In India, businesses can be structured in various ways, with the Public Limited Company being one of the most prominent forms. Whether you’re a business owner looking to expand or an entrepreneur interested in setting up a new venture, understanding the framework and key elements of a Public Limited Company (PLC) under the Companies Act, 2013 is crucial.

In this blog, we will walk you through the definition, features, registration process and other important considerations of a Public Limited Company in India. 

What is a Public Limited Company?

A public limited company is the company that offers shares to the public. These are typically large in size and have a significant number of shareholders. A Public Limited Company can raise capital from the public through the sale of shares and securities.

In India, Public Limited Companies are governed by the Companies Act, 2013. It must be registered with the Registrar of Companies (ROC) and adhere to specific regulatory requirements that promote transparency and accountability.

Definition of Public Limited Company Under the Companies Act, 2013

According to the Companies Act, 2013, a Public Limited Company is defined as a Company which:

1. Minimum of Seven members (shareholders);

2. Can raise a capital from the public by issue of shares or debentures;

3. Shares are freely transferable; 

4. It must be registered with the Registrar of Companies (ROC), as it is required to file annual reports and financial statements.

A PLC can either be listed or unlisted on the stock exchange. In the case of a listed company, the shares of the company are publicly traded, while in the unlisted company, the shares are privately held but still remain transferable to the public.

Difference Between Private Limited Company and Public Limited Company

The main differences between a Private Limited Company and a Public Limited Company in India lie in their structure, shareholder restrictions, and their ability to raise the capital.

Features of a Public Limited Company

A public limited company has several key features that distinguish it from other types of business structures:

• Limited Liability: Shareholders’ liability is limited to the amounts unpaid, if any, on their shares. Regarding the situation when the company fails, their own funds are protected and safeguarded.

• Separate Legal Entity: Public Limited Company has its own legal identity, distinct from its shareholders and directors. It is an independent person in the eyes of the law, which, like any other legal person, can engage in contracts, acquire rights and sue or be sued in the court of law.

• Ability to Raise Capital: Public Limited Company can raise further capital from the public by way of public issue i.e., by Initial Public Offer (IPO). 

• Ownership and Management Separation: There is a clear separation of ownership and control so that business could be professionally managed.

• Public Disclosure: If a Public Limited Company is listed on the stock market, then such public limited companies need to submit their financial statement, annual report and any other information of public interest to the stakeholders and the relevant authorities, to ensure good governance and transperancy.

• Transferability of Shares: The shares of the public limited companies can be freely transferred, making it easier for the investors to exit or for new investors to join. If the Public Limited is listed on the stock exchange, then it can be publicly traded as well.

Advantages of a Public Limited Company

A public limited company structure offers several advantages:

• Access to Capital: Public Limited Companies can get more funds from the public through issue of shares or debentures, which provides more flexibility in raising the capital for expansion or new projects.

• Limited Liability: Shareholders’ liability is limited to the unpaid amount on their shares, offering them personal asset protection.

• Transferability of Shares: Shareholders can easily transfer their shares, offering liquidity and flexibility in the management of the investments. 

• Public Recognition and Credibility: If a Public Limited Company is listed on the stock exchange, then it is an advantage to a public limited company because it enjoys higher credibility and trust amongst customers, suppliers and potential investors, as it is subject to stringent regulations and audits. 

• Perpetual Succession: Unlike a partnership or sole trading business, a public limited company enjoys a perpetual existence irrespective of transfer of ownership, death of any shareholder or even director.

• Diversification: The fact that the company can look for funding from the public is a plus because it expands the operation of the business and engages in various projects.

Disadvantages of a Public Limited Company

Despite its advantages, there are also several drawbacks to operating as a public limited company:

• Complex Regulatory Compliance: Public limited companies are required to conduct accounting and report as well as subjected to Compliance with the Companies Act in relation to offering of shares, presentation of reports and accounts, shareholders meetings and other corporate governance mechanisms. Such a process can be time consuming and also incurs a lot of expenses.

• Loss of Control: Instances where the Public Limited Company is listed, it becomes possible for the shares to be traded in the stock market meaning that, the original owners or promoters of the company may lose control over it. They might be able to report to a rather numerous group of shareholders.

• Cost of IPO: Going public through an Initial Public Offering (IPO) involves substantial costs, including underwriting fees, regulatory fees and marketing expenses.

• Vulnerability to Market Fluctuations: Cases when a Public Limited Company is listed on a stock exchange, sometimes the operations of the company correspond to the movement of the stock exchange, which means that changes in the market affect the fluctuation in the share prices, influencing the company’s position.

• Public Scrutiny: Being among the public limited companies they are more often exposed to criticisms from the media, analysts and the public especially during a crisis period.

Public Limited Company Examples

Some prominent examples of public limited companies in India include:

1. Tata Consultancy Service Limited (TCS)

2. Reliance Industries Limited

3. HDFC Bank Limited

4. Infosys Limited

5. State Bank of India (SBI) Limited

These companies are also listed with BSE and National Stock Exchange of India Limited (NSE) also, In India.

Public Limited Company Registration Process

The process to register a Public Limited Company in India involves the following steps:

• Obtain Digital Signature Certificate (DSC): The first step is to get a DSC for the proposed directors of the Company. This is essential for filing electronic documents with the ROC.
• Obtain the Director Identification Number (DIN): Each director of the Company needs a DIN, which is a unique identification number assigned by the Ministry of Corporate Affairs (MCA).
• Name Approval: Choose a unique name for the Company and file for name approval with the ROC through RUN (Reserve Unique Name) service.
• Drafting of Memorandum and Articles of Association (MOA and AOA): The MOA defines company’s objectives, while the AOA contains the internal rules for managing the Company.
• Filing with the ROC: Submit all the necessary documents, including the MOA, AOA, DIN,DSC and proof of the company’s registered address to the ROC.
• Certificate of Incorporation: Once the documents are verified and approved, the ROC issues a Certificate of Incorporation, officially establishing the Company.

How can InstaBiz Filings can help

At InstaBiz Filings, we offer expert assistance in the registration of Public Limited Companies in India. From helping you choose the right company structure to ensuring full compliance with the Companies Act, 2013, we guide through every step of process.

Our experienced team of professionals will ensure that your registration is seamless, and we also provide ongoing support for the annual filing, tax compliance, and other regulatory requirements.

Let us take care of the paperwork and legalities, so you can focus on scaling your business.

Why Choose InstaBiz Filings?

At InstaBiz Filings, we have a team of dedicated experts who specialize in corporate law, taxation and business registration. Our professionals are well-versed with the Companies Act, 2013 and ensure that your Company is registered with full compliance with the law. We offer personalized services tailored to meet your business needs and help you navigate the complexities of running a company.

Whether it’s registration compliance management, or other legal services, we’re here to make the process hassle-free for you.

Conclusion

Public limited company is one of the most common forms of the legal structure for a business venture that can help to attract a great deal of capital by issuing shares to the public, has limited liability and enhanced credibility. 

However, the process comes with its own set of regulatory requirements and challenges. If you’re considering forming a Public Limited Company in India, it’s essential to have the right support to ensure compliance with the Companies Act, 2013. 

Once having understood the relative differentiations between Private Limited Company and Public Limited Company and the procedure of registration and the advantages as well as disadvantages, you are well equipped to make informed decisions on the best business form that would match your objectives.

InstaBiz Filings is here to assist you with the registration of your Company and ensure that your business stays compliant with all legal requirements. Reach out to our team of professional experts today, and let us help you take that first step toward building a successful business!

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.