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 and also known as public limited liability.
A public limited company gets 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 gets invited to subscribe to the shares of a public company in India.
Characteristics of a public limited company
There are some characteristics of a public limited company. These are:-
- A public company in India has separate legal existence apart from its shareholders or its members.
- A public company has a minimum of seven 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.
- Public companies must have a minimum of 3 directors and a maximum of 15 directors for their existence as per section 149 of the companies act, 2013.
- The shares of a public company are easily transferable without the consent of the shareholders. A shareholder can transfer his 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 case of loss, the personal assets of the members/shareholders of the company cannot get attached for repayment of debt.
The public company’s name will get 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 don’t have any right to participate in the company’s management.
Advantages of a public limited company
Some advantages of a public limited company are:-
- A public limited company has a minimum of seven, and there is no ceiling on the maximum no. of members. It means that 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 get sued for its conduct or recovering debt, but its shareholder cannot be involved in it.
- The strict laws regulate the public companies and are obliged to make their financial statements public every year. It will help in the proper valuation of shares of that company and 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 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 get 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 registration of a public limited company
Some requirements need to get fulfilled to register a company as a public limited company. These are:-
- There is a minimum of seven shareholders required to form a public limited company.
- There is a minimum of 3 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 NOC from the landlord where the company office gets 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 ROC.
- Once the company’s name is approved, the E-MOA (INC-33) and E-AOA (INC-34) must get submitted to the ROC.
- Other documents like DIR-12, INC-7, and INC-12 needs to get submitted to ROC.
- Payment of the prescribed fees for the registration needs to get submitted to ROC.
- After the ROC approves registration, it issues a certificate of incorporation with a corporate identification number (CIN).
- After the registration gets completed, the company should apply to obtain the business commencement certificate.
Procedure for registration of a public company In India
There is a step by step procedure for registering a company and obtaining a certificate of incorporation for a public company in India. These are:-
- 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 the 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 last step is to submit all the concerned documents on the MCA portal to obtain the certificate of incorporation.
After verifying all the documents, the registrar of companies will issue a certificate of incorporation of that public company if found no conflict with the documents.
Documents required for incorporating a public company In India
Some documents must include a public company and obtain a certificate of incorporation for a public company in India. These are:-
- Identity proofs of all the shareholders and directors
- Address proof of all the shareholders, directors and main office of the company
- PAN no. of all the shareholders and directors
- Utility bill of the concerned office of the company
- A NOC from the landlord of the property where the office is situated
- Director identification number (DIN) of the directors
- Digital signature certificate (DSC) of the directors
- Memorandum of association (MOA)
- Articles of association (AOA)
A public company is a very beneficial form of a company in today’s economic scenario as it is a company that always aims for its growth and ultimately results in the development of the country. It can generate ample 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. It reduces the risk on the shareholders’ assets by ensuring a limited liability on members or shareholders part.
Suppose a creditor sues the company for repayment of debt. In that case, the company members will be 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 Public Company In India
What is authorised capital?
It is the company’s registered capital is the maximum limit of capital that a company can issue shares and collect money from shareholders. The registration fee of ROC will get 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. There is no limit on paid-up capital.
How a private company can get converted into a public company?
A private company can get 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 gets used for reservation of name of the company, incorporation of a public company in India, DIN allotment and application for generation of PAN/TAN.