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A public limited company is the best option for the prominent entrepreneur. It allows expanding the business on a big platform.
Public Limited Company
A public limited company is a business model which is registered by the Ministry of Corporate Affairs. It gives a big platform to the entrepreneur for expanding their business on national as well as international level as the name comprises “PUBLIC” words which clearly shows that the company can raise their funds from the general public and they have full interest and stake in the company. However, their liabilities are limited. A public company generally starts with a minimum of 7 people, but there is no maximum limit of the shareholder. In private limited companies, the numbers of members restricted to only 200, but there is no such limit in the public limited company which means there can be either 50 shareholders or 5000 shareholders in the public company, but it should not be less than 7. The management is handled by the board of directors of the company which contains a minimum of 3 and a maximum of 15 individual persons as directors of the company.
The trading of the share is also possible under a public limited company through the stock exchange. Under this company, any person can become the shareholder of the company no matters where he lives and what is his identity the only thing he needs is that he should hold at least one share of the company to become its shareholder. People invest their funds and get the opportunity to earn a profit in the form of dividends and other different ways.
Characteristics of 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 illegal actions.
Paid-up capital : A public limited company is required to have a minimum paid-up capital of Rs 5 lakh or such 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 for their shares.
Name : It is a compulsory requirement under the Companies Act, 2013 for all the public companies to add the word ‘limited’ after their name.
Requirements/Process for registration of Public Limited Companies
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
The 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 MOA, AOA, 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.’
Advantages of Public Limited Companies
Following are the advantages of forming a public limited company:
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.
Documents required for incorporating a Public Limited Company
Proof of identity of all the shareholders and directors
Proof of address of all the directors and the shareholders
PAN number of all the shareholders and directors
Utility Bill of the proposed office i.e. proposed registered office for the company
A NOC (No Objection Certificate) from the landlord where the office of the company will be situated
Director Identification Number (DIN) of all the directors
Digital Signature Certificate (DSC) of the directors
Memorandum of Association (MOA)
Articles of association (AOA)
