Public Company Inc

INTRODUCTION

A Public Limited Company, also known as a PLC, is a type of a company, which is authorized to offer its securities to the general public. It is recognized as a separate legal entity from its owners (the shareholders) and managed by Directors. It can own assets, borrow money, enter into agreements, and sue or be sued in its own name.

The word “Public” in its name denotes that ownership is open to anyone who wants to invest in the securities of the public company.

LEGAL FRAMEWORK

Unlike private companies, public limited companies are governed by stricter regulatory and reporting standards. The provisions of the Companies Act, 2013, regulates the establishment and working of a public limited company.

As per Section 2(71) of the Companies Act, 2013, a public company is defined as,

“Public Company” means a company which-

  1. Is not a private company and,
  2. Has a minimum paid-up share capital as may be prescribed by the Central Government,

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 purpose of this Act even where such subsidiary company continues to be a private company in its articles.

KEY FEATURES

  • Limited Liability:- Shareholders of a public company are only responsible for the company’s debts up to the amount they invested. Their personal assets are protected.
  • Distinct Legal Entity:– It is treated as a separate person in the eyes of the law. It can own assets, incur debts, sue, and be sued in its own name.
  • Public Ownership:- Shares are available for purchase by the general public, which spreads ownership widely among individuals and institutions.
  • Perpetual Succession:- The company continues to exist even if the ownership or management changes. The existence of a public company is not affected by the death, insolvency, or insanity of any of its shareholders or directors.
  • Minimum Membership Requirement:- There must be required minimum 7 members  to incorporate a public company. There is no upper limit on the number of members.
  • Unrestricted Share Transferability:- Shareholders of a public company may transfer their shares freely without the need for approvals from other shareholders or the company itself. This feature provides liquidity for investors and making public companies an attractive investment option.
  • Transparency:- It must comply with strict legal requirements, such as publishing annual reports, holding annual general meeting (AGMs), and disclosing important financial information to shareholders and regulatory authorities.
  • Split between Ownership and Control:- The day-to-day control rests with executives and the board of directors, not the shareholders.
  • Compulsory Statutory Meetings:– It is required by law that a public company must hold an Annual General Meeting and at least four Board Meetings in a financial year.
  • BENEFITS
  • Public companies can raise large amounts of money by selling shares to the public.
  • Risk is spread across a large number of shareholder.
  • Debt Financing is easier. Bank and Lenders may offer better credit terms to public companies.
  • Provides liquidity .
  • Greater public awareness and visibility.
  • HOW TO FORM A PUBLIC COMPANY?

Steps to be followed for formation of a company:

  • Obtain DSC..
  • Draft key documents such as MOA and AOA for incorporation.
  • Apply for company name reservation through the form SPICe+ PART A.
  • Once name is approved, file SPICe+ Part B Form, which includes;
  • Capital details;
  • Registered Office details;
  • Director and Shareholder details;
  • Stamp Duty calculation;
  • Apply for PAN and TAN;
  • File other relevant forms (AGILE PRO, e-MOA, e-AOA, INC-9).
  • Verification and Approval.
  • Obtain Certificate of Incorporation.
  • DOCUMENTS REUIREMENT
  • Documents required for Directors and Shareholders
  • Identity Proof – PAN/Passport/Driving license/Voter id
  • Address Proof – Electricity bill/Aadhaar/Bank statement
  • Photograph – Passport size photo
  • Contact Details – Email and Mobile number
  • Specimen Signature
  • Registered office Address – Electricity bill/Aadhaar/Bank statement
  • Mail Id of proposed Company