :
After all documents and forms have been correctly submitted, the Registrar of Companies under the Ministry of Corporate Affairs issues a certificate of incorporation issued to the public limited company after verification. After Receiving the certificate of incorporation from ROC, along with that certificate the company needs to apply for the ‘Certificate of Business Commencement’.
What are the major key differences between a Public Limited Company and a Private Limited Company?
| Particulars | Public Limited Company | Private Limited Company |
| 1. Regulating Act | The Indian Companies Act 2013. | The Indian Companies Act 2013. |
| 2. Minimum Number of Shareholders and Directors | Minimum 7 Shareholders. Minimum 3 Directors. |
Minimum 2 Shareholders. Minimum 2 Directors. |
| 3. Maximum Number of Shareholders and Directors | No maximum limit for shareholders. Maximum 15 Directors. |
Maximum 200 Shareholders. Maximum 15 Directors. |
| 4. Qualification of Directors | Due to the involvement of public funds, directors must have minimum qualifications and management skills. | No qualifications required for directors as it’s privately owned. |
| 5. Minimum Paid-up Capital | Minimum ₹5 lakh paid-up capital required. | Minimum ₹1 lakh paid-up capital required. |
| 6. Appointment of Director | Only one director can be appointed per resolution. | Two or more directors can be appointed via single resolution. |
| 7. Stock Exchange Listing | Can be listed on the stock exchange. | Cannot be listed on the stock exchange. |
| 8. Transferability of Shares | No restriction on transferability. | Transferability is restricted. |
| 9. Issue of Prospectus | Can issue prospectus to the public. | Cannot issue a prospectus. |
| 10. Visibility of Annual Reports to the Public | Reports are available on the MCA portal. | Reports are not publicly available. |
FAQ
FAQ ON PUBLIC LIMITED COMPANY :
1. Is there any specific conditions in choosing the name of a public limited company?
Yes, there are specific guidelines that need to be followed while choosing the name of a public limited company because the name of the name of the company compulsorily needs to fulfill the three conditions preferred to other conditions and they were.
- The prefix of the chosen name needs to be unique from other similar company names and the name should not be generic. eg.TATA
- The name of the company need should mention service that represent your company, eg.MOTORS
- The suffix of the name needs to end with the term limited,eg.lmt
Other than this conditions the name of the company should not fall with the ambition of offensive terms,restrictive words etc, and it is advisable to consult with the legal professional for choosing the name of the company to avoid the future risk.
2. What is the use of Prospectus in a Public Limited Company?
A Prospectus is a kind of legal document that contains the detailed information of the company and number of shares that is mentioned in the IPO(Initial Public Offering) and the public limited company uses the prospectus to attracts the public and investors to issue their shares to increase the public offering and securities.Whereas the prospectus cannot be used by private limited company for IPO.
3. Whether there is any opportunity that the public limited company can be delisted from a stock exchange?
Yes, the public limited company can be delisted from a stock exchange and they miss the great advantage of public offering and exchange of their share to the public this happens in the situation that the public limited company failed to meet the listing requirements or if the company itself voluntarily decided that they did want to list the company anymore in the stock exchange with the discretion of shareholders then in that situation the company can be delisted from stock exchange.
4. Can a Public Limited Company Function in Multiple countries?
Yes the public limited company can be functioned or operated in many other countries but they need to meet with the legal requirements and laws & regulations of each country. By Operating PLC in many countries which will help the company to attract more foreign investors
