Public Limited Company

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Section 2(71) of companies Act says, a public company means a company;

  • is not a private company; and

  • has a min paid-up share capital, as may be prescribed

According to the section 3(1)(a), public company can be formed  by seven or more persons for any lawful purpose , by subscribing their names to the memorandum of the company  and in accordance with the act in respect to the registration.

As per section 58(2), the securities or any other interest of any member in a company is freely transferable. However, any contract or agreement between persons in respect of transfer of securities or any other interest will be enforceable as  contract.

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  • Characteristics of Public Limited Company

    Directors

    As per the provisions of the Companies Act, 2013 to start a public limited company, a min number of 3 directors are required and there is no restriction to the number max of directors.

    Shareholders

    As per the provisions of the Companies Act, 2013 to start a public limited company, 7 shareholders are required to form these companies.  

    Limited Liability

    The liability of every shareholder is limited in the company. In other words, a shareholder of a public limited company is not personally responsible for any kind of  loss or debts occur to the company, for amount greater than that of the amount invested ; whereas the partners are jointly and severally liable for the debts occurred in the business.

     However, this character of a public company does not offer any immunity to the respected shareholders. The shareholders will be held liable for their own illegal acts.

    Paid up capital

    A public limited company is required to have a minimum paid-up capital of Rs 5 lakh or higher amount prescribed under respected the act.

    Prospectus

    A prospectus is statement of the affairs of the company issued to the general public and it is compulsory under the Act for public limited companies to issue a prospectus for general public. 

    Name

    It is a compulsory under the Companies Act, 2013 for all the public companies must use suffix  ‘limited’ after their name.

    Life Span

    A public limited company do not affected by death of its any shareholders, instead the shares are transferred to the legal heir of such deceased shareholder and the company continues to run its business as usual.

    Capacity to Sue and to be Sued

    Public limited company can take legal action against a person and also other person can take legal action against company.

  • Advantages

    More capital

    Shares are offered to the general public so  anyone can invest in a public limited company.

    Hence, improves capital of the company.

    More attention

    Public companies get more attention in stock market as they are mentioned in stock market list which ensures that mutual funds, hedge funds and other traders take note of business of the company. Eventually, it creates more opportunities for public companies.

    Spreading risk

    Since the shares are sold to the public the unsystematic risk of the market is spread out.

    Growth and expansion opportunities

    Though these companies has  less risk, there is a perfect opportunity for growing and expanding the business by investing in new projects from the money raised through shares.

  • Process for registration of Public Limited Companies

    There are certain conditions which needs to be fulfilled to register public limited companies, these requirements are mentioned below :

    Step 1: Application is made for DSC (Digital Signature Certificate) and DIN (Director Identification Number)

    Step 2: An application is required to be made for the selection of the name of the company

    Step 3 : An application comprising the main object clause of the company is to be made. Object clause is important as it contains the main objective of company.

    Step 4 : Submission of the application to ROC along with the required documents like MOA, AOA, duly filled Form DIR – 12, Form INC – 7 and Form INC – 22 is needed

    Step 5 : Payment of the prescribed registration fees to the ROC is required

    Step 6 : After obtaining an approval from the ROC, the company should apply for the ‘certificate of business commencement.’

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