A Public Limited Company in India is a business organization that has a minimum of seven shareholders and is incorporated under the Companies Act. It can raise funds by selling shares to the public through an IPO or subsequent public offerings. The liability of shareholders is limited, meaning their personal assets are not at risk in case of company losses or liabilities.
BENEFITS
LIMITED LIABILITY
Shareholders' liability is limited to the amount they have invested in the company. Their personal assets are protected in case of any financial difficulties or liabilities faced by the company.
ACCESS TO CAPITAL
Public limited companies have the advantage of raising capital by selling shares to the public through IPOs or subsequent offerings. This allows them to attract a large pool of investors and access significant funds for expansion, investment, or operational needs.
ENHANCED CREDIBILITY
Being a public limited company enhances the company's credibility and reputation in the market. It instills confidence among investors, customers, suppliers, and other stakeholders, as it is subject to stricter regulatory requirements and transparency obligations.
TRANSFERABILITY OF SHARES
Shares of a public limited company are freely transferable, allowing shareholders to easily buy or sell their shares on stock exchanges. This liquidity provides shareholders with flexibility and an opportunity to exit or diversify their investments.
GROWTH AND EXPANSION OPPORTUNITIES
Public limited companies have the potential for rapid growth and expansion due to their ability to attract substantial capital. They can use these funds for mergers and acquisitions, research and development, infrastructure development, market expansion, and other strategic initiatives.
CORPORATE GOVERNANCE
Public limited companies are subject to stringent corporate governance regulations, which promote transparency, accountability, and fairness in their operations. This helps protect the interests of shareholders and stakeholders and ensures responsible management of the company.
STEPS TO REGISTER
The process of registering a Public Limited Company in India involves several steps. Here is a general outline of the registration process:
- DIRECTOR IDENTIFICATION NUMBER (DIN): The first step is to obtain a Director Identification Number (DIN) for all the proposed directors of the company. This can be done by submitting an online application to the Ministry of Corporate Affairs (MCA).
- DIGITAL SIGNATURE CERTIFICATE (DSC): Next, the proposed directors need to obtain a Digital Signature Certificate (DSC) from government-approved agencies. The DSC is required for online filing of forms and documents during the registration process.
- NAME APPROVAL: Choose a unique name for the company and submit an application for name availability to the MCA. The name should comply with the naming guidelines specified by the Companies Act. Once the name is approved, it remains valid for 20 days.
- MEMORANDUM OF ASSOCIATION (MOA) AND ARTICLES OF ASSOCIATION (AOA): Draft the MOA and AOA of the company. These documents define the objectives, scope of activities, and internal regulations of the company. They must be prepared in accordance with the provisions of the Companies Act.
- FILE INCORPORATION DOCUMENTS: Prepare and file the necessary incorporation documents with the Registrar of Companies (ROC). These documents include Form SPICE 32 (Simplified Proforma for Incorporating Company Electronically), MOA, AOA, and other required declarations and affidavits. The forms can be filed online through the MCA portal.
- PAY FEES AND STAMP DUTY: Pay the required registration fees and stamp duty as applicable. The fees depend on the authorized share capital of the company.
- CERTIFICATE OF INCORPORATION: Once the ROC verifies and approves the submitted documents, they issue a Certificate of Incorporation. This document confirms the registration of the company and includes the Corporate Identity Number (CIN) of the company.
- APPLY FOR PERMANENT ACCOUNT NUMBER (PAN) AND TAX REGISTRATION: After obtaining the Certificate of Incorporation, apply for a PAN from the Income Tax Department. Also, register for Goods and Services Tax (GST) if applicable to the business activities.
- COMPLIANCE REQUIREMENTS: After registration, ensure compliance with ongoing regulatory requirements such as filing annual financial statements, holding annual general meetings, maintaining statutory registers, and complying with other legal obligations as per the Companies Act.
DOCUMENTS REQUIRED FOR PUBLIC LIMITED COMPANY
- Director Identification Number (DIN)
- Digital Signature Certificate (DSC)
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Form INC-9 (Declaration by proposed directors)
- Form INC-10 (List of subscribers and their consent)
- Form INC-7 (Application for incorporation)
- Form INC-22 (Registered office address proof)
- Form DIR-2 (Declaration by proposed directors)
- Form INC-8 (Sector-specific approvals, if applicable)
- Identity and address proof of directors and subscribers.
