PUBLIC
COMPANY
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
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 document 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:
Shares are legal documents 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.
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.
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 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.
The
following criteria are required by the entity to be eligible to be registered
as a public company:
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
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.
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 documents in
electronic form. Apart from this, documents are signed through this method can
be delivered electronically. The requirement of a DSC is mandatory as per the
law.
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.
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.
Once
all the formalities of the company are fulfilled, all the documents must be
submitted by the company. These documents include the incorporation documents,
shareholders certifications, Articles of Association and Memorandum of
Association. Once these documents are submitted to the MCA and ROC, the public
limited company registration process is almost complete.