Incorporating a Public Limited Company is a suitable option for large scale businesses that require huge capital. There should be a minimum of seven members with no limit on maximum number of members/shareholders for starting a Public Limited Company. A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. It’s stock can be acquired by anyone, either privately through (IPO) 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.
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.
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.
A public limited company is required to have a minimum paid-up capital of Rs 5 lakh or such higher amount as prescribed under the act.
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 for their shares.
It is a compulsory requirement under the Companies Act, 2013 for all the public companies to add the word ‘limited’ after their name.
Shares are offered to the general public at large i.e. anyone can invest in a public limited company. Hence, improves capital of the company.
Being listed on a stock market ensures that mutual funds, hedge funds and other traders take note of business of the company. This may result in better business opportunities for the Public Limited Company.
Since the shares are sold to the public at large the unsystematic risk of the market is spread out.
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.
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: