Public Limited Company

Career and Investment Planning

Entrepreneur Journey

We will be explaining about the Public Limited Company in this article in continuation to our entrepreneur journey articles under Career and Investment Planning Series.

Public Limited Company introduced by the Indian Government under Companies Act, 1956, where minimum 3 directors and 7 shareholders are required to incorporate. It has restriction over maximum directors of 12 person under Companies Act, 1956. Later, It has been increased to have maximum 15 person as directors under Companies Act, 2013. It is the oldest form of company introduced to protect and manage businesses with the facility of publicly trading shares. 

Features of Public Limited Company 

• A minimum of 7 people is required to form Public Limited Company and 3 as directors.  
• There is an upper limit on the maximum number of directors as 15 but no upper limit on the maximum number of shareholders. 
• The Liability of each shareholder is limited to their shareholding, but it does not offer immunity to shareholders for their illegal actions. 
• It provides protection to the directors or shareholders because they have limited liability towards Private Limited Company. For example, one may sue the Private Limited Company, not the shareholders or directors individually in case of any dispute. 
• Since it is being incorporated with the Ministry of Corporate Affairs, it requires the highest degree of compliance to be followed. 
• It requires 5 lakhs rupees minimum capital for formation. 
• It requires a prospectus to be issued for its public. 
• It allows to raise capital or funds using equity, expand from not just private investment but also general public because it has the facility of publicly trading shares through stock exchange listing and at the same time limits the liability. Thus, it enables companies to have enormous amount of capital. 
• Since it is separate legal person, it remains unaffected by a death or cessation of any member but continues to be in existence irrespective of the changes in membership until it is dissolved. 
• It has restrictions to have at least one-woman director for certain classes of companies. 
• 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. 
• Public Limited Company can be converted into Private Limited Company post Tribunal approval.

Formation Procedure

• Digital Signature Certificate (DSC) will be applied from the applicable competitive authorities. 
• You will apply Director Identification Number (DIN), once Digital Signature Certificate (DSC) is received. It is basically a registration number generated for every director or partner. It will be used for director or partner’s related applications and compliances. 
• Your will apply for allocation of company name as per the provision of companies act and rules once, Digital Signature Certificate (DSC) and Director Identification Number (DIN), is received. you need to apply for its allocation with following documents: 
  • Memorandum of Association 
  • Article of Association 
  • Proof of Registered Office Address 
  • Notarized Rental Agreement 
  • NOC from property owner 
  • A copy of sale deed or property deed (for an owned property) 
  • Compliance Certificate 
• Once your name allocation is approved, you will receive Certificate of Incorporation (COI) carrying its Company Identification Number (CIN), Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). On also need to apply for a Certificate of Business Commencement.  

Post Formation Procedure

• You will arrange Company Stamp, once the Certificate of Incorporation is received. Then, you need to open bank account in the name of Company. 
• You also need to apply for applicable registration as per requirement of your business operations for example: 
  • Goods and Service Tax Identification Number (GSTIN) 
  • Food Safety ad Standard Authority of India Registration Number (FSSAI Number) 
  • Trade License Number 
  • Real Estate Regulatory Authority Registration Number (RERA Registration Number) 

As an individual, you may find it difficult to handle all the operations related to Public Limited Company formation. Hence, now it is time to apply simple strategy which we have explained under General Management Application article under What It Takes To Be Successful series that’s

. So, hire a Chartered Accountant (CA) / Certified Management Accountant (CMA) to handle company formation formalities. 

We have already explained the features and formation procedure of Private Limited Company in this article. Now, we will be explaining in detail about Public Limited Company and its incorporation procedure in an upcoming article of the Career and Investment Planning Series.