What is a Public Limited Company?

Public Limited company is an association formed by a group of people and registered under The Ministry of Corporate Affairs, India. Generally, this form of company is chosen for attracting public funding and deposits or for having unlimited number of members. It is also known as publicly traded company, publicly held company, publicly listed company, or public limited company. Only a Public Company can list its securities (Except Debt Securities) on the Stock Exchange. Earlier there was a minimum requirement for Capital of Rs. 5 lakhs, however this limit was removed vide Companies (Amendment) Act, 2015 dated 29th May, 2015.

A public company can be broadly divided into 2 types of company. Listed Public Company: When a Public Limited company get its securities listed on the Recognized Stock Exchange (NSE/BSE) for trading on the stock market it is called as Listed Public Company. Unlisted Public Company: An unlisted public company is one which is not listed on any stock exchange but can have an unlimited number of shareholders to raise capital for any commercial venture.

Characteristics of a Public Limited Company

Name of Company

Name of a Public Company shall be mandatorily end with “LIMITED” For exp. ABC Retails Limited.

Directors

Minimum 3 Directors are required for Incorporation of Public Limited Company. Maximum 15 directors can be appointed; however, this number can be increased by complying with the respective provisions of The Companies Act, 2013.

Members

Initially, minimum 7 members are required to incorporate a Public Company. Further number of members can be unlimited.

Capital

No capital requirement is mentioned in the Act (The Companies Act, 2013) for incorporation, however SEBI Regulations are required to be fulfilled for listing its securities on the stock exchange, where required

Limited Liability

Liability of shareholders is limited only up to the amount of shares subscribed by them. They are not liable for the debts of the company in case company are unable to pay its liabilities.

Free transferability of Shares

The shares of Public limited Company can be freely transferred and traded in the open market.

Regulatory Authority

Ministry of Corporate Affairs, Registrar of Companies. If Listed, then, Securities and Exchange Board of India would be the regulatory authority.

Books and Financial statement

A PLC has to mandatorily present its financial statement and position publicly to maintain transparency. The financial books and records of the firm are open to public, allowing everyone to see how much profit or loss the firm is making.

Process of Public Limited Company Incorporation

In order to incorporate A Public Limited Company, one has to follow the procedure given by The Ministry of Corporate Affairs in accordance with The Companies Act, 2013.

Step 1: Consent of Directors and Members
Get consent of Three (3) Directors and Seven (7) member/subscribers who are willing to incorporate the company. The person who are becoming the member of the company (if Individual) can also become the Directors of the company.
Step 2: Check the name Availability
Check the name Availability for the proposed company. Rule 8 and 8A of The Companies (Incorporation) Rules, 2014 shall be abided while checking the name of the company. You will need professional expertise to check the name as there are several complexities while doing the same.
Step 3: Apply for DSC
The Digital Signature Certificates (DSC) of all the & subscribers and Directors of the proposed Company.
Step 4: Completion of Documentation:
Set of documents need to be prepared which will be filed with the Registrar of Company, Central Registry Centre.
Step 5: Filing for Forms:
Incorporation Forms such as SPICe PLUS, MOA, AOA, etc. will be filed with Ministry of Corporate Affairs.
Step 6: Approval:
If all the documents filed are complete and correct in all respect then the Ministry shall approve the company and the Certificate of Incorporation along with other documents will be issued.

Documents Required For PLC

Digital Signatures of all Directors and Subscribers
DIN No. for all Directors (If already allotted, otherwise it can be allotted later on)
Identity Proofs for all the Directors and Subscribers
Address Proof of all the Directors and Subscribers
Any Utility Bill as Address Proof of Registered office of the company
If Registered Office is Rented, No Objection Certificate/ Rent Deed from the owner of the Property
Others

Advantages

Huge Capital Infusement: Most important benefit for registering a Public limited Company is its ability to offer its shares to General Public for subscription. This also means widened shareholder base. Since anyone is able to invest their money in public Company the capital raised is generally higher than a private limited company.

Access to Stock Exchage:
Only a Public company can get its shares listed on Stock exchange and can trade in open market. It can also attract investment from hedge funds, mutual funds and other institutional traders.
Creating Brand Value:
Being a public company adds a sense of prestige and creates a goodwill in the market. More people will recognize the company if it is public, particularly if it’s listed on a stock exchange. It’s more likely for public company to receive attention from the media and investment professionals.
Dilution of Risk:
As the securities are offered to public at large, the ownership risk reduces with every increasing shareholder. At the same time it also enhances the options for the founders to exit the business at some point in the future, if they wish to do so.
Free Transferability of Shares:
Definition of Public Company gives power of free transferability of securities, i.e., easy buying and selling of securities. All the more, if the shares are listed on Stock exchange it becomes more easier to buy and sell securities with the help of SEBI intermediaries.
Better Growth Opportunities:
In terms of finance and other opportunities - Being in the eyes of Public and Government, increases the creditworthiness of company, which open doors for more finance options for growth and expansions. Also, company can have better negotiation power in terms of repayment and interest rates with the Financial Institutions. A public limited company will often find itself in a better position when looking at other potential sources of finance.
Better Management:
Companies Act provides a optimum combination of executive and nonexecutive directors, which ultimately ensures better management and compliance of applicable laws.