Public Limited Company: Features, Advantages & Registration Process

What is Public Limited Company?

  • As per the Company Act 2013, the company which is not a private company is known as public company. A private company, subsidiary of a Public company shall be deemed to be Public Company. 
  • Minimum member’s requirement for a Public Company is seven shareholder and three directors and no restriction on maximum shareholder. 
  • Through an initial public offering (IPO), public company can issue securities to general public and a public company can only be listed on stock exchanges. These companies are subject to higher levels of reporting, regulations, and public scrutiny. A listed Public company must meet stringent reporting requirements framed by Securities and Exchange Board of India (SEBI).

A Public Ltd. company has all the characteristics of Private Ltd. Co. and the ability to possess any number of members, ease in transfer of shareholding and more transparency. Identifying marks of a Public Ltd. Co. is through name, shares, formation, number of members management, directors and meetings, etc.

What are the features of Public Limited Company?

  • Minimum shareholders – 7
  • Minimum Directors – 3 (Directors and shareholders can be same person)
  • At least one Director who shall be resident in India
  • Minimum capital requirement is Rs 5 lakhs

What is the procedure for Public Limited Company formation in India?

  • Digital Signature Certificate (DSC) & DIN

For all the proposed Directors of the Company DSC and Director Identification Number (DIN) must be obtained.

  • Name Approval

Name approval has to be obtained from the Registrar of Companies [“RoC”] through submission of an application in Form No. – INC 1 and the applicant can give maximum six names in order of preference. The approved name by the authority is valid for sixty days. The Promoter /Subscriber to the MOA and AOA shall be the applicant for the availability of name application. The approved name by the authority is valid for 3 months. Name approval generally takes 1-2 business days.

  •  Memorandum and Articles of Association

After having name approval, the draft Constitutional Documents of proposed Company i.e. Memorandum of Association and Articles of Association of the company is to be drafted and then it is filed with the Registrar of Company along with the forms and other necessary documents stated below.

  • Subscription Pages of MOA & AOA

MOA & AOA shall be signed by each subscriber to the memorandum of the company who shall provide details of his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, details of occupation etc. The witness shall be a practicing professional i.e. practicing CS, Practicing Cost & Management Accountant, or practicing CA.

And in case of foreign subscriber the above mentioned documents should be attested by the Consulate of the Indian Embassy in the respective Country or by foreign public notary.

In case of wholly owned subsidiary, a copy of the Board resolution of Holding Company approving the investment in the proposed Indian Company and authorizing a person to sign the papers of incorporation on behalf of the company, duly attested by the officer of the Indian Embassy in the foreign country where the registered office is situate is also required to be attached with the papers.

Some other documents such as Affidavits, Consent Letters, and Certificate of Compliance from practicing professionals in Form No INC – 8, etc. will be made and filed with the incorporation forms.

  • Filing of Incorporation Forms on MCA Portal is a next step.
  • Certificate of Incorporation:

Once all clarifications are provided, the Certificate of Incorporation is issued by the Registrar of Companies along with a unique Company Identification Number (CIN) and the Company is deemed to be incorporated from the date of the Certificate of Incorporation. Once the Certificate of Incorporation is issued, Company may apply for PAN, TAN, Bank Account Opening and other tax and regulatory registration as may be required to run the business smoothly.

  • Bank Account Opening and Remittance of Subscription Money:

After incorporation, a Bank Account in the name of newly incorporated Company shall be opened by the Board of Directors and the Subscribers of Memorandum and Articles of Association of the Company shall deposit their subscription money in such bank account to help the company raise initial capital to start its business.

What are the Advantages of Public Limited Company?

  • More Capital

When you are selling shares to the public it means that anyone can invest in your company, so its greater source for value of funds.

  • Goodwill

As more attention being given to public limited company as it is listed on an exchange which ensures mutual funds and other traders take note of your business. So it’s great way to make your business a prominent name.

  • Growth and expansion opportunities

There is perfect opportunity for the growth and expansion of the business.

What are the disadvantages of Public Limited Company?

  • More Regulations

For a public limited company regulations are more stringent. Your company must have all the professionals.

  • Transparency

Public limited company is held accountable and more thoroughly scrutinised by auditors.

  • Control over shareholder

It’s much harder to control who is a shareholder of your company, so there’s a possibility of losing control of the direction of your business.

List of Public Limited Company Documents:

  • Income-tax PAN of Indian nationals;
  • Identity Proof (Voter ID/Aadhar Card/Driving License/Passport)
  • Passport in case of foreign nationals;
  • Residence Proof (Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement);
  • Registered Office address proof (rent agreement/ rent receipt/ copy of latest utility bill in the name of landlord and a NOC from the owner in case the premises are rented);
  • In case the premises are owned by a Director and Promoters, any documents establishing the ownership such as Sale Deed/House Tax receipt etc along with NOC.

What is the difference between Public and Private Limited Company?

BasisPrivate Limited CompanyPublic Limited Company
MeaningOwned and traded publicly on stock exchangeOwned and traded privately
Minimum paid up capitalRs 5 lakhRs 1 lakh
Minimum number of members2 membersAt least 7 members
Maximum number of membersRestricted to 50 membersNo restriction on members
Transferability of sharesComplete restriction through Article of Association  No restriction
Number of directors2 directorsAtleast 3 directors
Issue of prospectusProhibited to issue prospectusCan
Consent of directorsNo need to give consentMust have to file with the registrar for a consent to act as director
Commencement of businessCan start after the  certificate of incorporationCan only start after obtaining certificate to commencement of business
Quorum2 members5 members
Disclosure of financial reportNo obligation to discloseNeeds to disclose its financial reports quarterly and annual
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