Public Limited Company Registration

A Public Limited Company (PLC) is a corporate entity where the general public can own shares, which are traded on stock exchanges. This structure allows a wide range of investors, brokers, and traders to buy and sell equity, making it accessible to individuals from different backgrounds.

Public limited companies are subject to stricter regulatory requirements compared to private companies. In India, they are governed by the Companies Act of 2013. A minimum of seven members is required to start a public company, with no limit on the maximum number of shareholders.

The management of a public limited company is handled by an executive team appointed by a board of directors, which is elected by the shareholders. Shareholders have voting rights and can influence major decisions, including the election of the board. This setup ensures broad ownership while maintaining a professional management structure.

Public limited companies can be classified into two main types:

1. Listed Public Limited Company

A listed public limited company has its shares publicly traded on a recognized stock exchange, such as NSE or BSE in India. These companies must comply with regulations set by SEBI and are required to disclose financial information regularly.

2. Unlisted Public Limited Company

An unlisted public limited company does not trade its shares on any stock exchange, but it can still issue shares to the public. These companies are not subject to stock exchange regulations but must adhere to the Companies Act, 2013.

• Directors: As per the Companies Act, 2013, a public limited company requires a minimum of 3 directors and can have a maximum of 15 directors.
• Limited Liability: Shareholders in a public limited company have limited liability. They are not personally responsible for the company’s debts beyond the amount they have invested. However, shareholders can still be held accountable for their illegal actions.
• Share Capital: While there is no requirement for minimum paid-up capital, a public limited company must have authorized share capital of at least ₹1 lakh.
• Prospectus: Public limited companies must issue a prospectus, a detailed document about the company’s affairs, to invite the public to subscribe to their shares. Private limited companies do not have this obligation since they cannot invite public investments.
• Company Name: The word ‘Limited’ must be included at the end of a public limited company’s name as per legal requirements.

1. Easier Access to Capital

Public limited companies can raise substantial funds by issuing shares to the public. This ability to tap into the capital markets provides a significant advantage for businesses looking to finance expansion, research and development, or other growth initiatives.

2. Financial Flexibility

The structure of public limited companies allows them to explore various financing options, including equity, debt, and hybrid instruments. Strict regulatory oversight enhances investor confidence, making it easier for these companies to attract investment. Investors are more likely to invest in companies that adhere to transparency and accountability standards.

3. Limited Liability

One of the primary advantages of a public limited company is the limited liability protection afforded to its shareholders. This means that in the event of financial distress or legal issues, shareholders are only liable for the company’s debts up to the amount they invested. Their assets remain protected, making investment in public companies less risky.

4. Growth Opportunities

By going public, companies can access significant capital that can be used for expansion projects, entering new markets, or enhancing operational efficiencies. Additionally, being publicly traded often increases accountability and transparency, which can lead to improved management practices and business performance.

5. Flexible Shareholder Structure

Public limited companies must have a minimum of 7 shareholders, but there is no upper limit on the number of shareholders. This flexibility allows for diverse ownership structures, accommodating both individual and institutional investors.

6. Easy Share Trading

Shares of public limited companies are traded on stock exchanges, making it easy for investors to buy and sell shares. This liquidity attracts more investors, who can easily enter or exit their investments. It also allows existing shareholders to realise gains by selling their shares when desired.

These benefits make public limited companies an attractive option for businesses looking to grow, raise capital, and enhance their market presence.

1. Stringent regulations: There are a lot of stringent legal procedures involved in this type of business structure to safeguard shareholders from potential repercussions and to give transparency to shareholders.
2. Market Vulnerability: This type of company is vulnerable due to its dependency on the always-changing and dynamic market. Share or Stock values of your company can plummet due to many external factors and result in a loss.
3. High cost for formation and Management: There is a minimum requirement of paid-up capital of Rs. 5 lakh for the formation of a Public company, which is relatively high compared to other business entities. Also, you will require a lot of capital and resources to manage the company.

