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A public company as per Section 2(71)-
A Public Company is a legal entity that has separate identity from its shareholders/members. A company that can own property on its own name.
2. Easy Transferability
This means that a shareholder of public limited company can easily transfer its shares to the public. There is no restriction on the transferring shares to the public or inviting the public to subscribe shares to the public.
3. Perpetual Succession
The company can never come to an end. This means that the members/ directors/ shareholders may come and go, but the company never becomes non-existent. Due to the death or disability, the company never dies. It continues till the company is not closed or liquidated.
4. Limited Liability
The liability of the shareholders/directors is limited to the extent of the shares owned by them. The shareholders are not liable personally in case of losses or debts suffered by the company.
5. Paid-Up- Capital
The minimum paid up capital required by public company to start its operations are Rs 5, 00,000. This is the new amendment as per the Companies Act, 2013.
In the name of the public company, the word “LTD” will be prefixed at the end of the name.
In case of public company, the number of directors can be minimum 3 and maximum can be as many. There is no above limit.
They must only possess the Director Identification Number (DIN) which is issued by the Ministry of Corporate Affairs (MCA).
The registration of public limited company can issue a prospectus for inviting the public to subscribe to its shares.
Prospectus is the statement comprising the detail information about the company and the number of shares invited by the company in that particular IPO or subsequent listing.
9. Borrowing capacity
The attraction point of the public company is that it can borrow from various sources. A public company can issue Debentures (secured or unsecured) and raise the money. It can issue shares (equity or preference) to the public. Even banking and other financial institutions give the loans/ financial aid to the company.
10. Number of Members
The minimum number of members in the public company required is 7 and for maximum there is no limit.
11. Board of Directors
The minimum number of BOD required is 3 and maximum is 12. They are elected by shareholders in the Annual General Meeting.
12. Voluntary Association
It is easy to buy shares in the public company and so it is as easy to exit the public company.
13. Minimum Subscription
The minimum amount which has to be received on the subscription of shares has to be 90 percent of the shares in the public company. When the company is not able to receive the 90 percent amount then they cannot continue with the business.
14. Minimum subscribers
The minimum subscriber to the Memorandum of Association of Public Company has to be 7. They are the members of the company.
15. Certificate of Commencement
While in the case of public company, this is an important document which has to be acquired by the public company before starting the business. In case of private company, the Certificate of Incorporation was the last document required. However in case of a public company, the Certificate of Incorporation as well as Certificate of commencement is required both.
16. Memorandum of Association
The MOA is a major document in the formation of public company. A private company can start its business after making only Articles of Association. Whereas for the public company the Memorandum is its important document which has to be submitted to MCA as well in the registration of the company.
Memorandum is defined in section 2(56) of Companies Act 2013. It states the main objectives of the companies that is, the main businesses which the company is going to undertake.
|S.No.||PARTICULARS||PUBLIC COMPANY||PRIVATE COMPANY|
|2.||Maximum members||No maximum limit||200|
|3.||Commencement of business||They have to obtain with certificate of incorporation , the certificate of commencement||They have to only obtain certificate of incorporation and no certificate of commencement|
|4.||Minimum subscription||Rs. 500,000||Rs. 100,000|
|5.||Issue of prospectus||Can make prospectus for invitation of its shares to the public. They have to make prospectus or statement in lieu of prospectus for invitation of subscription of shares||No prospectus. As no invitation public is made|
|6.||Transfer of shares||Easily transferrable within public.||Restriction on transfer to the public. Within members is allowed|
|7.||Statutory meeting||They have to hold statutory meeting within 6 months of its commencement of business.||No need to hold statutory meeting.|
|8.||Articles of association||They can adopt table under schedule I of companies act, 2013.||They can make its own articles of association.|
|9.||No. Of directors||3||2|
|10.||Consent of directors||Required in writing||No requirement|
|11.||Qualification shares||A minimum shares is required to qualify as director||No such requirement|
|12.||Retirement of directors||Minimum two third directors retire by rotation||No such compulsory Retirement|
|13.||Name of the company||Must contain ltd at the end||Must contain pvt ltd at the end|
|15.||Inspection of accounts||Open for public inspection.||Not for public inspection.|
|16.||Annual return||They have to file only return and no declaration.||They have to file return with a declaration that no of members does not exceed 200 and no share capital or debenture is issued to the public.|
Read our article:Difference Between Private and Public Limited Company