Public Limited Company in India

PUBLIC LIMITED COMPANY IN INDIA

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Public Limited Company in India - An Overview

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A Public Limited Company in India, commonly known as a PLC, is a limited liability company established under the Companies Act, 2013. The greatest benefit of a public limited company is that it can offer shares to the general public and procure funds. It is the best suitable business structure for individuals planning to do large-scale operations. 

In order to do public limited company registration, there should be a minimum of seven members and three directors as per Section 149(1) of the Companies Act, 2013. In this article, we will learn what is a public limited company, the difference between private and public limited company, the features of public limited company in India and the procedure for private limited company registration.

What is a Public Limited Company in India?

A public limited company in India is a company that has its shares listed in the public stock exchange to raise funds for the business. A public limited company in India enjoys all the privileges of a corporate entity along with the leverage of limited liability. A public limited company registration involves filing more compliances than a private limited company. But what makes it worth it is the easy transferability of shares and the ability to raise funds through initial public offering or trading in the stock market.

Features of Public Limited Company in India

1. Number of Directors:

According to the Companies Act 2013, a minimum of three directors are required for incorporating a public limited company in India. Please note that there is no restriction to the number of directors in a public limited company in India.

2. Limited liability:

The liability of each shareholder in a public limited company in India is limited to the extent of capital contributed by him/her. This implies that a shareholder of the company will not be personally responsible for any debts of the company. However, the shareholders will still be liable for their legal actions.

3. Paid-up capital:

A public limited company is required to have a minimum paid-up capital of Rs 5 lakhs.

4. Prospectus:

A prospectus is a comprehensive, legal statement issued by a public limited company in India for its public to invite them to subscribe to its shares.

5. Name:

It is mandatorily required for a public limited company in India to write ‘limited’ after their names.

Advantages of a Public Limited Company in India

1. Perpetual succession:

A public limited company in India enjoys the status of a separate individual entity. It has a different legitimate character from that of its directors. Passing away, insolvency or insanity of the directors or shareholders does not lead to the closure of a public limited company.

2. No minimum paid-up capital:

A public limited company in India has the ability to raise a tremendous amount of capital by way of issue of shares to the general public, ESOP, borrowings from financial institutions, etc. Thus, the directors are not liable to contribute a minimum paid-up cash to the company as long as the authorized capital is at Rs 5 lakhs or more.

3. Limited liability:

Directors in a public limited company have limited liability. Since a public limited company in India is a separate legal entity, debts on the company do not create a charge on the personal assets of the directors.

4. Better access to capital:

In comparison to a private limited company, a public limited company in India has better access to cash. It can raise capital by way of shares, debentures, loans or simply by offering stocks or partnerships to its employees.

5. Easy transferability of shares:

Shares in a public limited company in India are issued on the public stock exchange. Thus, they are easily transferable and offer ease of accessibility.

6. Growth opportunities:

In a public limited company, the risk is divided and effectively spread across shareholders. Thus, it provides an opportunity to grow and expand the business by way of investing in new projects from the money raised through shares.

7. Listing in the stock exchange:

As aforementioned above, a public company in India is listed in the stock exchange. This offers greater credibility to the company by way of the issue of prospectus and builds higher investors’ interest.

Requirements for public limited company registration

Here is what you should keep in mind while registering for a public limited company in India:

  1.   Minimum of seven shareholders
  2.   Minimum of three directors
  3.   Digital Signature Certificate (DSC) of one of the directors
  4.   Director Identification Number (DIN)
  5.   A minimum of paid-up capital of Rs 5 lakhs
  6.   Submission of application to the Registrar of Companies along with the relevant documents such as MoA, AoA, DIR-12, Form INC-7 and Form INC-22.
  7.   Payment of the prescribed registration fee to the RoC (Registrar of Companies).

Procedure for registration of public limited company in India

These are the steps you shall follow for public limited company registration:

1. Obtaining the Digital Signature Certificate (DSC):

Prior to the public limited company registration process, one must enrol for the Digital Signature Certificate (DSC) of the designated directors of the proposed company by filing on the MCA portal. This is done because all the documents of a public limited company in India are required to be digitally signed. DSC is also a mandatory document for all subscribers and directors in the Memorandum of Association (MOA) and Articles of Association (AOA).

