A public company is an entity, the ownership of which is disseminated to general public in the form of shares or securities which are freely traded on any stock exchanges or over the counter exchanges or can be acquired privately through Initial Public Offering (IPO). The model of public limited company (PLC) is registered by Ministry of Corporate Affairs (MCA) and provides a huge platform to the entrepreneur for expanding their business horizons nationally as well as internationally. A public company can raise money from general public and they have full stake and interest in the company.
A public Limited Company is governed by the provisions of Companies Act, 2013.
Eligibility or characteristics of PLC
- No minimum paid-up capital requirement for incorporating PLC in India.
- Every company can conduct any business activity provided, it is not illegal. Company can alter its business activities by taking prior approval of shareholders in general meeting and subsequently altering its Memorandum of association (MOA).
- PLC is mandatorily required to add the words “limited” or “ltd” at the end of its name.
- It is mandatory for a company to have registered office in its name where all the notices and documents are received by it. In case of change in registered office of the company, the same shall be done after Registrar’s approval only.
- Liability of shareholders are limited, however, company always has unlimited liability.
- Minimum 7 members are required in case of incorporation a public company.
- No maximum limit of shareholders is prescribed under any law and shares of PLC are freely transferable. Shareholders receive profits earned by the company in the form of dividends.
- Minimum 3 and maximum 15 individuals can be directors of the company as well as constitute board of directors (Board) of the company who are responsible for its management. At least one director should be an Indian resident who stayed in India for more than 120 days in previous year.
- It is mandatory for minimum 7 members as well as 3 directors incorporating a PLC to acquire digital signature certificate (DSC) since company registration process is online and forms are filed electronically. DSC is required for signing e-forms.
Our service portfolio includes
- Filing for name approval via Spice+
- Formation of company through Spice+
- Applying for permanent account number (PAN) and Tax collection and deduction Account Number (TAN)
- Registration under EPFO
- Registration under ESIC
- GSTIN through AGILE Pro form is optional
- Bank account opening
- Filing of INC20A i.e. declaration for commencement of business
- Obtaining DSC
- Accounting and booking services
- Trademark registration, if any
- Auditing and assurance services
- Registration, returns and certifications
- Handling representation, assessment and litigations
Documents required for incorporating PLC in India
For directors and shareholders of the company:
- PAN card of all the Indian directors and shareholders of the company and Passport for foreigners
- Any Id proof of all the directors and shareholders of the company (Except Aadhar Card Copy)
- Bank statement / utility bill which is not older than 2 months
- Passport size photographs
For registered office of the company:
- In case of owned property
- Registry proof, or
- House tax receipt
- In case of rented property
- Latest utility bill,
- Rent agreement, and
- No objection certificate from the owner of rented property
Benefits derived by PLC in India
- Limited liability of shareholders: Shareholders can hold any number of shares in a company and also relish the benefits of limited liability i.e. in case of payment of debt or losses incurred by the company, shareholders will be liable only to the extent of amount remaining unpaid on the shares held by them.
- Company’s growth prospects: Diversified option of raising funds results in opening the avenues of growth for company and its business activities. Growth of any business could be a result of any of the following activities:
- Undertaking a new project
- Acquisition of improved or advanced technology
- As a result of research and development
- Paying off all the liabilities or writing off its debts
- Enhanced brand or market value
- Entry into unexplored market or global markets
- Diversifying product lines or operations
- Borrowing capacity of company: Invitation is made to public at large for raising funds in PLC. Stringent rules and regulations are mandatorily adhered to under different laws which restore the faith of both banks as well as financial institutions for lending funds.
- Share transferability: Shares of PLC can be freely transferred from one person to another. This transfer activity can be continued for any number of times.
- Company’s liquidity: Due to easy availability as well as trading of shares in the market, PLC provides high liquidity to its shareholders. No complex procedure or stringent provisions are followed while selling the shares of PLC in the market.
- Enhanced credibility: PLC operates under stern legal rules and regulations as a result of which it has more credibility as compared to any other form of company. Different provisions under different laws administer the operations of the company hence, it is obligatory for all the companies to maintain transparency between themselves and the company.
Concerns related to PLC
- Tax liability: Companies fall under the tax bracket of flat 25% / 30% rate. No tax exemptions are provided to companies and tax is mandatorily required to be paid on all the profits earned by the company.
- Stringent regulations: PLC has to comply with various rules and regulations under different laws as compared to any other form of organization. This is to protect the interest and stake of shareholders as well as creditors of the company. Failure in complying with the provisions under any law will lead to penalties on both the company and officers in default.
- Ownership and management: Board of directors constitute the management of the company though cannot take any significant decisions as the ownership lies with the shareholders and prior consent of owners of the company is a requisite before undertaking any major decisions on behalf of the company. In a private setup, ownership and management lies with the same group of people which mitigates public interference.
- Confidentiality of business operations: All the financial matters, bye-laws, guidelines, code of conduct, brand value, market value, execution of new projects, etc. are required to be disclosed on the website of the company as well as with registrar of companies which might hamper the confidentiality of the company.
- Management’s decision making process: Due to its vast dynamics PLC may face issue in managing its business activities. Since it is managed by the Board which is a small group of people, there is a huge probability that directors of the company may have contradicting opinions. Consequently, company might suffer from loss or other industrial issue.
For detailed procedure on incorporating a public company in India, click here.