Public Company - Types, Benefits, Registration & More

A Public Limited Company (PLC) is the backbone of India's corporate landscape. The Companies Act 2013 governs the establishment and operation of a public limited company. This type of business structure offers its shares to the general public and enjoys limited liability. The stock offered to the general public can be bought either through trading on the stock market or via IPOs (Initial Public Offerings).

Some of the world's biggest brands stand tall under this business structure; however, a PLC must adhere to strict regulatory requirements and make its financial and operational health publicly available to shareholders. 

In this blog post, we will understand what a Public Limited Company is, including its type, characteristics, registration process, documentation, and more. 

Types Of Public Limited Company

Public limited companies fall into different categories based on their access to capital, market status, and purpose. The following are the types of public companies. 

1. Listed Public Company: These types of companies list their shares on recognized Indian stock exchanges, such as the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The shares of such companies can be bought or sold at any time during trading hours, provided they comply with SEBI regulations.
2. Unlisted Public Company: These companies do not list their shares on Indian stock exchanges. However, they still issue their shares, but only via private placements, not through a public offer. 
3. Government Public Companies: In this type of public company, the state or the central government holds the 51% shareholding.
4. Multinational Public Companies: Such companies operate globally and have their shares listed on Indian stock exchanges as well.

What Are The Characteristics Of A Public Limited Company 

Knowing a public limited company's characteristics is essential to understanding how it is operated. The following are the characteristics of a public limited company: 

• Directors: The provisions of the Companies Act 2013 state that to start a public limited company, a minimum of three board directors is required, and the maximum is 15 directors. 
• Limited Liability: In a public company, every shareholder's liability is limited. Meaning the public limited company shareholder is not personally responsible for the company's debt or loss beyond the amount invested, unlike sole proprietorships or partnerships, where the business owners are jointly liable for the business's debts and losses.
  However, the limited liability of a public company does not provide any shield to its shareholders. Meaning the shareholders will be responsible for their own wrong actions. 
• Share Capital: A public limited company does not require a minimum paid-up capital to operate, although it should have an authorized share capital of at least Rs 1 lakh. 
• Prospectus: A prospectus is a detailed statement of affairs issued by a public company when raising capital from the public. This statement highlights the financial performance, business operations, risk factors, and the purpose of funds. Every public limited company must mandatorily issue a prospectus under the Companies Act. 
• Name: The Companies Act 2013 requires all public companies to add the word "limited" after their name. 

Advantages Of A Public Limited Company

The following are the advantages of a public limited company: 

Capital via Public Issue Of Shares

One of the most obvious advantages of a PLC is the company's ability to raise share capital from the public. When a company is listed on a reputable Indian stock exchange, it can sell shares to the public, and anyone can invest. The capital raised by a PLC is typically larger than that of a private limited company, as the sale of shares in a private company is restricted to public platforms. 

In addition to the general public, institutional investors such as hedge funds, mutual funds, and other traders can also contribute to the PLC's fund. 

Spreading Risk & Broad Shareholder Base

As the company's shares are sold to the general public, the market's unsystematic risk is spread. Furthermore, the PLC not only sells its shares to the general public but also to institutional investors, for which it is listed on a publicly accessible and recognized stock exchange. This demonstrated that a PLC has a diverse range of owners, and that the associated risks the company might face in the course of its operations are widely shared among all these shareholders. 

Enhanced Credibility

When a company is publicly listed on a recognized stock exchange, its credibility is enhanced in the eyes of partners, investors, and customers, leading to greater business visibility and growth. 

Disadvantages Of Public Companies

The following are the disadvantages of a public limited company. 

Strict Regulatory Compliance

Compared to a private company, the legal and regulatory framework of a public limited company is more rigid. However, these strict regulatory requirements are in place to protect shareholders' rights. 

Additional restrictions in a PLC are as follows:

• Before a public company can trade, it must obtain a trading certificate from Companies House. There is no such requirement for a private company to fulfill. 
• A public limited company needs to have at least three directors. 
• With respect to the loans to directors, the rules get stricter. 
• A public limited company needs to have a suitably qualified company secretary. 
• The PLC company accounts need to maintain high transparency. 

Apart from these, there are additional restrictions on the company's share capital and limits on dividends and pre-emption rights. 

High Level Transparency

The public limited company has to adhere to a high standard of transparency towards the general public and its shareholders. For example, a PLC needs to have its account audited frequently. Furthermore, the company had to provide detailed information on its financial and operational performance and the status of its accounts to all shareholders. 

