A public limited company (PLC) is a type of company that is registered under the Companies Act, 2013. A PLC is not a private company, which means that there is no limit on the number of shareholders. A PLC must have at least 5 lakhs of paid-up capital.
A PLC can invite the general public to subscribe to its shares and debentures. It is mandatory to add the term “Public Limited” or “Limited” to its name as a suffix.
There are two types of PLCs:
- Unlisted PLC: An unlisted PLC is one that is not listed on the stock exchange market. It can have an infinite number of shareholders. The shares of these shareholders will be considered as unlisted Shares. A public limited company gets incorporated as a unlisted company only.
- Listed PLC: A listed PLC is one that is listed on a specific stock exchange. Whose shares can be traded publicly. There is a specific criterion which needs to be matched to make a public company listed from Unlisted.
The criteria for a public company to be listed from unlisted are:
- Net Tangible assets of company should not be less than 3 crore in each of the preceding three full years.
- On an average minimum of 15 crores of profit before tax in at least 3 years of the past 5 years.
- Net worth of at least 1 crore in each of previous 3 years.
- If there has been change in the company name. at least 50% of the previous year’s revenue should be after the name change.
- The shares issue size should not be more than 5 times of current net worth.
The advantages of forming a public limited company:
- Multiple opportunities of funding: Public limited companies can raise funds from individuals, other entities, and financial institutions. The funds can be raised via equity shareholding, debentures, and preference shareholding.
- Limited liability: Shareholders of a public limited company have limited liability protection. This means that in case of unexpected losses and liabilities of the company, the personal properties of the shareholders are not liable to be used to pay off the debts.
- Spreading risk: Since the shares are sold to the public at a large scale, the unsystematic risk of the market is also shared across the shareholders. This means that if the company’s performance is not good, the shareholders will not lose all of their investment.
- Transfer of shares: Shares in a public limited company can be easily transferred from one shareholder to another. This makes it easy for investors to buy and sell shares, which can help to increase the liquidity of the company’s shares.
- Rapid expansion: Since the risk is shared across multiple shareholders, it gives the company the opportunity to grow and invest in new projects from the money raised through shares. This can help the company to expand rapidly and become more successful.
Checklist/requirements for incorporating a public limited company in India:
Basic Requirements
- At least 7 shareholders
- At least 3 directors, with a maximum of 50
- At least 1 director must be a resident of India
- Directors and shareholders can be the same person
- Minimum paid-up share capital of INR 5 lakhs
- An address that will serve as the company’s registered address
Documents Required
- For each director and shareholder:
- Permanent Account Number (PAN) card* (mandatory for Indians and others if held)
- Passport* (for NRI, Foreigners, and Indians if held)
- Address proof (any one of the following, not more than 2 months old):
- Bank statement
- Phone bill
- Mobile bill
- Electricity bill
- For registered address:
- No Objection Certificate (NOC) from premises owner*
- Rent agreement*
- Utility bill*
Steps to Register a Public Limited Company in India:
1. Apply for a Digital Signature Certificate (DSC) and Director Identification Number (DIN):
A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA). A DIN is a unique identification number that is assigned to each director of a company. It is required for filing documents with the MCA.
2. Apply for name reservation:
The name of the public limited company must be unique and cannot be similar to the name of any other existing company. You can apply for name reservation online through the MCA website.
3. Draft and file the Memorandum of Association (MOA) and Articles of Association (AOA):
The MOA and AOA are the governing documents of the public limited company. They set out the company’s objectives, structure, and management. You can either draft the MOA and AOA yourself or hire a lawyer to do it for you.
4. Apply for PAN and TAN of the company:
Once you have the DSC, name reservation, and MOA and AOA, you can apply for PAN and TAN for your company. You can apply for PAN and TAN online through the Income Tax Department website.
5. Receive the Certificate of Incorporation along with PAN and TAN:
Once PAN and TAN are allotted, you will receive a Certificate of Incorporation from the MCA. This document is proof that your public limited company is a legal entity.
Key deliverables for incorporating a public limited company in India:
- Digital Signature Certificate (DSC) of directors and shareholders: A DSC is a secure electronic signature that is used to sign digital documents. It is required for filing documents with the Ministry of Corporate Affairs (MCA). Each director and shareholder of a public limited company must have a DSC.
- Share Certificates: Share certificates are documents that evidence ownership of shares in a company. They must be issued to all shareholders of a public limited company.
- Certificate of Incorporation along with Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN): A Certificate of Incorporation (COI) is a document that is issued by the Registrar of Companies (ROC). It is proof that the company has been incorporated and is a legal entity. A public limited company must have a COI. A PAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all financial transactions in India. A public limited company must have a PAN. A TAN is a 10-digit alphanumeric number that is issued by the Income Tax Department. It is required for all businesses that are required to deduct tax at source. A public limited company must have a TAN.
- Memorandum of Association (MOA) and Articles of Association (AOA) of the company: The MOA and AOA are the governing documents of the public limited company. They set out the company’s objectives, structure, and management. The MOA and AOA must be filed with the ROC.
What do you want to know?
Yes, DSC is mandatory for all subscribers and witnesses in eMoA(INC-33) and eAoA(INC-34). eMoA and eAoA shall be used only where the maximum number of subscribers do not exceed 7. In case the number of subscribers are more than 7, INC-7 shall be used and DSC is not mandatory in such cases.
Shareholders are the actual owners of a Public limited company; However, they appoint a board of directors who controls and make the decision about the business.
Compliance list for Unlisted Public limited company: 1. Board Meeting, 2. Appointment of cost auditor, 3. Return of deposits, 4. Appointment of CEO, CFO and CS. 5. Annual general meeting, 6. CSR Committee, 7. Director’s disclosure.
No, only private / unlisted public company or a partnership firm can be converted into LLP.
“India” can be used by foreign company which is incorporating its subsidiary company in India. The original name of the holding company as it is may be allowed with the addition of word “India” or name of any Indian state or city, if otherwise available. The words “Global” “International” can be used in the name of an Indian company.
A director shall be liable for the offences / non-compliances occurred during his tenure even after his resignation and disassociation with the company.
An individual can serve as an auditor for a term of five consecutive years. A firm can serve two terms of five consecutive years each, i.e., a total of 10 years as an auditor. Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting.
Every company shall in each year hold in addition to any other meetings, a general meeting of its shareholders as its annual general meeting for adoption of audited financial statements, declaration of final dividend etc. The first AGM of a company should be held within a period nine-month from the date of close of first financial year. In any other case, within a period of six months from the date of closing of the financial year.