Through an initial public offering (IPO), a public company can issue securities to the general public and a public company can only be listed on stock exchanges. These companies are subject to higher levels of reporting, regulations, and public scrutiny. A listed Public company must meet stringent reporting requirements framed by Securities and Exchange Board of India (SEBI).
A Public Ltd. company has all the characteristics of Private Ltd. Co. and the ability to possess any number of members, ease in transfer of shareholding and more transparency. Identifying marks of a Public Ltd. Co. is through name, shares, formation, number of members management, directors and meetings, etc.
What are the features of a Public Limited Company?
- Minimum shareholders - 7
- Minimum Directors - 3 (Directors and shareholders can be same person)
- At least one Director who shall be resident in India
- Minimum capital requirement is Rs 5 lakhs.
What are the Advantages of a public limited company?
1. More Capital
When you are selling shares to the public it means that anyone can invest in your company, so it's a greater source for the value of funds.
As more attention is given to public limited companies as it is listed on an exchange which ensures mutual funds and other traders take note of your business. So it's a great way to make your business a prominent name.
3. Growth and expansion opportunities
There is a perfect opportunity for the growth and expansion of the business.
What are the disadvantages of a Public Limited company?
1. More Regulations
For a public limited company regulations are more stringent. Your company must have all the professionals to handle the queries and to stay compliant with all the rules and regulations of a public company.
Public limited companies are held accountable and more thoroughly scrutinised by auditors.
3. Control over shareholder
It’s much harder to control who is a shareholder of your company, so there’s a possibility of losing control of the direction of your business.
What is the procedure for Public Limited company formation?
1. Digital Signature Certificate (DSC) & DIN:
For all the proposed Directors of the Company DSC and Director Identification Number (DIN) must be obtained.
2. Name Approval:
Name approval has to be obtained from the Registrar of Companies [“RoC”] through submission of an application in Form No. – INC 1 and the applicant can give a maximum of six names in order of preference. The approved name by the authority is valid for sixty days. The Promoter /Subscriber to the MOA and AOA shall be the applicant for the availability of name application. The approved name by the authority is valid for 3 months. Name approval generally takes 1-2 business days.
3. Filing documents with MCA:
After having name approval, the draft Constitutional Documents of proposed Company i.e. Memorandum of Association and Articles of Association of the company is to be drafted and then it is filed with the Registrar of Company along with the forms and other necessary documents stated below.
Subscription Pages of MOA & AOA – MOA &AOA shall be signed by each subscriber to the memorandum of the company who shall provide details of his name, address, description and occupation, if any, in the presence of at least one witness who shall attest the signature and shall likewise sign and add his name, address, details of occupation etc. The witness shall be a practicing professional i.e. practicing CS, Practicing Cost & Management Accountant, or practicing CA.
And in case of foreign subscribers the above mentioned documents should be attested by the Consulate of the Indian Embassy in the respective Country or by foreign public notary.
In case of wholly owned subsidiary, a copy of the Board resolution of Holding Company approving the investment in the proposed Indian Company and authorizing a person to sign the papers of incorporation on behalf of the company, duly attested by the officer of the Indian Embassy in the foreign country where the registered office is situate is also required to be attached with the papers.
Some other documents such as Affidavits, Consent Letters, and Certificate of Compliance from practicing professionals in Form No INC – 8, etc. will be made and filed with the incorporation forms.
4. Certificate of Incorporation
After submitting all the documents along with forms as mentioned and explained above for the registration, ROC will inspect the documents and then file