Given that such integral company information is publicly accessible, business analyses often examine and comment on the PLC's financial statements. They do so because the performance of such public limited companies not only affects the micro level of the market but also the macro level. 

High Financial Commitment

To set up a public limited company, a paid-up capital of at least Rs 5 lakh is needed. Furthermore, a PLC has to put in its funds to fulfill the wide range of compliance imposed upon it. This ultimately increases the company's overall operational cost. 

Registration Requirements Of A Public Limited Company. 

To incorporate a public limited company in India, certain basic considerations must be met. These conditions are in place to ensure that the company has the right structure, clarity, control, and oversight. 

Here's what you must keep in mind while registering a public limited company. 

• A minimum of 7 shareholders are required to form a public limited company. 
• A minimum of three directors is required to form a public limited company. 
• An authorized share capital of at least Rs 1 lakh is required. 
• The Digital Signature Certificate of one of the directors is required when submitting the self-attested copies of the address and identity proof. 
• Each company director must have a Director Identification Number (DIN).
• The company name must be in accordance with the provisions of the Company Act and Rules. 
• Integral documents such as Articles of Association (AOA), Memorandum of Association (MOA), and a duly filled DIR-12 Form are needed. 
• The PLC must pay the registration fees to the ROC. 

Documents Required For Incorporating A Public Limited Company

The following is the list of documents required for incorporating a PLC in India: 

Identity & Address Proofs 

• PAN cards for all directors/shareholders
• A passport for foreign nationals that must be apostilled or notarized. 
• Address proof such as Aadhaar, Voter ID, utility bill, and so on. 

Registered Office Proof

• Utility bill not older than 2 months. 

• Rent/lease agreement or the ownership deed. 
• NOC, that is the no-objection certificate from the owner if the property is rented. 

Director-Specific Documents

• Director Identification Number (DIN) for all (at least three directors via SPICe+). 
• Digital Signature Certificate (DSC) for all the directors. 
• DIR-2: Consent to act as a director
• INC-9: Declaration of compliance by the shareholders/directors. 

Incorporation Forms & Agreements

• eMOA (INC-33) and eAOA (INC-34): Electronic Memorandum and Articles of Association. 
• SPICe+ (INC-32): The main integration form for company details. 
• AGILE-PRO (INC-35): For GSTIN, EPFO, ESIC, and the bank account. 

Process To Register A Public Limited Company

The following is a simple, step-by-step process for registering a public limited company in India. 

Step 1: Digital Signature Certificate (DSC)

The company's registration process is entirely online; henceforth, a digital signature is required to file forms on the MCA portal. Anyone incorporating a public limited company must ensure that all the proposed directors, as well as the subscribers of the memorandum and the articles of association, have a digital signature certificate. 

Step 2: Director Identification Number (DIN)

A Director Identification Number is a unique identifier assigned to every director of a company. The DIN of a proposed director, along with their name and address, must be mentioned in the company registration form. 

Step 3: Registration On The MCA Portal

To apply for company registration, a complete SPICe+ form is submitted on the MCA portal. To complete the SPICe+ form and submit all required documents, the company director needs to register on the MCA portal. Once the registration process on the portal is successfully completed, the directors will be granted access to the MCA portal services, which include filing e-forms and viewing public documents. 

Step 4: Incorporation Certificate

Once the company registration application, along with the required documents, is submitted, the Registrar of Companies (ROC) inspects the application. After the application is verified, the Certificate of Incorporation is issued under the name of the Public Company. 

After obtaining the COI (Certificate of Incorporation) from the ROC, the company should immediately apply for the "Certificate of Business Commencement". 

The Bottom Line

A public limited company is best suited for a business with large ambitions, a high risk appetite, significant capital, operations spanning national and international borders, and a highly creditworthy business. This type of business structure helps the company raise capital from the public, expand with confidence, and build credibility. However, incorporating a public limited company demands regular reporting, strict compliance with the provisions of the Companies Act, transparency, and discipline. 

As an NRI, if you are looking to incorporate a public company in India, Savetaxs is the name to trust. Our expert provides end-to-end consultation on the complex, legal, and regulatory requirements for establishing a public limited company. Furthermore, the experts ensure that the documentation is accurate, complete, and that everything is executed within the specific timeframes. 

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