Public Limited Company
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ABOUT PUBLIC LIMITED COMPANY
As per Section 2(71) of the Companies Act, 2013:
A Public Company means a company which—
- Is not a Private Company;
- Has a minimum paid-up share capital as may be prescribed (currently, no minimum is prescribed);
- And offers its securities (shares/debentures) to the public, and may get listed on a stock exchange.
A Public Company:
- Allows free transfer of shares.
- Can raise capital from the public through IPOs (Initial Public Offerings).
- Has more stringent compliance and disclosure requirements compared to private companies.
Additionally, a subsidiary of a public company is deemed to be a public company even if it is registered as a private company.
Key features of public limited company
| Feature | Description |
|---|---|
| Minimum Members | 7 shareholders are required to form a public company. |
| Maximum Members | No limit. Shares can be held by thousands or even lakhs of investors. |
| Minimum Directors | At least 3 directors must be appointed on the Board. |
| Separate Legal Entity | The company has a legal identity separate from its owners and directors. |
| Perpetual Succession | The company continues to exist irrespective of death, insolvency, or exit of its members. |
| Limited Liability | Shareholders are liable only to the extent of their unpaid share capital. |
| Name Suffix | Must end with the word "Limited". Example: Tata Motors Limited. |
| Public Invitation | Can invite the general public to subscribe to its securities. |
| Listed or Unlisted | Can be listed (on stock exchanges like NSE/BSE) or unlisted. |
| Transferability of Shares | Shares are freely transferable unless restricted by the Articles or specific legal provisions. |
| Higher Compliance | Subject to higher scrutiny and compliance requirements (ROC + SEBI if listed). |
Advantages of public limited company
| Advantage | Description |
|---|---|
| Access to Large Capital | Can raise large sums of money from the public via IPOs, FPOs, etc. |
| Limited Liability | Personal assets of shareholders are protected. Liability is limited to unpaid share capital. |
| Perpetual Succession | Death or exit of shareholders does not affect the continuity of the company. |
| Increased Brand Value | Public companies enjoy greater credibility and visibility. |
| Share Liquidity | Shares can be bought/sold easily through stock exchanges (if listed). |
| Wider Ownership Base | Public companies can attract investors from across the world. |
| Employee Stock Options | Can issue ESOPs and other incentive schemes to attract talent. |
| Better Governance | Due to statutory audits, board committees, independent directors, etc. |
Disadvantages of public limited company
| Disadvantage | Explanation |
|---|---|
| High Cost of Compliance | Regulatory requirements under the Companies Act, SEBI, Listing Regulations, etc. |
| Dilution of Control | Original promoters may lose control due to widespread shareholding. |
| Loss of Confidentiality | Mandatory public disclosures of financials, board decisions, etc. |
| Subject to Market Fluctuations | Share price can be volatile, affecting company valuation and perception. |
| Takeover Risks | Risk of hostile takeovers if someone buys a large chunk of shares. |
| Slower Decision-Making | Involvement of various stakeholders can delay crucial business decisions. |
| Mandatory Board Composition | Requirement to appoint independent directors, women directors, etc., can be challenging. |
LIMITATIONS of public limited company
| Limitation | Description |
|---|---|
| Complex Incorporation Process | Formation requires multiple steps like Digital Signatures, Name Approval, MOA, AOA filing, etc. |
| Extensive Reporting Obligations | Filing of financial statements, annual returns, board reports, auditor's reports, etc., is mandatory. |
| Statutory Audits & Secretarial Audits | Regular audits increase costs and administrative burden. |
| Regulatory Oversight | Compliances with SEBI, MCA, and stock exchanges are compulsory if listed. |
| High Cost of Listing | IPO process and listing require extensive documentation, investment banker services, legal compliance, etc. |
| Stringent Penalties | Non-compliance can attract severe fines and penalties on both the company and directors. |
| Loss of Strategic Flexibility | Must follow corporate governance standards, even for internal decisions. |
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Affordable & Transparent Pricing, Tailored to Your Growth — covering everything from Incorporation to Year-round Compliance
B-Basic
₹3999 ₹2999
What's Included
- Reserve Company name at MCA
- Expert advice on incorporation
- Filing of incorporation documents at MCA
- MCA Processing
- Company CIN, PAN, TAN
- Memorandum of Association
- Articles of Associations
- DIN for 2 directors
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B-Silver
₹7999 ₹6999
What's Included
- Reserve Company name at MCA
- Expert advice on incorporation
- Filing of incorporation documents at MCA
- MCA Processing
- Company CIN, PAN, TAN
- Memorandum of Association
- Articles of Associations
- DIN for 2 directors
- ESIC & PF Registration
- GST Registration
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