Public Limited Company: An Overview

A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. Its stock can be acquired by anyone, either privately through (IPO) an initial public offering or via trades on the stock market.

A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders.

Characteristics of a Public Limited Company

Directors  
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.

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.

Paid-up Capital  
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.

Prospectus  
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.

Name  
It is a compulsory requirement under the Companies Act, 2013  for all public companies to add the word ‘limited’ after their name.

Advantages of Public Limited Company

More capital  
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.

More attention  
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.

Spreading risk  
Since the shares are sold to the public at large the unsystematic risk of the market is spread out.

Growth and expansion opportunities  
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.

Requirements for Registration of a Public Limited Company

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:

1. Minimum of 7 shareholders are required to form a public limited company.  
2. Minimum of 3 directors is required to form a public limited company.  
3. A minimum share capital of Rs. 5 lakhs is required.  
4. Digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.  
5. Directors of the proposed company will need a DIN.  
6. An application is required to be made for the selection of the name of the company.  
7. An application comprising the main object clause of the company is to be made. This object clause will define what a company will pursue after its incorporation.  
8. Submission of the application to ROC along with the required documents like MOA, AOA, duly filled Form DIR – 12, Form INC – 7 and Form INC – 22 is needed.  
9. Payment of the prescribed registration fees to the ROC is required.  
10. After obtaining approval from the ROC, the company should apply for the ‘certificate of business commencement.’

Annual Compliances

Unlisted Company

Board Meetings: An unlisted Public Limited Company is required to hold at least 4 board meetings in compliance with Section 173 of the Companies Act,2013.  

Appointment of a Cost Auditor: The auditor is required to be appointed as per Section 148(3) along with Rule 6(2) and Rule 6(3A) of the Companies Rules,2014. For this form, CRA 2 is to be filed. It is pertinent to mention that the original appointment of the auditor should be done within 30 days of the Board meeting or 180 days of the financial year, whichever is earlier. When a casual vacancy arises the same is to be filed within 30 days.  

Return of Deposits: Returns of deposits have to be filed with the ROC under whose jurisdiction the company falls via Form DPT 3 in compliance with rule 16 of the Companies (Acceptance of Deposit) Rules,2014.   
 

Appointment of CFO or CS or CEO: Section 203 read with Rule 8 and Rule 8A of the Companies Rules,2014 requires the appointment of the CFO or CS or CEO within 30 days of the AGM or 6 months in case of the casual vacancy. Form MGT 14 or Form DIR 12 are filed.   
 

Annual General Meeting: AGM for the declaration of the dividend has to be conducted in compliance with Section 96 of the Companies Act, 2013.   
 

CSR Committee: CSR Committee has to hold four meetings with a gap of not less than 120 days between the two meetings held for discussion and approval of the CSR activities. This is done under the Companies Act,2013 read with Companies Rule,2014 and Secretarial Standard.   
 

Director’s Disclosure: Directors are required to disclose any financial interest in the Company via Form MBP 1 in compliance with Section 184(1) of the Companies Act,2013 read with Rule 9(1) of the Companies (Meetings of Board and its Powers) Rules,2014.

Listed Company

Annual General Meeting: Annual General Meeting has to be held following Section 121(1) of the Companies Act, 2013. Form MGT-15 has to be filed once the AGM has been conducted   
 

Financial Statements: The Financial Statements of the Company have to file as per Section 137 of the Companies Act,2013, read with Rule 12(2) of the Companies (Accounts) Rule,2014. The Financial statement consists of the balance sheets, cash flows statements, Director's statement, Director's report, Auditor's report, and the combined financial state, meaning which is prepared in XRBL (Extensible business reporting system). This is filed via Form AOC 4   
 

Annual Return: This has to be filed following Section 92 of the Companies Act.2013 read with Rule 11(1) of the Companies (Management and Administration) Rules,2014. The Annual return contains information about the directors and shareholders and is required to be filed in Form MGT7 with the relevant ROC.   
 

Financial and Director’s Report: Adoption of the financial and director's report is to be done in consonance with Section 173 of the Companies Act read with the Secretarial standard 1. The filing is done via form MGT 14.   
 

Income Tax Returns: This is to be filed with the Tax department in form ITR 6 on or before September 30th of the financial year   
 

Secretarial Audit Report: Submission of the Secretarial report is a requirement under Section 204 of the Companies Act,2013 read with Rule 9 of the Companies Rules,2014. The secretarial report has to be submitted only when the Company's total paid-up capital is equal to or crosses Rs. 50 crores or the annual turnover is equal to or exceeds INR 50 crores or the annual turnover is exceeding Rs.250 crores. This filing did via Form MR 3   
 

Other compliances: These include the rules and regulations that are laid down by SEBI. The listed Companies have to comply with the regulations of 2015.

Documents Required

1. Proof of identity of all the shareholders and directors.  
2. Proof of address of all the directors and the shareholders.  
3. PAN number of all the shareholders and directors.  
4. Utility bill of the proposed office i.e. proposed registered office for the company.  
5. A NOC (No Objection Certificate) from the landlord where the office of the company will be situated.  
6. Director Identification Number (DIN) of all the directors.  
7. Digital Signature Certificate (DSC) of the directors.  
8. Memorandum of Association (MOA).  
9. Articles of association (AOA)