Public Limited Company Registration

Public Limited Company is an entity which has to be differentiated from a private limited company. The requirement for having a specific amount of shareholders and directors for a public limit company is mandatory. The minimum amount of shareholders and directors of a public limited company is seven and three, resp..

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Overview of Public Limited Company Registration

A public limited company is an entity that has its shares listed in a public stock exchange. An individual going for public limited company registration must differentiate the meaning of public limited company from a private limited company. Shares are offered in the stock exchange to raise money. An offering of shares in a stock exchange for the first time by a company is known as a primary offering. Public companies can go for secondary offerings based on the requirements. However, these offerings can only be given to a particular class of shareholders known as preference shareholders.

Under section 2(71) of the Companies Act, 2013, a public company is understood as an entity which is not classified as a private limited company. Apart from this, the minimum paid-up share capital of a public company is prescribed as per the requirement of the companies act. A public company can also be understood as an entity which is not a subsidiary of a private limited company.

Usually, these forms of business structures are considered by companies that have a large form of infrastructural plans. Some examples of public companies would include Biotechnology Companies and Information Technology Companies. These companies usually raise capital through primary and secondary issues, apart from securing regular profits.

Table of Contents

Like private limited companies, public limited companies are regulated by the Companies Act, 2013 and previous company law 1956.

The meaning of a public company is present under the Companies Act, 2013. As per section 2(71), a public company is an entity which does not have the meaning of a private company. Apart from this, the share capital of the public company can be changed. A public company does not need to have a specific amount of share capital.

The structure of the public company allows it to raise some form of finance through primary and secondary issues. When going for a primary issue, a prospectus is offered to the public. Under section 2(70) of the Companies Act 2013, a prospectus can be understood as a necessary paper which includes a notice or an invitation to the public to subscribe to the shares of the company.

Hence when the company issues a prospectus to the public, it is an invitation to the public to subscribe to the shares of the company.

Minimum three directors and seven shareholders or members are required for a public limited company.

As per the Companies (Amendment) Act, 2015, there is no requirement for the company to have a minimum amount of share capital.

When it comes to registration of shares in a public stock exchange, then compliance has to be maintained by the public company. For instance, when listing shares in the stock exchange compliances has to be maintained as per the rules of the listing agreement.

The public company must also comply with the requirements of the SEBI (LODR) Regulations, 2015.

A subsidiary of a public company is also treated as a public limited company. This would be considered even if the company is a private company.

Why is Public Limited Company Registration Beneficial?

Public Limited Company Registration is beneficial for the following reasons:

beneficial reasons for Public Limited Company Registration

  • Shares can be transferred easily

Shares are legal necessary papers which can be transferred as per the Indian Contract Act, 1872. Under the Companies Act, 2013, these instruments can be transferred easily with minimum compliance requirements. Apart from this, a listing of shares in a stock exchange, make it easier for transfer of shares from one party to another.

  • Increased Borrowing Capacity

In the eyes of the law, public companies are reputed when it comes to borrowing money from banks and other financial institutions. An added advantage of being a public company would give the company recognition.

  • Separate Legal Entity

The principle of separate legal entity is enjoyed by the directors and shareholders (members) of a public limited company. This means that the liability of the members and directors is only limited to a specific amount. Creditors cannot approach the members in case of any debts owed by the public company.

  • Shares can be listed in the Stock Exchange

Shares of a public company can be listed in a stock exchange. However, compliance has to be followed by the public company in listing its shares in a stock exchange. Through this process, the public company can raise secondary finance. Hence an applicant must consider the above when going for public limited company registration.

