A public limited Company is a business organisation that trades on a public stock exchange and has its shares available to the general public.
Business owners with ambitious plans like constructing a new IT infrastructure or manufacturing facility may consider becoming a Public Limited Enterprise or PLC. Most modern business owners prefer a Private Limited Company structure to a Public Limited Enterprise. But it should be taken into account if someone is genuinely planning something significant and wants to raise funds from the public by offering them shares in exchange. In that circumstance, forming a PLC as the business entity of choice is the best course of action.
If you’re a small or medium-sized business looking to acquire equity money from the public, forming a public limited Enterprise is your best option because it gives you all the protections afforded by a corporation with limited liability.
Define a Public Limited Enterprise
According to the Companies Act of 2013, a business can become a public limited Enterprise. And this type of company can issue shares to the public in exchange for funding if it wants to do so. Additionally, registering a public limited corporation requires a minimum of seven members and three directors. The Companies Act 2013 defines a PLC in section 2(71).
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As of the enactment of the Company Act, 2015, there is no minimum capital requirement for the formation of a Public Limited Enterprise Public Limited Enterprise’s regulations are more stringent and formal than those of a Private Limited Company. Still, it’s a preferable corporate structure to a private corporation.
Characteristics of Public Limited Enterprise
Some significant characteristics of a public limited Enterprise are as follows.
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Board of Directors
The Companies Act requires a public corporation to have at least three directors, but there is no maximum limit.
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Company Name
All publicly traded firms must legally include “Limited” to their name. It’s a symbol used to identify a corporation that is open to the public.
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The Company’s Prospectus
Company prospectuses are required for all publicly traded corporations. It’s being distributed to the public at large by the planned corporation. This document provides a summary of the company’s activities and financial status.
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Paid-Up Capital
Regulations under the Act do not specify a minimum amount of start-up share capital necessary for registration.
Advantages of Registering Public Limited Corporation
Here are some of the benefits of forming a PLC:
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Independent Legal Entity
There is a clear separation of ownership and control in a public limited Enterprise. The public limited Enterprise can have a PAN, approvals, contracts, bank accounts, licenses, assets, and obligations.
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Multiple financing sources
When seeking capital, a public limited corporation may seek contributions from private investors and traditional lending institutions. Equity shares, preference shares, or debentures are all acceptable forms of capitalization for this purpose.
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Shares are easily transferrable
The benefit of a Public Limited Enterprise is that its shareholders can readily transfer their shares to other legal entities, such as individuals or organizations in India or elsewhere. A company’s longevity can be ensured by electing new directors.
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Company with limited liability
In a public limited company, shareholders have minimal legal responsibility for the company’s actions. The stockholders will be unaffected if the company itself incurs any unanticipated liabilities.
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Expansion prospects
When a company has a lot of money on the books, it can take advantage of many expansion opportunities, especially if it’s a publicly traded limited liability company.
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Management
It is the Board of Directors’ responsibility to manage the company. The company’s investors select members of the Board of Directors through a democratic voting process.
Guidelines for PLC Registration
Listed below are the prerequisites that must be met to register a public limited Enterprise
- A Public Company needs seven shareholders to incorporate.
- Public company incorporation requires three directors.
- At least one director needs a Digital Signature Certificate (DSC) to sign digitally.
- All proposed company directors must get a DIN (Director Identification Number).
- Submit a main Object Clause application. The object clause details the company’s goals after incorporation.
- Apply for ROC (Registrar of Companies) with required documents like MOA and AOA.
Documents for PLC Registration
The following documents are necessary for the registration of a Public Limited Enterprise
- Document all directors’ and shareholders’ identities, such as a PAN card, voter ID, Aadhaar card, or driver’s licence.
- Address proof of all directors and shareholders.
- Water, telephone, gas, or power bill of the registered office. But it can’t be more than two months old.
- It is necessary to have a “No Objection Certificate” (NOC) from the building’s actual landlord to use a location as a Registered Office.
- All Directors’ Taxpayer Identification Numbers (DINs).
- Obtain the Directors’ Digital Signature Certificates.
- Articles of Association and Memorandum of Association.
Registration Process for a Limited Liability Public Company
The following are the required steps to incorporate a Public Limited Company
Step 1: Acquire DSC and DIN
One of the first things that need to be done is to get a director’s DSC (Digital Signature Certificate). Digital and electronic signatures both require the same information. The certifying authority issues this necessary document.
Furthermore, all proposed company directors must register for a Director Identification Number (DIN). The MCA has streamlined the process of acquiring a DIN; directors can apply simply by filling out the SPICe form.
Step 2: Submit Company Name
The next thing to do is to see if the desired company name is available on the MCA (Ministry of Corporate Affairs) website. After going to the MCA portal, choosing the MCA services and looking for name availability is the next step. The proposed name, however, must not replicate an existing trademark or service mark.
Step 3: Submission of SPICe+ Form
The applicant can apply for a Certificate of Incorporation by filing the SPICe+ form once the proposed name has been accepted. The applicant must also submit all necessary documents alongside the form, including a Memorandum of Agreement and Articles of Association.
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Step 4: Certificate of incorporation
Certificates of Incorporation, complete with the company’s CIN (Corporate Identification Number) and the incorporation date, are issued once an entity’s formation paperwork has been received, processed, and approved by the appropriate authorities.
Step 5: Obtaining firm PAN and TAN
Once the company has its COI, the members and directors can apply to the MCA for a Permanent Account Number (PAN) and a Tax Deduction Account Number (TAN Registration) to be issued in the company’s name (Ministry of Corporate Affairs).
Step 6: Create a New Bank Account
It is now simple for the company’s members to create a savings account in the company’s name by providing the bank with the details from the PAN card and the COI.
Conclusion
When starting a firm, growing an existing one, or investing in cutting-edge research and development, a public limited corporation is expected to attract funding from the general public—growth on a Global Scale, etc. However, a public limited corporation is best suited for massive enterprises with broad scopes and ample room for expansion rather than the neighborhood corner store. A Public Limited Company is the best option if you wish to run a firm with unlimited liability and a large amount of money. Consult Vakilsearch if you need legal counsel during the Public Limited Enterprise Registration process.
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