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Public Limited Company

Updated on:  

08 min read

A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. Its stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market.

A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders.

Characteristics of a Public Limited Company

Directors

As per the provisions of the Companies Act, 2013 to start a public limited company, a minimum of 3 directors are required and there is no restriction on the maximum number of directors.

Limited Liability

The liability of each shareholder is limited. In simple words, a shareholder of a public limited company isn’t personally responsible for any loss or debts of the company for any amount greater than the amount invested by them; contrary to partnerships and sole proprietorships, where the partners and business owners are jointly and severally liable for the debts of the business.

However, this characteristic of a public limited company does not offer immunity to the shareholders. The shareholders will be held responsible for their own illegal actions.

Paid-up Capital

A public limited company is required to have a minimum paid-up capital of Rs 5 lakh or such a higher amount as prescribed under the act.

Prospectus

A prospectus is a comprehensive statement of the affairs of the company issued by a public limited company for its public and there is a requirement under the Act for public limited companies to issue a prospectus.  However, there are no such provisions for Private Limited Companies. This is because private limited companies cannot invite the public to subscribe to their shares.

Name

It is a compulsory requirement under the Companies Act, 2013  for all public companies to add the word ‘limited’ after their name.

Advantages of Public Limited Companies

More capital

Shares are offered to the general public at large i.e. anyone can invest in a public limited company. Hence, improves the capital of the company.

More attention

Being listed on a stock market ensures that mutual funds, hedge funds and other traders take note of the business of the company. This may result in better business opportunities for the Public Limited Company.

Spreading risk

Since the shares are sold to the public at large the unsystematic risk of the market is spread out.

Growth and expansion opportunities

Due to less risk, there is a perfect opportunity for growing and expanding the business by investing in new projects from the money raised through shares.

Requirements for Registration of a Public Limited Company

There are various rules and regulations prescribed under the companies act, 2013 for the formation of a public limited company.  Here is what you should keep in mind when registering a public limited company:

  • Minimum 7 shareholders are required to form a public limited company.
  • Minimum of 3 directors is required to form a public limited company.
    A minimum share capital of Rs. 5 lakhs is required.
  • Digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.
  • Directors of the proposed company will need a DIN.
  • An application is required to be made for the selection of the name of the company.
  • An application comprising the main object clause of the company is to be made. This object clause will define what a company will pursue after its incorporation.
  • Submission of the application to ROC along with the required documents like MOAAOA, duly filled Form DIR – 12, Form INC – 7 and Form INC – 22 is needed.
  • Payment of the prescribed registration fees to the ROC is required.
    After obtaining approval from the ROC, the company should apply for the ‘certificate of business commencement.’

Procedure for Registration of a Public Limited Company

Step 1: Digital Signature Certificate (DSC)

Since the registration procedure of a company is entirely online, a digital signature will be required for filing the forms on the MCA portal. For all proposed directors as well as the subscribers of the memorandum and articles of association, DSC is compulsory.

Step 2: Director Identification Number (DIN)

It is an identification number concerning a director; it has to be procured by anyone who intends to become a director in a company. DIN of a proposed director in addition to the name and address proof has to be mentioned in the company registration form.

Step 3: Registration on the MCA Portal

A completed SPICe+ form has to be submitted on the MCA portal in order to apply for company registration. To fill the SPICe+ form and submit the required documents, the Director of a company needs to register on the MCA portal. After the registration process is completed, the director will get access to the MCA portal services which comprises filing e-forms as well as viewing public documents.

Step 4: Certificate of Incorporation

After the registration application is submitted along with the concerned documents, the Registrar of Companies will inspect the application. After the application is verified, he will issue the Certificate of Incorporation of the Public Company.

Documents Required for Incorporating a Public Limited Company

Related Articles:

Company Registration Online – How to Register a Private Limited company in India

Company Conversion From Pvt Ltd Company to Public Ltd Company

Advantages of Company Incorporation

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