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10 Facts you didn’t know about Public Limited Company

Gonica Verma

| Updated: Jul 04, 2019 | Category: Company Registration

In India, there are two companies that are limited by shares; Private Limited and Public Limited Company. Public Limited Company is a company whose securities are traded in the stock market and could be sold to anyone. It is also called Publicly Held Company.

In this company, the members have to follow strict rules and regulations & they can also advertise their securities by providing complete and accurate details about the company. They can invite shareholders and raise capital of the company by issuing shares. We should know some facts about Public Limited Company to make our understanding more strong regarding this company.

Facts we should know about Public Limited Company

There are several aspects of a Public Limited Company that you won’t be aware of. However, we have enlisted below some significant features of companies with public limited company registration:

1. Limited Liability

In Public Limited Company, the owners and shareholders of the company have limited liability. In case of solvency of the business, or, if business is occurring huge losses then owners and shareholders are not liable to sell their own personal assets to recover the business. There will be no risk to the personal assets of the owners and shareholders. Money could only be recovered from all those securities which are associated with business. If shares are issued as Part-Paid to the shareholders then, they are liable to pay the Par or face value of the shares if there will be any claim made against the capital of the company.

2. Paid up capital

Paid-up capital is the amount received by company from its shareholders in exchange of its shares. The shares can be sold in the share market to invite investors for the company. The total paid up capital required to establish the Public Limited Company is minimum Rs 5, 00,000 and there is no maximum limit. Owners have to prescribe their capital details time to time with the registrar.

3. Issue of Prospectus

It is compulsory to all Public Limited Companies to issue Prospectus for its public. The prospectus includes the following:

  • Background of the Company
  • Financial information of the Company in the form of Trading Account, Balance Sheets etc.
  • Number of shares issued by company.
  • Description of management.
  • Risk to buyers.
  • Growth of the company.
  • Description about the offering of securities.
  • Company’s legal opinion.
  • Disclaimer from Securities& Exchange Commission.

4. Perpetual succession

Another fact of Public Limited Company is the Perpetual Succession. If any owner or shareholder of the company is dead or bankrupt, then the life of the company will still go on. The principles of perpetual succession state the following:

  • Company’s life will not depend on its members or shareholders lives. Death, insanity, exit, insolvency will not affect the company’s continuity.
  • The status of the company will not get affected by the change in membership of the company.
  • The company’s life will go on until the winding up of the company by its members.

5. Advertisement of securities

Public Limited companies can also advertise their shares or securities in the market with their respective prices. This is not possible in the case of Private Limited companies. The owners of the company have to follow the Code of Advertisement prescribed by respective Exchange board. They need to submit the copy of advertisement to the Exchange board before publishing any advertisement in the media. Those companies who will not follow the Code of Advertisement may face issues by the Exchange Board. The Code of Advertisement contains the following:

  • It contains all forms of communication through which brokers will communicate to their public. It contains all the documents, forms, articles, literature, research studies, circulars, brochures etc. which may be used in advertisement for the company.
  • The Code of Advertisement contains the advertisement materials which include the name of the company, registered office address, registration number offered by SEBI to the company, logo of the company etc. The information shall be accurate, reliable, unambiguous, real, complete and concise.
  • The companies need to mention the standard warning to the investors in the font size of 10.
  • If company is advertising through SMS, then company needs to mention the broker’s name, the registered office address, Registration number offered by SEBI etc. but it doesn’t need to mention the standard warning line, instead of that, they can mention the link of the company which should contain all the relevant details.
  • The company should mention the respective registration number in case the advertisement mentions the content related to Mutual Funds, Bonds, Fixed Deposits, Initial Public Offerings, loans etc.
  • In case, the company is mentioning any kind of security only for the advertisement purpose, then they should mention this in the warning that the security is used only for the advertisement purpose.
  • If the company’s advertisement contains all the brokerage rates then they should inform their public that their brokerage rates do not exceed the rates prescribed by SEBI.

6. Minimum Subscription

The minimum Subscription for Public Limited Company is 90%. If the company is not able to receive 90% amount of the shares they issued then they cannot run the company’s business operations further.

7. Selling shares and securities

Public Limited Companies is allowed to sell their securities and shares through recognized stock exchanges of India in Public Limited Company, the ownership can be sold and transferred but before that the formality of Stock Transfer must be completed.

  • The shares can be transferred from one to another in the form of cash, non-cash (goods, services, bad debts writing off etc.), and an employee share scheme or may be a gift to friends, family etc.
  • If the shares are issued after the company’s formation, then the existing shareholder shall fill the Stock Transfer Form which contains the following:
  • Company’s name
  • Registration number of the company issued by SEBI
  • Class and Quantity of the shares
  • Name of the existing shareholder
  • Address of the existing shareholder
  • Name of new shareholder
  • Address of new shareholder
  • Amount of the shares
  • If transaction is happening in non-cash, the reasons must be mentioned in the form
  • Sign of both the parties
  • SDLT (Stamp Duty Land Tax) Liability, if applicable

8. Public Limited Company Compliances

There are various compliances and returns associated with Public Limited Company that are needed to be filed on annual basis. As per the rules of Companies Act, 2013, the rules and regulations of various legal bodies like SEBI, RBI, FEMA, etc. have become very strict. The compliances associated with Public Limited Companies are as follows:

  • The Form MGT-7, which states the annual returns of the company
  • Form AOC-4, which states all the financial statements of the company
  • Income tax return of the company
  • Form MR-3, which states the Secretarial audit of the company
  • Form MGT-14, states the Adoption of directors and financial report of the company
  • Form MGT-15, which states the report of Annual General Meeting
  • All the compliances associated with the rules and regulations of State Exchange Board of India
  • Other legal compliances in the form of CCL (Corporate & Commercial Law), RBI, Pollution Control Act, Excise & Custom Duty etc.

9. Cost involved in Public Limited Company Registration

Document

Quantity

Price

DSC (Digital Signature Certificate) of Directors

7

Rs500*7= Rs3500( Basic Fees)

DIN (Director Identity Number) in case of additional director after the incorporation of the company

Rs500/Director

Company’s Name approval

1

Rs1000

Article of Association, Memorandum of Association, Incorporation Certificate

NA

MoA fees vary state to state and INC could be filed with MoA& AoA.

Stamp Duty

NA

Varies state to state but higher in Punjab. Kerala and Madhya Pradesh

Tan and PAN

NA

Rs107(PAN)+ Rs65(TAN)=Rs173

INC 22 ( if filed separately)

NA

Rs400- Rs600

Goods & Services Tax

NA

Nil

10. It can be converted to Private Limited Company

According to the Section 14 (1), any Public Limited Company can be converted in Private Limited Company by passing the following requirements:

  • Passing a special resolution with the consent of shareholders in Annual General Meetings
  • Alteration in MOA and AOA of the company
  • Filing of Form MGT 14 with Registrar.
  • Passing a special resolution in the electronic form RD 1
  • Declaration
  • List of creditors
  • Newspaper advertisement publication

Conclusion

The above-mentioned are some facts about Public Limited Company. This company has several benefits such as limited liability, financing opportunities, better access to capital, growth opportunities, goodwill, etc. We may not receive in other form of companies.

So, if you are planning to register as Public Limited Company, then may be it has many complex legal formalities and procedures but it has several great advantages as well which are incomparable. To make your registration process hustle free, contact Swarit Advisors.

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Gonica Verma

Gonica Verma- MBA( Marketing & Sales) with NTA NET qualified in Management, Content writer with working knowledge of online content strategy, Proof reading with good descriptive research skills.

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