REGISTERATION COMPLIANCES
Once a public limited company is registered in India, it is subject to various compliance requirements under the Companies Act, 2013, and other applicable laws. Here are some of the key compliances that a public limited company needs to adhere to:
- ANNUAL GENERAL MEETING (AGM): The Company is required to hold an AGM within six months from the end of the financial year. During the AGM, matters such as approval of financial statements, appointment or reappointment of directors, and declaration of dividends are discussed.
- FINANCIAL STATEMENTS: The Company must prepare and file annual financial statements, including the balance sheet, profit and loss account, cash flow statement, and other relevant statements, within a specified time frame.
- DIRECTORS' REPORT: A directors' report providing a comprehensive overview of the company's operations, financial performance, future prospects, and other relevant information needs to be prepared and submitted along with the financial statements.
- APPOINTMENT OF AUDITORS: The Company must appoint auditors to conduct statutory audits of its financial statements. The auditors' appointment is subject to approval by the shareholders at the AGM and must comply with the relevant provisions of the Companies Act.
- BOARD MEETINGS: The board of directors is required to hold regular meetings to discuss and make decisions on important matters concerning the company. At least four board meetings must be held in a calendar year, with a maximum gap of 120 days between two consecutive meetings.
- STATUTORY REGISTERS: The Company is required to maintain various statutory registers, such as the Register of Members, Register of Directors, Register of Charges, etc. These registers must be updated and maintained at the registered office of the company.
- FILING OF ANNUAL RETURNS: The Company must file its annual returns with the Registrar of Companies (ROC) within a prescribed period. Annual returns provide details about the company's share capital, shareholders, directors, indebtedness, and other key information.
- COMPLIANCE WITH CORPORATE GOVERNANCE NORMS: Public limited companies are expected to comply with corporate governance requirements, including having independent directors on the board, forming committees such as the Audit Committee and Nomination and Remuneration Committee, and adhering to guidelines related to related party transactions and other governance practices.
- COMPLIANCE WITH TAX LAWS: The Company must comply with various tax laws, including filing of income tax returns, payment of taxes, tax deductions at source (TDS), Goods and Services Tax (GST) compliance, and other applicable tax obligations.
- OTHER COMPLIANCES: Depending on the nature of the company's business and its specific circumstances, there may be other regulatory and industry-specific compliances that need to be adhered to, such as environmental regulations, labor laws, data protection laws, and sector-specific regulations.
FAQs
A public limited company is a business organization that is incorporated under the Companies Act and can raise capital by selling shares to the public.
A public limited company must have a minimum of seven shareholders.
The Companies Act does not specify a minimum capital requirement for a public limited company. However, it must have an authorized and paid-up share capital.
Advantages include limited liability, access to capital through public offerings, enhanced credibility, transferability of shares, growth opportunities, and robust corporate governance.
The documents generally required include DIN, DSC, MOA, AOA, Form INC-9, Form INC-10, Form INC-7, Form INC-22, Form DIR-2, and identity/address proofs of directors/subscribers.
The registration process typically takes around 15-30 days, depending on the timely completion of documentation and government processing.
Yes, subject to compliance with the Companies Act, a public limited company can be converted to a private limited company.
Yes, a public limited company can change its name by following the prescribed procedures and obtaining approval from the ROC.
Compliance requirements include holding annual general meetings, filing financial statements and annual returns, maintaining statutory registers, and adhering to corporate governance norms.
Yes, a public limited company can raise funds through private placements, subject to compliance with securities laws and other regulatory requirements.
Yes, a public limited company can have foreign directors and shareholders, subject to compliance with applicable laws, such as obtaining necessary approvals and adhering to foreign investment regulations.
Yes, shares of a public limited company can be listed and traded on recognized stock exchanges, providing liquidity and an opportunity for shareholders to buy or sell their shares.
No, a public limited company must have a minimum of three directors.
Tax obligations include filing income tax returns, payment of taxes, compliance with GST laws (if applicable), and adherence to tax deduction at source (TDS) provisions.
No, a public limited company must have a registered office in India.
No, the liability of directors is limited to the amount they have invested in the company, and their personal assets are generally protected.
Yes, a public limited company can issue different classes of shares, such as equity shares, preference shares, or debentures, based on the company's requirements.
Yes, a public limited company can merge with another company through a prescribed legal process, subject to approval from shareholders, creditors, and regulatory authorities.
Yes, a public limited company can be dissolved or wound up voluntarily or by order of the court, following the liquidation process as per the Companies Act.
Yes, a public limited company can issue bonus shares to its existing shareholders as a way to distribute profits or reserves without receiving any additional payment.