WHAT IS A PUBLIC LIMITED COMPANY

According to the Company Act of 2013, a public limited company is one that sells shares to the general public and has limited responsibility for its members. Anyone can purchase its stock, either privately through an initial public offering (IPO) or through stock market transactions. A Public Limited Company is subject to stringent regulations and must disclose to its shareholders and the public at large its actual financial situation.

CHARACTERISTICS OF PUBLIC LIMITED COMPANY

Members

Public Company shall have minimum 7 shareholders, however there is no limit on the maximum number of the shareholders.

Limited Liability

The liability of the shareholders/directors is limited to the extent amount unpaid on the shares owned by them. The shareholders are not liable personally in case of losses or debts suffered by the company.

Perpetual succession

The Company keeps on going concern in the eyes of law irrespective of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.

Index of members

A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members

Number of directors

When it comes to directors a private company needs to have Minimum two directors. With the existence of 2 directors, a private company can come into operations.

Paid-up capital

Paid-up capital –Private company may be incorporated with Rs. 2 only.

Name

The name of the private company must end with the word “Private Limited or Pvt. Ltd.

SECTIONS/REGULATIONS/RULES APPLICABLE TO PUBLIC LIMITED COMPANY

  • Section 2(71) of the Companies Act, 2013 ;
  • Companies Incorporation Rules, 2014 ;

PUBLIC COMPANY UNDER COMPANIES ACT, 2013

Section 2(71) of the Companies Act, 2013 states that a “Public Company” means a company which :

is not a private company ;

has a minimum paid-up share capital, as may be prescribed ;

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;

ADVANTAGES OF A PUBLIC COMPANY

High Credibility :

The investors find the public limited company to be more reliable and trustworthy, increasing its credibility.

Tax Efficient :

A public Company gets various tax benefits like tax-deductible costs and other allowances. On paying off the corporation tax, the company is saved from paying high-income tax.

Additional Capital :

Public Company can easily raise finance from different source, whether domestic or international to meet the capital requirement of the business.

Limited Liability :

The shareholders are not liable to pay the company’s debts or losses beyond their investment value in case of insolvency or bankruptcy.

Expert Board of Directors :

the board of directors comprising of expert and talented people those are nominated and appointed by the Board or committee constituted for the said purpose.

Business Growth and Expansion :

The acquisition of additional by issuing of shares, provide financial strength to the business and develops the scope of growth.

Easy Share Trading :

The shares of a public limited company can be bought or sold in seconds on the stock exchange market. Thus, making it convenient for the investors and shareholders to acquire a part of the company.

Risk Spreading :

Since, there are many shareholders owning small portions in the company, the risk of loss and insolvency is also widespread among them.