As per Companies Act 2013, a Public Limited Company is a company that has limited liability and may offer shares to the general public by Initial Public Offer (IPO). Where the company is listed, an individual can also acquire the shares of such company via stock market. A Public Limited Company has stringent regulatory requirements and has no exemption allowed under the Companies Act 2013.
This article covers the following topics
A Public Limited Company has the following characteristics:
The liability of the shareholder is limited under Public Ltd Company. In other words, shareholders of the company are not liable to pay any amount over and above the unpaid amount on shares hold by them at the time of liquidation.
As per the Section 149 of the Companies Act, 2013 a Public Limited company shall have a minimum of 3 directors. Further, a company can have a maximum number of 15 directors. However, through a special resolution a company may appoint more than the prescribed limit.
Paid up capital
A public limited company shall have a minimum paid-up capital of 5 Lacs INR or such higher amount as may be prescribed under the act. However, there is no prescribed limit for maximum capital amount.
As per Companies Act 2013, any company which has registered as Public Ltd. A company is required to add the word limited after their name. For example XYZ Limited.
As per Section 2(70) of the Companies Act 2013, a prospectus means any documents including red-herring and shelf prospectus or any notices, circular, advertisement, or other documents that are issued by the company for inviting offer from the public for the subscription of shares or debentures.
Any company which is registered as a public limited company can enjoy the following benefits:
Separate Legal Entity
A company is a legal entity that can own property and also incur debts in its own name. Moreover, the Shareholders/Directors of a company have no liability to the creditors of a company for such debts.
A shareholder of a company limited by shares can easily transfer his shares to any other person. For transferring the share to the buyer, the shareholder has to file and sign a share transfer form along with that he needs to provide a share certificate.
A company, being a separate legal identity, continues to be in existence irrespective of the changes in membership due to death or other departure of any member. In other words, a company has perpetual succession, that it has uninterrupted existence until it is legally dissolved.
A public company can raise fund by issuing debentures (secured as well as unsecured) and shares (preference or equity) to the public. Even banking and financial institutions provide high financial assistance to a company when compared to partnership firms or proprietary concerns.
As company is a separate legal entity it can acquire property in its own name. As long as the company is a going concern, no member of the company can make any claim upon the property of the company.
Increase in Attraction Rate
Listing of the company on stock market ensures the attraction of mutual funds owner and other stock traders. This may result in attracting better funding source for the Public Limited Company.
More Development Opportunities
The growth and expansion opportunities of Public Limited Company are higher, as they can grow and expand their businesses with the help of Initial Public Offer.
For the formation of a public limited company, there are various rules and regulations prescribed under the Companies Act 2013. While registering a public limited company, you should keep the following points in mind:
- Minimum 7 shareholders and 3 directors are required
- The minimum share capital of Rs. 5 lakhs
- At least one Director’s DSC (Digital signature certificate) at the time of submission of identity and address proof
- DIN of proposed directors
- For choosing the company name an application shall be furnished
- An application stating the company’s prime object clause shall be furnished, defining what a company will perform after its formation.
- The application shall be submitted to ROC along with MOA, AOA, duly filled Form DIR-12, Form INC-7 and Form INC-22.
- Prescribed registration fees shall be paid to the ROC
- After obtaining ROC approval, the company shall register for the commencement of business cerificate.
Following documents are required for the incorporation of a Public Limited Company
- Address and Identity proof (shareholders & directors)
- PAN number of all the members (Shareholder/Director)
- Utility Bill of the prospective registered office of the business
- No Objection Certificate (NOC) duly signed by the owner of the premises where the company’s office will be situated
- DIN and DSC of all the directors
- MOA (Memorandum of Association)
- AOA (Articles of association)