The Companies Act 2013 incorporates a public company. The directors of the company manage the company, and the shareholders own it.
A public company has limited liability, and its shares are tradable in the public market. A public company is also known as public limited liability.
A public limited company is regulated by various legislation either in its business or in trading its shares.
A public limited company in India is obliged to make its financial reports and balance sheets public to give shareholders all the information about the company before investing in its stocks.
In a public company, shareholders are liable jointly and individually for the tax debts of the company. All the public companies are required to add the suffix ‘limited’ after their name.
As per The Companies Act 2013, the public limited companies are obliged to issue their prospectus in the public domain.
The public at large is invited to subscribe to the shares of a public company in India.
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Characteristics of a public limited company
The characteristics of a public limited company are as follows:
- A public company in India has a distinct legal existence apart from its shareholders or its members.
- A public company has a minimum of 7 members for its formation, and there is no limit on the maximum number of members as per Section 3 of the Companies Act 2013.
The people buying the shares of a particular company are called the company’s members, and the amount of money raised from that selling of shares is called share capital.
- As per Section 149 of the Companies Act, 2013, public companies should have a minimum of three directors and a maximum of 15 directors for their existence.
- The shares of a public company are easily transferable without the consent of the shareholders. A shareholder can transfer his/her shares to the public. There are no restrictions on transferring or invitations to subscribe shares of that company or any member of the company.
- The liability of a public company member is limited up to the number of shares owned by them. The shareholders are not liable personally for the losses or debt of the company.
In the case of loss, the personal assets of the members/shareholders of the company cannot be attached for the repayment of debt. The name of the public company is suffixed with ‘limited’ due to the limited liability of its members.
- There is a separation of power between the ownership and management of the company. The power of decision making is vested with the company’s directors, and shareholders does not have any right to participate in the company’s management.
Advantages of a public limited company
Some advantages of a public limited company are as follows:
- A public limited company has a minimum of seven members, and there is no ceiling on the maximum number of members. A public company can have as many members as its share capital can accommodate.
- The shareholders have limited liability up to the contribution of their share. That is why it has a separate legal existence from its shareholders.
A public company can be sued for its conduct or recovering debt, but its shareholders cannot be involved in it.
- Strict laws regulate public companies and they are obliged to make their financial statements public every year for proper valuation of shares of the company and to attract potential investors.
- Public companies can raise capital through the capital market because of their ability to issue stocks in the share market. These companies can also raise capital by issuing debentures and bonds through the market in the public domain. These debentures are unsecured debts issued to the companies based on their financial performance and integrity.
- The shares of a public company are freely transferable without the consent of other shareholders. These shares can be transferred between the members and the traders of the stock market.
- There is an opportunity for growth and expansion of business due to the funds raised by selling stocks.
Requirements for the registration of a public limited company
A public company should satisfy the following requirements for registration:
- The company has a minimum of seven shareholders to form a public limited company.
- The company has a minimum of three directors and a maximum of 15 directors to form a public limited company.
- A digital signature certificate (DSC) of one director is required while submitting self-attested address and identity proofs.
- A no-objection certificate (NOC) should be issued by the landlord where the company office is situated
- The director identification number (DIN) for all the directors is required.
- An application for the selection of the name of the company is requisite.
- An application for the object clause of the company should be made to the registrar of Companies (ROC).
- On approval of the company name, the E-MOA (INC-33) and E-AOA (INC-34) should be submitted to the ROC.
- Other documents such as DIR-12, INC-7, and INC-12 should be submitted to the ROC.
- Payment of the prescribed fees for the registration should be submitted to ROC.
- After the ROC approves registration, it issues a certificate of incorporation with a corporate identification number (CIN).
- After completion of registration, the company should apply to obtain the business commencement certificate.
Procedure for the registration of a public company In India
A step-by-step procedure for registering a company and obtaining a certificate of incorporation for a public company in India is as follows:
- The first step is to obtain a digital signature certificate (DSC) from the E-MUDHRA portal. The DSC is required to file forms on the MCA portal.
- The next step is to register on the MCA portal to submit forms as the whole registration process is online.
- The third step is to obtain a director identification number (DIN) by filing a SPICe form.
- The final step is to submit all relevant documents on the MCA portal to obtain the certificate of incorporation.
After verifying all the documents, the registrar of companies issues a certificate of incorporation of that public company if it does not find any conflict with the documents.
Documents required for incorporating a public company in India
The following documents are required to obtain a certificate of incorporation for a public company in India:
- Identity proofs of all shareholders and directors
- Address proof of all shareholders, directors, and main office of the company
- PAN number of all the shareholders and directors
- The utility bill of the concerned office of the company
- An NOC from the landlord of the property where the office is situated
- DIN of directors
- DSC of directors
- Memorandum of association (MOA)
- Articles of association (AOA)
A public company is a beneficial form of a company in today’s economic scenario as it is a company that always aims for growth and results in the development of the country. A public company can generate considerable funding through the public and contribute to the country’s infrastructure and other development projects.
The public company in India gives the company growth opportunity by reducing the overall risk by improving the company’s capital. The company reduces the risk on the shareholders’ assets by ensuring a limited liability on the part of members or shareholders.
In case a creditor sues the company for repayment of debt, the company members are liable for the amount remaining unpaid on the shares. No further liability is on them, and their private properties cannot be attached to the debt repaying process.
FAQs regarding a public company In India
What is authorised capital?
Authorised capital is the maximum limit of capital that a company can issue shares and collect money from shareholders. The registration fee of ROC is calculated based on authorised capital.
What is a paid-up capital
The paid-up capital is the amount of capital raised by the shareholder in the company. Paid-up capital does not have any limit.
How a private company can be converted into a public company?
A private company can be converted into a public company by altering the company’s articles of association.
What is a SPICe form?
A SPICe form or INC-32 is a simplified proforma for incorporating a company electronically, which is used for the reservation of name of the company, incorporation of a public company in India, DIN allotment, and application for the generation of PAN/TAN.