The Companies Act, 2013 regulates the establishment and working of a public limited company. A public limited company offers shares to the general public and has limited liability. Its stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market. It is strictly regulated and is required to publish its true financial health to its shareholders.
As per the provisions of the Companies Act, 2013 to start a public limited company, a minimum of 3 directors are required and there is no restriction on the maximum number of directors.
The liability of each shareholder is limited. In simple words, a shareholder of a public limited company isn’t personally responsible for any loss or debts of the company for any amount greater than the amount invested by them; contrary to partnerships and sole proprietorships, where the partners and business owners are jointly and severally liable for the debts of the business.
However, this characteristic of a public limited company does not offer immunity to the shareholders. The shareholders will be held responsible for their own illegal actions.
A public limited company is required to have a minimum paid-up capital of Rs 5 lakh or such a higher amount as prescribed under the act.
A prospectus is a comprehensive statement of the affairs of the company issued by a public limited company for its public and there is a requirement under the Act for public limited companies to issue a prospectus. However, there are no such provisions for Private Limited Companies. This is because private limited companies cannot invite the public to subscribe to their shares.
It is a compulsory requirement under the Companies Act, 2013 for all public companies to add the word ‘limited’ after their name.
Shares are offered to the general public at large i.e. anyone can invest in a public limited company. Hence, improves the capital of the company.
Being listed on a stock market ensures that mutual funds, hedge funds and other traders take note of the business of the company. This may result in better business opportunities for the Public Limited Company.
Since the shares are sold to the public at large the unsystematic risk of the market is spread out.
Due to less risk, there is a perfect opportunity for growing and expanding the business by investing in new projects from the money raised through shares.
There are various rules and regulations prescribed under the companies act, 2013 for the formation of a public limited company. Here is what you should keep in mind when registering a public limited company:
Since the registration procedure of a company is entirely online, a digital signature will be required for filing the forms on the MCA portal. For all proposed directors as well as the subscribers of the memorandum and articles of association, DSC is compulsory.
It is an identification number concerning a director; it has to be procured by anyone who intends to become a director in a company. DIN of a proposed director in addition to the name and address proof has to be mentioned in the company registration form.
A completed SPICe+ form has to be submitted on the MCA portal in order to apply for company registration. To fill the SPICe+ form and submit the required documents, the Director of a company needs to register on the MCA portal. After the registration process is completed, the director will get access to the MCA portal services which comprises filing e-forms as well as viewing public documents.
After the registration application is submitted along with the concerned documents, the Registrar of Companies will inspect the application. After the application is verified, he will issue the Certificate of Incorporation of the Public Company. After obtaining the certification of incorporation from the ROC, the company should apply for the ‘Certificate of business commencement' also.