Eligibility Criteria for Public Limited Company Registration

The following criteria are required by the entity to be eligible to be registered as a public company:

criteria are required by the entity to be eligible to be registered as a public company

  • Minimum Amount of Shareholders

Like a private limited company, a public limited company must have a minimum amount of shareholders. As per the requirements of the Companies Act, 2013 the minimum amount of shareholders for a public limited company is seven. There could be penalties imposed if compliance is not met with the requirement of the number of shareholders of the company 

  • Minimum Amount of Directors

Every Company is required to have a minimum number of directors. Be it a private company or a public company, it is a statutory requirement for the company to have a minimum amount of directors.  Under Section 149 to 172 deals with the requirement for the appointment of directors under the Companies Act, 2013. Hence a public limited company must have a minimum of three directors on the board. Apart from this, there is a requirement for appointment of independent directors under the Companies Act, 2013. This requirement is present under section 149(6) of the Companies Act, 2013. Hence a public company has to have directors who are classified as independent directors and executive directors.

  • Digital Signature Certificate of the Director

This is one of the important requirement for forming a public limited company. An individual or entrepreneur going for public limited company registration must carry out the formalities and apply for the digital signature certificate. This requirement is needed for at least one director in the public company.

A digital signature certificate will allow the applicant to sign necessary papers in electronic form. Apart from this, necessary papers are signed through this method can be delivered electronically. The requirement of a DSC is mandatory as per the law.

  • DIN for all Directors

DIN is an abbreviation for a director identification number. Under section 153 and 154 of the Companies Act, 2013, this number is allocated to a director. A director identification number (DIN) is an eight-digit number allocated to the director when the company recruits them. The application for the DIN has to be filed in accordance with the provisions of FORM- DIR 3. However, the above requirement is simplified, and directors would receive the DIN number through filing SPICe form with the MCA. Through this method, it is become straightforward to secure the DIN.

  • Company to Pursue Activities in Objects Clause

The memorandum of association of the company contains different clauses. Some of the clauses included are the name clause and objects clause. The activities of the organisation must be under the objects clause filed with the registrar of companies. However, there are specific instances where the activities carried out by an entity can be incidental to the main objects. Hence, the company must ensure to carry out activities which are present in the objects clause of the organisation.

  • Submission of necessary papers

Once all the formalities of the company are fulfilled, all the necessary papers must be submitted by the company. These necessary papers include the incorporation necessary papers, shareholders certifications, Articles of Association and Memorandum of Association. Once these necessary papers are submitted to the MCA and ROC, the public limited company registration process is almost complete.

Process for Public Limited Company Registration

The process for public limited company registration is similar to private company registration. The following steps are required to be followed for public limited company registration:

process for public limited company registration

  • Filing the Form

The application form for public limited company registration must be completed online. This must be done through the respective MCA portal. Along with this, all necessary papers have to be submitted.

  • Applying for DSC and DIN

In the next step, the applicant must apply for a Digital Signature Certificate and Director Identification Number. The digital signature certificate would provide authenticity for processing electronic necessary papers. Apart from this, the DSC also helps in carrying out electronic signatures as per the requirements of the act. Applying for a DIN will allow the company to recruit a minimum amount of directors to carry out the requirements of a public limited company.

  • Verifying the Name of the Company

In this step, the name of the company is checked and verified as per the requirements of the Ministry of Corporate Affairs (MCA). The name of the company must not be similar to any other name. Apart from this, the name of the company must not breach any provisions related to intellectual property law in India.

  • Filing SPICe Form

When the name of the public limited company is approved by relevant authorities, then the applicant would go in for filing SPICe form for securing the certificate of Incorporation. When the SPICe form is filed by the applicant, the DIN number would also be allocated to the directors of the company.

  • Submitting necessary papers

Once the above steps are carried out, the applicant must submit all the necessary papers to the MCA. The necessary papers which have to be filed with the authorities will include the memorandum of association and articles of association. Along with this, the company has to submit collateral Paper works such as the mission, goals, objectives and long term aspirations of the company.

  • Incorporating the Company

After verifying the process, the MCA and Registrar of Companies will issue the certificate of incorporation of the public limited company. This certificate as a legal necessary paper to prove the status of the public limited company.

  • Opening a Bank Account

In the final step, a bank account has to be opened in the name of the public limited company. This must be open to carry out day to day transactions on behalf of the organisation. This bank account must be differentiated from opening an individual bank account.

