Public Limited Company

Public Limited Company

We provide registration service for Public Limited Company.

Public Limited Company: An Overview

As the name reveals, a public limited company has a wider coverage than a private limited company. It is generally called a 'Public Company'.

Generally, companies requiring huge capital investment from a large base of shareholders are opting for registration as a Public Limited Company.

A 'Public Company' is an incorporated business entity registered under the Companies Act, 2013, with the following features:

  • Minimum number of shareholders is 7. There is no restriction on maximum number of shareholders.

  • Minimum number of directors is 3. The proposed director must have a DIN allotted by the Ministry of Corporate Affairs, Government of India.

  • A public company can issue shares to public subject to the compliance of the Companies Act and other regulations.

  • A public company can accept deposits from public subject to the compliance of the Companies Act and other regulations.

  • Operations of public limited companies are subject to compliance of many restrictive provisions of the Companies Act.

Typically, large-sized businesses and/or stock exchange listed entities are incorporated as public companies.

Public Limited Company: Incorporation Process

Basic Requirements

  • Minimum 7 Shareholders

  • Minimum 3 Directors

  • At least 1 of the Directors shall be an Indian Resident

  • The directors and shareholders can be same person

  • Minimum Share Capital shall be 100,000 (INR One Lac)

  • DIN (Director Identification Number) for all the Directors

  • DSC (Digital Signature Certificate) for all the Directors

Documents Requirements (for all the Directors)

  1. Passport size photograph

  2. PAN Card copy

  3. Proof of Identity (Any one of the below)

    1. Passport

    2. Aadhar Card

    3. Driving License

    4. Voter ID

  4. Proof of Residence (Any one of the below)

    1. Bank Statement

    2. Electricity Bill

    3. Telephone Bill

    4. Mobile Bill

  5. Proof of Registered Office Address

  6. Conveyance/Sale deed or Lease deed or Rent Agreement along with the rent receipts & any one of the below

    1. Electricity Bill

    2. Gas Bill

    3. Telephone Bill

    4. Mobile Bill

Important Points to be considered

  1. Ensure that the scan documents are clear & visible

  2. Identity Proof shall be in addition to PAN Card

  3. The address proof should be in the name of the applicant and shall have Pin code/Zip code in it.

  4. Please ensure that the address proof is not older than 40 days (In case of Telephone bill, Bank statement, light bill & Mobile bill)

  5. The Identity & Residence Proof must be attested by the Notary Public.

  6. Before attestation and notarization of the documents, please email us the scanned copy of the above mentioned proofs for checking and verification

  7. As per new Incorporation Rules, (in all States in India) the promoter/s has to provide notarized affidavits for DIN application & other declarations. In this regard, the Director/s needs to purchase the stamp papers in their own name and personally visit & arrange for the notarization.

Public Limited Company: FAQ

What is Certificate of Commencement of business?

Unlike private companies, a public company cannot start its business after getting the certificate of incorporation. It has to obtain a certificate of commencement of business from the ROC.
The ROC will issue the certificate of commencement of business after a public company files the 'Statement in Lieu of Prospectus' (SLP)

What are the advantages of a Body Corporate?

A body corporate has certain distinctive advantages:

  • Perpetual Succession: It has identity independent of its members. It can hold property or do business on its own name. Individual members come and go, but 'corporate body' continues.

  • Limited Liability: This removes one of the major drawbacks of partnership. A member is not saddled with liability in respect of debts or liabilities that might have been incurred by others in the business.

  • Diversions of Ownership and Control: Body corporate has authority to appoint small body which will look after day to day operations of the body corporate, unlike partnership firms where individual members interfere in day to day affairs. The members are entitled to appoint an auditor who is authorized to check accounts on their behalf and report irregularities.

  • Routine affairs with small body: the day to day affairs are looked after a body consisting of hews persons - say 2 to 15. Such body may be called as 'Board of Directors'.

  • Rules of Business: A body corporate must have rules for conduct of business. Such rules may be called as Constitution, Regulation or Memorandum and Articles of Association.

