Public Limited Company in India

Overview of  Public Limited Company Registration

The formation and operation of a Public Limited Company are governed by the Companies Act, 2013. A Public Limited company has a limited liability and provides shares to the general public. Anyone can purchase its stock through trading on the stock market or a private (IPO) initial public offering. It must disclose to its shareholders its genuine financial health since it is rigorously controlled.

A Public Limited Liability business offers its owners and management team minimal responsibility. However, a company can sell shares to investors after a public limited Company Registration, which is considered as a good act in obtaining funds for the company. A Public Limited Company must have at least three Directors and can have any number of members. Importantly, compared to a Private Limited Company, it has more regulatory obligations. This is why it has been observed that regulatory compliances are difficult and a person must take the help of an expert who has due knowledge of the compliances and can assist better in the Public Limited Company registration process.

Although a Public Limited Company is a different kind of business, it has many traits that resemble with a Private Limited Company. More benefits include, ease of transfer, limited liability, ability to borrow, and continuous life.

Understanding Public Limited Company

A Public Limited Company in India enjoys limited liability advantages in addition to all the rights and privileges of a corporate entity. When a Public Limited Company wants to raise money from the general public, it is listed on the stock exchange. Therefore, in order to establish a Public Limited Company, you must adhere to several government rules. Moreover, complying with all the government rules requires due knowledge and we cannot expect every individual to have due knowledge of the same. Therefore, Corpbiz has a team of experts who have already several clients across the country and with experience they have due knowledge of the same. 

Furthermore, a Public Limited Company has stricter laws and restrictions than a Private Limited Company. However, since a Public Limited Company gives the benefits of a Private Limited Company with features like simple transferability and share ownership, it is better to establish one while adhering to all legal compliances and governmental regulations.

What are the Features of Public Limited Company?

The features of a public limited company are mentioned below:

1. Number of Shareholders: A Public Limited Company has to be formed with a minimum of 7 shareholders. Moreover, there is no upper limit on the number of shareholders that a Public Limited Company may have as per the Companies Act.
2. Board of Directors: The Companies Act, 2013 mandates that a Public Limited Company must have a minimum of three directors in order to manage its administration. But this figure can be increased to a maximum of 15.
3. Separate ownership and management: In a Public Limited Company, the owner or shareholder is not involved in the management of the company. The owners select the company's directors, who together make up the Board of Directors, and are responsible for the company's management.
4. Separate legal entity: In accordance with the guidelines outlined in the Companies Act, 2013, a Public Limited Company must register or incorporate with the Registrar of Companies. The company acquires a legal identity of its own after incorporation, which is separate and apart from the identities of its owners or shareholders.
5. Perpetual Succession: A Public Limited Company may continue to exist even after its directors or shareholders pass away or become insolvent. A Public Limited Company's shares are easily transferred to a new shareholder or his ascendents to take the place of the deceased shareholder upon the death or permanent departure of any shareholder.
6. Limited Liability: In a public limited company, the owners' liability is limited to the amount of capital they have subscribed to. This is the significance of the word "limited." The shareholders should not be required to pay more than the unpaid amount of the shares they own in order to settle any obligations incurred in the name of the firm.
7. Share transferability: There is no restriction on transfer of shares of a public limited company. The shares of listed public company are listed on the stock exchange, and people easily buy and sell shares of such companies. 

Benefits of a Public Limited Company

The benefits of public limited company registration are mentioned below:

Easy to raise funds

The most common and practical company structure among established small, medium, and big businesses is the Public Limited Company registration or incorporation. The major goal of these businesses is still to make it simple for unrelated individuals or corporations to become shareholders, therefore giving funding to the company without requiring personal guarantees or other complications. A Public Limited Company is able to raise funds from shareholders by open offers or private distribution.

Enhanced Borrowing Capacity

When a public limited company borrows money from banks and other financial institutions, the company's visibility rises as a result.

Company Reputation

A Public Limited Company's legality and ability to draw in skilled workers and other stakeholders, such as suppliers, shareholders, and business partners, are two other significant benefits of incorporation. People consistently believe that public limited companies, which are subject to MCA regulations, have better corporate governance than other informal structures since they are subject to MCA rules. Additionally, this enhances their reputation in the markets in which they do business and draws in better deals and talent.

Distributing risk and profit

The risk and profit of the company is shared since the shares are offered for sale to the general public. 

Possibilities for growth and expansion 

The company has a chance to grow and expand by spending the money earned via share in new initiatives because there is less risk involved.

Requirements of Private Limited Company Registration

The requirements for registering a private limited company are mentioned below:

• For registration of a private limited company in India, there can be a minimum of 3 Directors and a maximum of 15. Among which, at least one director shall be an Indian resident.
• There is no prescribed limit for the maximum number of members of a public limited company, there shall be a minimum of seven members for registration. In a public company, the director and shareholder can be a same person. 
• A company must suggest at least 2 names for reserving a name of the company.
• The directors must have a Digital Signature Certificate (DSC) and a Director's Identification Number. 
• Information on the location to be used as the proposed public company's registered office, together with documentation proving ownership. 
• Moreover, in case of rented property, a notice of intent from the owner to use the space for the purpose of operating a public limited company, and a utility bill in the owner's name that is no more than two months old.

Required Document for Public Limited Company Registration

The documents required for public limited company registration are mentioned below:

• Proof each director's and shareholder's identification.
• Proof of address for each shareholder and director. 
• PAN numbers for each director and shareholder.
• Utility bill for the office, which is the company's proposed registered office. 
• A No Objection Certificate (NOC) from the landlord of the company's planned location. 
• Each director's Director Identification Number (DIN). 
• The directors' Digital Signature Certificate (DSC). 
• Drafted Memorandum of Association (MOA). 
• Articles of Association of the company (AOA).

Public Limited Company Registration Process

The process of public limited company registration is mentioned below:

Step 1: Comply with the Legal Requirements

All legal criteria, including the minimum paid-up share capital and the number of directors and shareholders, must be met. Only after completing this step, you will be able to proceed ahead.

Step 2: Obtain DSC and DIN

Getting the DSC and DIN for the company's directors is the next step. No individual or entity, including LLPs or financial institutions, may hold the position of director; only natural persons are eligible. 

Step 3: Registration of Company's Registered Office

The company's correct address is required in order for it to be acknowledged as a registered office. The Registrar of Companies, under whose authority the office is located, must receive a registration application of the registered office address. Since the registered office address will be used for all business correspondence, it is important that this office address shall be recorded accurately. The registration charge will be determined by the company's authorized capital.

Step 4: Approval of Company's Name

After beginning with the company registration process, the ROC shall approve the name of the company. The term "Limited" must be at the end of the name of a Public Limited Company. This application will be submitted to the Ministry of Corporate Affairs using the RUN form. In the event that a certain name is unavailable, it is preferable to submit a list of at least 2 to 4 names arranged in order of preference.

Step 5: Submission of important Documents

The preparation of the Company's essential papers, the Memorandum of Agreement, and the Articles of Association, is required after the approval of the Company's name. The documentation must be prepared and sent to the ROC for verification as soon as possible.

Step 6: Examination and issue of Incorporation Certificate

The Registrar will verify the application and documents submitted. After the verification, the ROC registers the business and issues the incorporation certificate and CIN.

Step 7: Certificate of Commencement

After getting the Certification of Incorporation, the company cannot instantly begin its operations. Within 180 days after the COI is received, the company must submit a certificate of commencement certifying that each subscriber to the memorandum has paid the subscription fee.