Is it beneficial to go for public limited company registration or private limited company registration?

When critically analysing the differences between both the entities, the following can be understood:

Difference

Private Limited Company

Public Limited Company Registration

Incorporation

Online and Offline Mode

Online and Offline Mode

Directors

Two directors have required for a setting up a private limited company.

Three directors are required for the public limited company registration process

Independent Directors

There is no requirement to have independent directors for a private limited company

For a public limited company, independent directors must be recruited by the Board.

Members or Shareholders

Three Members are required for a private limited company

A minimum of seven members is required public limited company registration

Share Capital

There is no minimum share capital requirement for a private limited company.

Previously there was a requirement for the company to have minimum share capital. However, this requirement has been removed.

IPO

A private company cannot go for an initial public offering.

A public company can go for an initial public offering. However, compliances have to be met in accordance with the requirements of the SEBI and listing regulations.

Foreign Direct Investment

Foreign Direct investment is allowed for a private limited company

This facility is also permitted for a public limited company. However, there are specific requirements which have to be adhered for securing foreign direct investment.


From the above differentiation, it is clear that both private limited company and public limited companies have their benefits and disadvantages. Hence, depending on the requirement of the entrepreneur establishing such forms of business entities should be analysed in depth.

necessary papers required for incorporation of a public limited company

  • Identity Proof- Such as PAN Card, Aadhaar Card, Driving License and Voter ID
  • Utility Bills- Electricity, Water and Rent
  • Registered Office Address- Any utility bill can be utilised for this purpose
  • Address of the Shareholders
  • Digital Signature Certificate
  • Directors Identification Number
  • MOA and AOA

Enterslice Advantage- Public Limited Company Registration

  • Experts at Enterslice have conducted different forms of registration activities with the primary objective of adding value to your business.
  • Our team of professionals comprising of Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
  • We have experience in registering different forms of entities.
  • Constant monitoring and 24*7 customer service.

How to reach Enterslice?

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Frequently Asked Questions

As per the Companies Act, 2013 a public limited company is an entity that offers shares to the public. Public limited companies are different from private limited companies. Private limited companies do not offer shares to public.

The requirements for public limited company registration are as follows:

• Minimum amount of Shareholders and Directors

• Submitting respective necessary papers in companies’ registry and MCA.

Under the companies act, 2013- a public company has to have one independent director. Independent directors are determined based on their actions carried out for the welfare of the organisation. Their integrity is determined based on independent decision making functions which are carried out on day to day basis.

Up to certain extent FDI is allowed for a public limited company.

Yes foreigners and non-resident Indians are allowed to be recruited as directors for a public limited company. However, any entrepreneur going for public limited company registration has to secure requisite Paper works such as foreign passports and visas. These necessary papers have to be submitted to the registrar of companies.

Usually, it takes up to 20 working days or clear days to incorporate a public limited company in India. However, this amount may vary depending on the clearances obtained from different government authorities.

The following are the statutory requirements that have to be carried out for the public limited company registration:

• Holding the annual general meeting -This must be carried out at least once a year

• Holding Board meeting- This compliance must be carried out at least once in three months.

• Filing returns

• Filing GST.

Offering is the process of issuing shares to the public. This is usually carried out by a public limited company during the process of an initial public offering. Primary Offering- Usually in a primary offering shares is issued for the first time to the public. Secondary Offering- Usually secondary offering is issued to specific shareholders. These shareholders are called preference shareholders. Such shareholders have preference rights when it comes issuing of dividend and winding up of the company.

There are different grounds for winding up the public limited company:

• If the company is not paying its debts

• If the company is not complying with the rules of the Companies Act 2013

• If the company is not performing its business.

The shareholders and directors carry out business activities relating to the business. However, when it comes to managing the business of a public limited company, then directors have the main authority for carrying out such activities. Shareholders only overlook the different processes that occur in the business.

CIN is an abbreviation for Corporate Identification Number. This number is a registration number provided by the registrar of companies. This is a 21 digit number that provides authenticity.

 

 

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