When registering a public limited company in India, it is essential to follow the specific requirements outlined in the Companies Act, 2013. Understanding these key regulations ensures a smooth and compliant registration process. Here are the major prerequisites for forming a public limited company.

• Minimum Shareholders: A public limited company (PLC) must have a minimum of 7 shareholders, with no limit on the maximum number of members.
• Board of Directors: At least 3 directors are required, each with a valid Director Identification Number (DIN).
• Authorised Share Capital: The company must have a minimum authorised share capital of ₹1 lakh for registration.
• Digital Signature Certificate (DSC): A DSC is needed for at least one director to authenticate electronically submitted documents during registration.
• Company Name: The proposed name should be unique, comply with the Companies Act, and not be already in use.
• Foundational Documents: Important documents include the Memorandum of Association (MOA), Articles of Association (AOA), and Form DIR-12 for registering director details.

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

Post incorporation of Public Limited Company, you’ll receive the following documents:

1. Certificate of Incorporation
2. Permanent Account Number (PAN) of the company
3. Tax Deduction or Collection Account Number (TAN) of the company
4. Articles of Association (AoA)
5. Memorandum of Association (MoA)
6. Director Identification Number (DIN)
7. Digital Signature Certificate (DSC)
8. EPF and ESIC registration documents
9. Company Master data

It takes approximately 10 to 12 days from the submission date of documents and SPICe+ form, subject to approval by the MCA.

Things that Delay a Registration Process

Below are some common things that can lead to delays in the registration process:

• Providing incorrect, mismatched, or incomplete documentation
• The chosen company name is not compliant with naming guidelines or is unavailable.
• Note- A quick Company Name Search on our website can come to your rescue. We search multiple official databases to ensure your company is unique and available to avoid such complications.
• Difficulties in submitting your application due to technical glitches or a slow server on the MCA websites sometimes
• Failing to submit your application or pay in the prescribed timeframe
• Varying processing times and requirements in each Jurisdiction

For Directors and Shareholders

• Minimum Shareholders: A public limited company requires at least seven shareholders, with no upper limit.
• Minimum Directors: At least three directors must be appointed to manage the company.

Compliance for Listed Companies

• Annual General Meeting (AGM): Must hold an AGM and file Form MGT-15 afterwards.
• Key Appointments: Appoint a Chief Financial Officer (CFO), Chief Executive Officer (CEO), and Company Secretary (CS) within 30 days of the AGM.
• Financial Statements: File Form AOC-4, which includes:
  • Balance sheets
  • Cash flow statements
  • Director’s statement and report
  • Auditor’s report
• Annual Returns: Submit through Form MGT-7.
• Income Tax Returns: File ITR 6 by October 31st of the financial year.
• Secretarial Report: Required if paid-up capital or annual turnover exceeds ₹50 crores.
• Corporate Social Responsibility (CSR): Establish a CSR committee.

Compliance for Unlisted Companies

• Board Meetings: Hold at least four board meetings each year.
• Annual General Meeting (AGM): Conduct an AGM and file Form MGT-14 (DIR-12).
• Auditor Appointment: Appoint an auditor within 30 days of the board meeting and file Form ADT-1.
• Deposits Reporting: File returns of deposits using Form DPT-3.
• Director’s Disclosure: Directors must disclose any financial interest in the company via Form MBP-1.

Minimum Capital Requirement

• A minimum capital of ₹5,00,000 (five lakh) is required to start a public limited company, although a higher amount may be necessary based on the business plan.

Tax Rates

• Basic Tax Rate: For FY 2023-24, the tax rate is 25%, excluding surcharge and cess.
• Surcharge: A surcharge of 12% applies to the calculated income tax.
• Health and Education Cess: A 4% cess is levied on the total income tax plus any applicable surcharge.
• Note: Tax rates may vary under special taxation provisions, such as Sections 115BAA or 115BAB, or other deductions.