Advantage of 'Company form' over other forms of 'Body Corporate'?

Company form- of forming a 'corporate body' is the most Popular, form for carrying out any business activity, as it removes all defects of 'partnership form' or 'cooperative society' or any other method of forming a 'corporate body' for conducting business. The 'company form' of organization has certain advantages over other forms of 'corporate bodies'.

Disadvantages of the company form of organization?

Though company form has many advantages, there are some disadvantages too:

  • High cost of formation - Formation of a company requires many formalities and involves costs, like printing of memorandum & articles of association, stamp duty, filing fees etc. On the other hand, formation of partnership is very easy. In fact, even registration of a partnership firm is not mandatory.

  • High cost of running the organization - Accounts of the company have to be audited yearly. Meeting of shareholders have to be arranged yearly and meeting of Board of Directors have to be organized at least four times in a year. Elaborate records of members, directors, charges, minutes etc. have to be maintained. Annual return has to be filed. In case of partnership, there are very few formalities required.

  • Difficult to close the company - Winding up of the company is a very long, tedious, costly and tune consuming process. On the other hand, closing a partnership business is comparatively very easy and fast.
    Despite these few disadvantages, the advantages far outweigh the disadvantages. Almost all businesses of any considerable size are always formed as a 'company'. Even when partnership business becomes large, it is usually converted into a limited company.

What are the situations when member has unlimited liability?

The shareholders can have unlimited liability only in the following cases-

  • Fraudulent conduct of business - If any person conducts business of the company fraudulently, he will be personally liable [section 339 of the 2013 Act -Section 542 of the 1956 Act]. He can also be personally liable in class action under section 245 of the 2013 Act.

  • Personal guarantee for loans - Often promoter - directors are asked to give personal guarantees for the loans given to the company. In such cases, the directors/promoters will be personally responsible to the extent of guarantees given.

  • Personal liability of directors of taxes - The directors do not have liability in case of liabilities of company. However, in few cases e.g. taxation liability in case of private company, directors has personal liability.

Can a company enter into partnership with others?

A company, being juristic person can do what a 'person' can do. Thus, legally, a company can enter into partnership with another.

What are the procedures after Incorporation of Company?

A company having share capital (public or private) is required to file a declaration signed by a director or subscriber that every subscriber has paid the value of shares agreed to be taken by him and the company has filed with ROC a verification of its registered office in prescribed manner - section 11(1) of the 2013 Act.

    Commence business only after filing declaration - A company having share capital (public or private) can commence business or exercise any borrowing powers only after filing declarations regarding minimum paid up capital and verification of registered office, as required under section 11(1) of the 2013 Act. The declaration shall be filed by director in form INC.21 with fees and verified by practicing CA, CS or CMA.

    Verification of registered office - The verification of registered office shall be filed in Form No. INC.22 with prescribed fees.

    First Board meeting - First Board meeting should be held within 30days and minimum required resolutions should be passed (see under Board meetings).

What are the various mode of raising Capital in a Company?

Share capital are 'own funds' of the company. Share capital can be raised by company by following means-

  1. Private Placement - From friends and relatives of promoters & directors if authorized by special resolution.

  2. Public Issue - Invite public to contribute to share capital. Public Offer can be (a) initial public offer (IPO) or (b) further public offer of securities of company or (c) Offer for sale of securities to the public by an existing shareholder.

  3. Rights Issue - Asking existing members to take new shares in proportion to their existing share holding

  4. Sweat Equity to employees/directors/promoters.

  5. ESOP/ESOS to employees, on passing of special resolution.

  6. Issue of shares to other for consideration of cash or other than cash, if price is determined by registered valuer and issue authorized by special resolution.

  7. Bonus Shares.

  8. Conversion of debentures into shares, partly or fully.

  9. Conversion of loan or debentures into shares, if there is such a term in loan agreement or issue of debentures and it is approved in general meeting by a special resolution.

  10. Compulsory conversion of debentures or loans into equity by Central Government on terms decided by Government.

  11. Global Depository Receipt (GDR) in any foreign country.