Advisory Services
Audit
Consulting
ESG Advisory
RBI Registration
SEBI Registration
IRDA Registration
FEMA Advisory
Compliances
IBC Services
VCFO Services
Growing
Developing
ME-1
ME-2
EU-1
EU-2
SE
Others
Select Your Location
A proper assessment of the benefits of a Public Limited Company will be necessary for entrepreneurs who wish to establish their startup as a Public Company, as well as for an existing business looking forward to getting converted into a Public Limited Company.
Table of Contents
A Public Limited Company is one of India’s many preferred business structures. And incorporated under the Companies Act 2013[1]. That provides limited liability to its owners and shareholders. The shares are traded on public platforms like the stock exchange and are open for sale to the general public.
The Ministry of Corporate Affairs and the Securities and Exchange Board of India (SEBI) regulate the company. It is subject to stringent laws by these regulatory agencies and regularly updates the shareholders on its financial situation.
As a legally incorporated entity, a company has a distinct legal identity and is entitled to the right to hold properties and assets in its name.
Large companies generally take a Public Limited Company as an organisational structure with huge revenue-earning potential and a broad consumer base in the country of origin and other foreign nations. A company’s huge preference among entrepreneurs establishes that it has a wide range of advantages for all its stakeholders.
The capacity to raise share capital through a public issue of shares is the most obvious benefit of a Public Company, especially when the company is listed on a reputable stock exchange platform. The amount of capital raised is often substantially more than that of a Private Company, where the sale of shares is wholly restricted on public platforms. Other than the general public, institutional investors such as mutual funds, hedge funds, and other traders, who are also listed on these platforms, contribute to Public companies’ funds on the stock exchange platforms.
A company must have at least seven shareholders who have bought its shares to become a Public Company. To become a public company, there is no maximum limit on the number of shareholders of the company to sell the shares. Moreover, a Public Company sells its shares to institutional investors and the general public, for which it is listed on publicly accessible stock exchange platforms. It indicates that a company has the most diverse range of owners or shareholders. The risks the company would face in due course of operations shall be widely distributed among all these shareholders. Contrarily, there are business structures where the burden of the adverse risk is only the owner or a few owners of the business.
Companies which usually adopt a Public Company as their business structure conduct large-scale operations and hence, have massive potential for growth and expansion. It makes it easy for a Public Company to raise equity/share capital funds through multiple other channels like credit from banks and financial companies, bonds, debentures, crowdfunding, etc.
Moreover, it has its legal identity and can be listed on stock exchange markets, making it more credible and reliable for investment. Additionally, the business is better positioned to negotiate advantageous interest rates and loan payback arrangements.
The indirect endorsement due to listing on a recognised stock exchange platform
Transferring shares in a Public Company is way more accessible and flexible than in a Private Limited Company. The shares issued by the Public Company can be listed and traded on any stock exchange market. The sale of these shares is open to the general public as well. Moreover, unlike a Private Limited Company, where the shares are to be transferred to the existing shareholders to purchase, and they refuse, the option is to transfer the shares to another investor. In contrast, a Public Company does not have to follow any such restriction in transferring its shares.
Depending on the scale of the business, becoming a Public Company is an invitation to partial ownership to extended hundreds or even thousands of people. These people now have direct involvement in the company’s critical decisions and have the chance to share their ideas based on their expertise in various subjects. It could enhance the efficiency and effectiveness of the company.
Like a Private Limited Company, a Public Company also restricts or limits the liability of its shareholders upto the amount of capital they have invested in the company. Suppose a Public Company accumulates liabilities like debts in its name. In that case, the shareholder shall not be liable to pay more than the unpaid or due amount of the capital he has subscribed to under any circumstances. It is a massive benefit for the shareholders, compared to other unlimited businesses, where the owner does not have an option but to pay the business’s total liability, sometimes from his pocket.
The ability to sell shares on the stock exchange platforms and the high credibility of setting up a Public Limited Company are just some of the benefits that Public Limited Companies enjoy. Ultimately, the stability and risks the business faces will determine whether or not you decide to opt for a Public Company structure. The benefits of a Public Limited Company can significantly boost growth and open new development opportunities for the business.
Also Read:Characteristics of Public Limited CompanyDifference Between Private and Public Limited Company
Minakshi Bindhani has completed LL.M. with a specialization in Criminal Law from Madhusudan Law University, Cuttack, Odisha. She is more inclined toward legal research and writing and have prior experience in Civil and Criminal litigation and content writing.
Black money has been the subject of heated political debate in India for a long time. Successiv...
The Apex Court pronounced a judgement in the case titled Tata Motors Vs The Brihan Mumbai Elect...
Since economies are moving towards digitalisation and making it feasible to conduct transaction...
The Alternative Investment Funds (AIFs) Pro-rata and Pari-Passu Rights Proposal Consultation Pa...
The Financial Action Task Force, i.e. FATF (the Force), is the global money laundering and terr...
Advance tax refers to the payment of the tax liability before the end of the relevant financia...
On 11.12.15, the Hon’ble Delhi High Court (HC) pronounced a landmark judgement in the case ti...
Money laundering can be defined as the process of illegal concealment of the origin of money ob...
Every assessee in India is obligated to file an income tax return and make the timely payment o...
In the recent past, India has seen burgeoning demand for internet and smartphones. The rapid ri...
Are you human?: 8 + 6 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Introduction In legal terms, Insolvency is a situation where the liabilities of a person or an organization exceed...
16 Jan, 2018
The British Virgin Islands is simply called “The Virgin Islands” is a British Overseas Territory held at the Ca...
27 Aug, 2018
Red Herring Top 100 Asia enlists outstanding entrepreneurs and promising companies. It selects the award winners from approximately 2000 privately financed companies each year in the Asia. Since 1996, Red Herring has kept tabs on these up-and-comers. Red Herring editors were among the first to recognize that companies such as Google, Facebook, Kakao, Alibaba, Twitter, Rakuten, Salesforce.com, Xiaomi and YouTube would change the way we live and work.
Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
Stay updated with all the latest legal updates. Just enter your email address and subscribe for free!
Chat on Whatsapp
Hey I'm Suman. Let's Talk!