A Public Limited Company (PLC) is a business entity recognized under the Companies Act, 2013, designed for large-scale operations with the ability to raise capital from the public through the issuance of shares. This structure is ideal for companies looking to expand and attract a large number of investors. Public limited companies are listed on stock exchanges, providing shareholders with liquidity and the opportunity to trade their shares freely.
This guide explores the meaning, features, benefits, compliance, and registration process for public limited companies.
What is a Public Limited Company?
A Public Limited Company is a corporate entity that offers its shares to the general public through an Initial Public Offering (IPO) or on a stock exchange. It is governed by strict regulatory frameworks and disclosure norms to ensure transparency and protect investors’ interests.
Key highlights include:
- Minimum 7 shareholders and 3 directors.
- No limit on the maximum number of shareholders.
- Shares are freely transferable.
Key Features of a Public Limited Company
- Separate Legal Entity
A Public Limited Company has its own legal identity, distinct from its shareholders and directors. - Limited Liability
Shareholders’ liability is limited to the unpaid value of their shares. - Free Transferability of Shares
Shares of a Public Limited Company can be freely bought and sold on stock exchanges. - Perpetual Succession
The company’s existence is unaffected by changes in ownership or the death of its members. - Mandatory Disclosures
Public companies are required to disclose their financial information and comply with strict reporting standards to ensure transparency. - Large-Scale Operations
Public Limited Companies are designed for large-scale operations and have greater access to capital markets.
Advantages of a Public Limited Company
- Access to Capital
Public companies can raise substantial funds by issuing equity shares, preference shares, and debentures to the public. - Credibility and Transparency
The regulatory requirements and mandatory disclosures enhance the company’s credibility among investors and stakeholders. - Liquidity
Shareholders can easily buy or sell shares on the stock exchange, providing them with liquidity. - Growth Opportunities
With access to a vast pool of capital, public companies can expand operations, invest in new projects, and achieve rapid growth. - Limited Liability
Shareholders are not personally liable for the company’s debts or losses, safeguarding their personal assets. - Attracting Talent
Offering shares as an incentive can attract skilled professionals and retain employees.
Disadvantages of a Public Limited Company
- Regulatory Compliance
Public companies must adhere to strict regulatory norms, including regular filings, audits, and disclosures. - Ownership Dilution
Issuing shares to the public dilutes the ownership and control of the original promoters. - High Formation Costs
The incorporation and operational costs of a public company are higher than other business structures. - Vulnerability to Market Fluctuations
The company’s share price is influenced by market conditions, making it susceptible to fluctuations.
How to Register a Public Limited Company in India
- Obtain Digital Signature Certificate (DSC)
Each director must have a DSC to sign incorporation documents digitally. - Director Identification Number (DIN)
Apply for a DIN for all directors of the company. - Reserve Company Name
File the SPICe+ Part A form with the Ministry of Corporate Affairs (MCA) to reserve a unique company name. - Draft Incorporation Documents
- Memorandum of Association (MOA): Defines the company’s objectives.
- Articles of Association (AOA): Outlines the rules and regulations governing the company.
- Filing Incorporation Form
File the SPICe+ Part B form along with the required documents, including:- Proof of registered office address.
- Identity and address proof of directors and shareholders.
- PAN and TAN Application
Apply for the company’s Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). - Certificate of Incorporation
Once approved, the Registrar of Companies (ROC) issues a Certificate of Incorporation, marking the company’s legal existence. - Listing on Stock Exchange
To go public, the company must fulfill the requirements of the Securities and Exchange Board of India (SEBI) and list its shares on a recognized stock exchange.
Compliance Requirements for a Public Limited Company
- Board and General Meetings
- Conduct at least four board meetings annually.
- Hold an Annual General Meeting (AGM) to discuss financial statements and other critical matters.
- Annual Returns
File annual returns with the Registrar of Companies using Form MGT-7. - Statutory Audit
Appoint a statutory auditor to audit the company’s financial records. - Maintenance of Records
Maintain statutory registers, including registers of members, charges, and directors. - Filing of Financial Statements
Submit financial statements in Form AOC-4. - Compliance with SEBI Regulations
Public companies listed on stock exchanges must adhere to SEBI’s guidelines and disclosure norms.
Public Limited Company vs. Private Limited Company
| Aspect | Public Limited Company | Private Limited Company |
|---|---|---|
| Ownership | Unlimited shareholders | Maximum 200 shareholders |
| Share Transferability | Freely transferable | Restricted |
| Compliance | Higher | Moderate |
| Fundraising | Through IPOs and stock exchanges | Limited to private investors |
| Regulatory Oversight | Strict SEBI and MCA regulations | Fewer regulatory requirements |
FAQs About Public Limited Companies
1. What is the minimum capital required for a Public Limited Company?
There is no minimum paid-up capital requirement as per the Companies Act, 2013.
2. Can a Public Limited Company be converted into a Private Limited Company?
Yes, a Public Limited Company can convert into a Private Limited Company by following the procedures specified under the Companies Act.
3. Are Public Limited Companies required to be listed?
No, public companies can remain unlisted. However, listed public companies have additional compliance requirements.
4. What is the role of SEBI in Public Limited Companies?
SEBI regulates the listing and trading of shares on stock exchanges to protect investors and maintain market integrity.
5. Can a Public Limited Company issue preference shares?
Yes, public companies can issue preference shares, provided they comply with the provisions of the Companies Act, 2013.