Public Limited Company Registration in India | Finance Bazaar

Public Limited Company Registration

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What is Public Limited Company

A public limited company is a voluntary association of members which can be incorporated by seven or more persons. It has an independent legal existence apart from its members who built it. It must have at least of seven members but there is no limit as regards the maximum number. Its shares are freely transferable and that too without the prior consent of other shareholders. It is independent legal person, its existence is not affected by the death, retirement or insolvency of any of its shareholders. These companies can invite deposits and from capital the public. These Companies can be unlisted or listed.

A public limited company grants restricted liability to its management and owners. A public company allows a firm to sell shares to financier this is beneficial in raising capital. There should be at least three persons for establishing a Public Limited Company and it has more stringent regulatory requirements compared to a Private Limited Company.

Public Limited Companies are those types of companies where minimum members is seven and there is no cap on the maximum number of members. A public limited company has most of the attribute of a private limited company. A public limited company has all the benefits of private limited company and the ability to have any number of members, ease in transfer of shareholding and more transparency. Identifying marks of a public limited company are name, management, shares, formation, number of members, directors and meetings, etc.

Public Limited Company Registration Requirements

Minimum Seven People: Minimum seven people are required to start the public limited company in India. These companies shall have minimum three directors. The same seven people can become shareholder and director of the company. However, maximum any number of people can become shareholder in the public limited company.

No Minimum Capital: Capital of the business is depending on the need of the business and statutory no minimum capital is required to start the public limited company. However, minimum authorized and subscribed share capital required for public company is Rupees five lakh.

One Resident Director: Among director, one person must be Indian citizen.

Unique Name: The name of the public limited company should be unique and should not be similar to the any existing company name or trademark.

A Public Limited Company is strictly controlled and is required to publish its true financial health to its shareholders.

• Characteristics of Public Limited Company
• Advantages of Public limited companies
• Requirements/Process for registration of Public Limited Companies
• Documents required for incorporating a Public Limited Company

Characteristics of Public Limited Company:

Directors

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

Limited Liability

The liability of each shareholder is limited. In simple words, a shareholder of a public limited company isn’t personally responsible for any debts or loss of the company for any amount greater than the amount invested by them; contrary to partnerships and sole proprietorships, where the partners and business owners are jointly and severally liable for the debts of the business. However, this characteristic of a public limited company does not offer freedom to the stockholders. The stockholder will be held responsible for their own illegal actions.

Paid up capital

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

Prospectus

A prospectus is a comprehensive report of the affairs of the company issued by a public limited company for its public and there is a requirement under the Act for public limited companies to issue a prospectus.  However, there are no specific provisions for Private Limited Companies. This is because private limited companies cannot request the public to subscribe for their shares.

Name

It is a mandatory requirement under the Companies Act, 2013  for all the public companies to add the word ‘limited’ after their name.

Advantages of Public Limited Company Registration:

The advantages of forming a public limited company are as follows:

More capital:- Shares are offered to the general public at broad i.e. anyone can invest in a public limited company. Hence, improves capital of the company.

More attention:- Being listed on a stock market assure that mutual funds, hedge funds and other traders take note of business of the company. This can result in better business opportunities for the Public Limited Company.

Spreading risk:- Since the shares are sold to the public at large the unsystematic liability of the market is spread out.

Growth and expansion opportunities:- Due to less risk, there is a perfect opportunity for expanding and growing the business by investing in new projects from the money raised through shares.

Larger amount of capital:- Public limited companies can bring more capital as compared to other form of organization. There can be unlimited number of shareholders, who can contribute to the capital of the public limited company.

Efficient management:- Public limited company is more efficiently managed entities as compared to other form of organization. These have larger pool of talented people, who contribute in efficient management of public limited company.

Free transfer of shares:- The shares of a public limited company are freely transferable and that too without the prior consent of other shareholders, as compared to private limited companies.

Larger Borrowing Power:- Public companies are most recognized in terms of financial assistance/borrowing from banks and financial institution and also there are several financial instruments available to public limited companies, which are not available to other form of business organization.

Limited Liability of shareholder:- Liability of shareholders of the public limited company are limited only up to the shares subscribed by them and should not be personally liable for the debts of the company in case company are unable to pay its liabilities.

Separate Legal Entity:- Public limited company legal entity are separate than its shareholders/promoters.

Perpetual Existence:- Public limited company existence will go for ever and its existence will not be affected by the death of shareholders, directors or transfer of shares to others.

Capacity to Sue and to be Sued:- Public limited company can take legal action against another and also other person can take legal action against company separate from directors, shareholders & promoters.

Ownership of property:- Public limited company can sale, purchase and own the property like individual.

Public Limited Company Registration Process

Name reservation:- The first step in incorporation is to reserve/approve the name of company. The proposed name selected should do not consist of any word which is prohibited under Companies Act, 2013. An approved name is available for a period of 20 days from the date of approval, for a new company registration. It is allowed to apply for two names and one Resubmission (RSUB) while Reserving Unique Names for companies through the RUN web service.

Digital Signature Certificate (DSC) of Director:- The application for public limited company is filed online and it is mandatorily required to be signed by the director and shareholder of the company. So DSC is required to be taken for the directors and shareholder of the company, who is required to sign the e-form for registration before filing incorporation application for the company. ID, Photo and Address proof is required to along with DSC application form for issuance of DSC.

Obtain Director Identification Number (DIN):- DIN is a unique identification number to the director issued by Registrar of the companies (ROC) for becoming a director in India. An application is filed along with address and ID proof duly attested by CS/CMA/CA.

Approval of other authorities:- The Registrar of Companies can require the applicant to furnish the approval or concurrence of any department, regulatory body, appropriate authority, or Ministry of the State or Central Government(s) in relation to the work to be done.

Document submission:- Application for registration/incorporation of public limited company is made to Registrar of Companies (ROC) along Memorandum and Article of Associations, declaration, affidavits etc. At least Seven persons are required for incorporation of public limited company.

Certificate of Incorporation:- ROC then scrutinizes the incorporation form and documents, if ROC finds the documents are in order, issues Certificate of Incorporation which is the Registration certificate of public limited company. After receiving the certificate of Incorporation, the public limited company is set to start its function.

PAN & TAN of the company:- PAN and TAN are simultaneously applied along with company registration forms and are issued along with Certificate of Incorporation and also mentions into Certificate of Incorporation.

Opening of Bank Account:- On compliance of Certificate of Incorporation & other essential documents, bank open a current account in name of company, required for smooth running of the company.

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Documents required for incorporating a Public Limited Company