2. Apply for DIN:

After obtaining the DSC, one must file for the Director Identification Number (DIN) within 5 to 7 working days of the filing for DSC. The DIN is to be obtained by anyone who wants to work as a director of a public limited company in India. The application for DIN is to be filed through Form DIR-3. Along with Form DIR-3, the directors are also required to attach scanned copies of partners’ identity proofs (Aadhar card and PAN card).

3. Registration on the MCA portal:

In order to apply for a public limited company registration, a complete SPICe+ form has to be submitted along with the relevant documents. After the completion of the registration process, the directors may get access to all the services including filing forms as well as viewing documents publicly.

4. Name proposal:

With effect from 23 February 2020, instead of filing the RUN form, the Ministry of Corporate Affairs, in an effort to ease the process of public limited company registration, had decided to introduce the SPICe+ form. Merely filing of Part-A of the SPICe+ Form allows the user to reserve two proposed names and one resubmission (RSUB) for the public limited company in India. It is worth mentioning that it is recommended to use the free name search facility on the MCA portal to select names that are not similar to the existing LLPs, trademarks or registered companies.

5. Filing SPICe+ form:

Filing of Form SPICe+ (INC-32) Part B is done for the public limited company registration. Upon the name approval, the user can click on the link on his/her dashboard and proceed with filing Part-B to do public limited company registration. The most beneficial characteristic of the SPICe+ form is that the details filled in this form are automatically submitted and mentioned in the linked forms including the AGILE-PRO, eAoA, eMoA, URC1, INC-9 (as applicable).

These forms are required to be downloaded and duly signed by the directors of the public limited company and submitted for incorporation purposes. Further, a DSC of a certified professional (Chartered Accountant, Company Secretary, Cost Accountant or an advocate) is required to file Form INC-32. With effect from January 2018, RUN form, INC-7 and INC-1 are omitted and have been merged into the SPICe+ form. The RUN facility is available solely to change the existing name of a public limited company.

6. Drafting the relevant documents:

In an attempt to ease the procedure for public limited company registration, the MCA has introduced electronic filing of the relevant documents such as the e-MoA and e-AoA.

7. Certificate of Incorporation:

After the submission of the documents, the Registrar of Companies inspect the application. When the application is verified, he/she issues the Certificate of Incorporation of the public limited company.

8. Opening an individual bank account:

Since a public limited company registration is a separate legal entity, it is mandatory to open a bank account in its name.

Documents required for incorporation of a public limited company in India

  1.   Proof of identity of each of the shareholders and directors
  2.   Proof of address of each of the directors and the shareholders
  3.   PAN of all shareholders and directors
  4.   Utility bill of the registered office address
  5.   NOC (No Objection Certificate) obtained from the landlord where the company will be established
  6.   DIN of each of the directors
  7.   DSC of the directors
  8.   MoA (Memorandum of Association)
  9.   AoA (Articles of Association)
  10.     Passport size photographs of the directors

Difference between private and public limited company

It is very essential to understand the difference between private and public limited company. Here are a few vital distinguishing factors between the two:

Basis of Distinction

Private Limited Company

Public Limited Company

Meaning

Private Limited Company is owned and traded privately.

Public Limited Company is owned and traded on the stock exchange.

Suffix

Private Limited is used after a private company’s name.

Limited is used after the public company name.

Minimum and Maximum No. of members

Minimum- 2

Maximum- 200

Minimum- 7

Maximum- Infinite

Minimum of Directors

Minimum-2

Maximum-3

Public Subscription of shares

Private subscription of shares is not allowed in private companies.

Public subscription of shares is not allowed in public companies.

Statutory Meeting

Optional

Compulsory

Issue of Prospectus

Optional

Compulsory

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FAQ's

There is no minimum paid-up capital as of now for company incorporation.

The entire registration process can be completed within seven working days depending upon the time taken by the registrar for approval of the application filed. If the forms don’t get approved in the first application, then the time period for completing the process may get extended accordingly.

unique company name is essential for a public company registration because it distinguishes the company from the existing ones and should not match with the existing registered company names. There are 3 main parts of deriving to a unique company name.

No, Public Limited Company Registration is similar to OPC or LLP or any other form of business entity registration. You can definitely register it irrespective of your turnover.