As per Companies Act, 2013 A Public Company is a Company which is not a Private Company. A Public Limited Company is a company that has limited liability and offers shares to the general public. A private limited company can have a maximum of 200 members while there is no limit on the number of members in case of a public limited company. Its stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market.
“A Public Limited Company can be either listed or unlisted. A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders”
Characteristics of the Public Company
1. Paid-up Capital
There is no such bar on the minimum paid-up capital.
As per the provisions of the Companies Act, 2013 a public company requires a minimum number of 3 directors and there is no such restriction on the maximum number of directors.
As per the provisions of the Companies Act, 2013, a public limited company should be having at least 7 members and there is no such restriction on the maximum number of members.
4. Limited Liability
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 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, unlike the unlisted public company. However, there are no such provisions for Private Limited Companies. This is because private limited companies cannot invite the public to subscribe for their shares.
It is a compulsory requirement under the Companies Act, 2013 for all the public companies to add the word ‘limited’ after their name. But in the case of private limited companies, they need to add “privately limited” after their name.
Advantages of Public limited companies
Following are the advantages of incorporating a public limited company:
Raising of more capital
In the case of Public Limited Company, 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.
As discussed, Public Limited company can be two types one Listed and another one Unlisted. 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.
Distribution of Risk
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 expanding the business by investing in new projects from the money raised through shares.
Requirements/Process for registration of Public Limited Companies
There are various rules and regulations prescribed under the companies act, 2013 for the formation of a public limited company. Important points to be kept in mind while incorporating the company:
·Filing of RUN with the two proposed names along with the objects of the Company
·Minimum 7 shareholders are required to form a public limited company
·Minimum of 3 directors is required to form a public limited company
·Digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.